For 300 years, Scotland has been part of the United Kingdom, which includes England, Scotland, Wales, and Northern Ireland. Now there is a strong movement within Scotland that calls for independence. This movement believes that Scotland has given more within the union than it receives and it is better off being an independent state.
Scotland has oil and other natural resources and also has a strong fiscal position, which is now rare in Europe. On the other hand, it has banks that are too large for its size and for its independent government to rescue if a financial crisis erupts.
At the time this article was published there was no final decision of the referendum held Sept. 18. After the polls closed it was clear the voting would be extremely close. My Scottish friends are divided where some belong to the yeses, while the others are undecided but no one subscribes to the nos.[S1] [K.P.2]
One of the major issues that has created a lot of debate about the usefulness of Scottish independence is what currency Scotland should use in carrying out transactions. To many, the pound sterling [K.P.3] is the best currency option for independent Scotland. But the recent debt crisis in the eurozone[K.P.4] casts doubt on separating currency and state, as the state will not have control over its monetary policy.
This case will also be more so for independent Scotland because the Bank of England may turn a blind eye to this country’s problems and needs. It may also work against Scotland to punish it for its separation from the United Kingdom[K.P.5] .
My opinion is that Scotland should work for currency independence within a specific interim period. This means that in this interim period, Scotland should keep using the pound for the specific period, which may range between three to five years.
In the meantime, Scotland should work on building the Scottish Central Bank [K.P.6] and complementary financial institutions. At the end of the interim period, Scotland should have its own currency, which I call the “scot.” This can be supported by Scotland’s strong fiscal position. This should not be a big challenge for Scotland to live happily as an independent state.
Take for example Estonia, which separated from the Soviet Union in 1990, became an independent state in the early 1990s and later a member of the eurozone. Estonia is smaller than Scotland. It has 1,294,455 people according to the 2011 population count, while Scotland’s population is about 5,254,800 people. If Estonia can make it, then Scotland can make it better.
Scotland has other role models in history where countries split and adopted their own currencies. The krone or korona was the currency of the Austro-Hungarian Empire from 1892 until the empire’s dissolution in 1918. In 1924, the schilling became the official Austrian currency. In Hungary, the Austro-Hungarian currency was replaced by the Hungarian korona[K.P.7] , which was replaced by the pengo in 1927. In Czechoslovakia, the currency was superseded by the koruna.
Scotland can also learn from the peaceful and successful separation between the Czech Republic and Slovenia, which had become federal subdivisions of Czechoslovakia in 1969.
There are important political implications if Scotland separates from the UK. It may encourage other members of the United Kingdom to separate. Since the separation is rooted in the distribution of wealth and resources within the union, it may be relevant for other unions such as Russia, the United States, and Switzerland.