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Scotland's Salmond proposes fiscal stability pact with UK

Reuters News
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Posted: Mar 04, 2012 1:19 PM
Scotland's Salmond proposes fiscal stability pact with UK

LONDON (Reuters) - Scotland's First Minister Alex Salmond said on Sunday his country would need a fiscal stability pact for a monetary union with the rest of Britain, if Scots vote for independence.

He also said his Scottish National Party (SNP) will launch its independence campaign in May, more than two years before the "yes" campaign's preferred date for a planned referendum.

While acknowledging a fiscal pact would limit its room for maneuver, he said, "there would have to be a stability pact which would have criteria on what you could borrow."

"I think there is general acceptance that there is half a dozen fiscal policy initiatives you could make to boost growth within the context of a stability pact and monetary union," he told BBC television.

"Your fiscal room for maneuver is limited in the modern world anyway.

"Let's say your stability pact said over the long term your borrowing should not exceed 3 percent of GDP. I would argue that is no more than the fiscal discipline that a sensible country would have in any case."

The SNP won a majority in Scotland's devolved parliament last May, and has promised to hold a referendum on independence within five years, penciling in autumn 2014, saying it would give Scots enough time to realize what independence would mean.

The British government argues the vote should be held earlier, saying investors are being put off by the uncertainty. Over the weekend, Scottish Secretary Michael Moore said it had set out how a referendum could be held within 500 days.

Prime Minister David Cameron has offered the prospect of more devolution, without giving details, if Scotland voted against independence.

"I think we will win the referendum," Salmond said.

"In fact, so confident are we about winning the referendum, that shortly after the local elections in Scotland in May and the final position on the Scottish government's consultation, which is I think is May 11, then the 'yes' campaign will be launched."

Salmond said Scotland would keep sterling if Scots vote to end the 300-year-old union with England.

Danny Alexander, Treasury minister in the Conservative-led coalition, argued the euro crisis showed Britain needed strong central control of budget policy and borrowing.

Salmond, who before the current euro zone crisis had argued Scotland should adopt the single currency, said a sterling zone would work because there was "identical productivity in Scotland to the rest of the UK."

"So I think the fundamental imbalances within the euro don't apply within a sterling zone," he said. "But I agree you need a fiscal stability arrangement for a monetary union."

He has agreed that a currency union would mean the central bank in London continuing to set interest rates for the 5.2 million people of Scotland after separation.

He also said Scotland would not have to apply to join the European Union because it would be a successor state.

(Reporting by Avril Ormsby; Editing by Maureen Bavdek)


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