Scottish Referendum 2.0?

The Union between Scotland and England has been in existence since 1707, but was not born under an auspicious star: The Scots were bankrupt and had to agree to the Union purely out of financial considerations. A partnership between equals it definitely was not. It is therefore not surprising that the Scots have repeatedly risen up against the dominance of the parliament in Westminster. What is, however, far more surprising was the result of the first Scottish referendum on independence held in 2014, which ended with a majority of 55% to 45% in favour of the Union. In the years since then, the mood in Scotland has markedly changed, however. The triggers have included not least the British EU referendum. While in England and Wales the majority of those who voted wanted an exit from the EU, the Remain camp booked a clear majority of 62% in Scotland. Nicola Sturgeon, elected First Minister of Scotland in 2014, has been championing a second referendum on independence ever since. The latest reports indicate there are first signs of hope for the Scots: Theresa May is said to be prepared to agree to a second referendum as soon as Great Britain has exited the EU, which is supposed to have happened by mid-2019.

However, even if the Scots, shaken awake by the pending Brexit, would today more readily vote for independence than was the case in 2014, this has not changed any of the complications this would entail. While it may be true that the Scots’ per capita GDP would initially rise as would tax revenues, neither would last long. Long gone are the best days of offshore oil production and planned higher government spending would invariably lead to a deterioration in the budget. Not to forget Scotland’s unfavourable demographic development, let alone the danger that Scotland’s economy faces from a completely out-sized financial services sector. Moreover, Scotland’s plans for the EU are unlikely to come to fruition: The EU has little interest in fostering separatist movements and is therefore very reluctant when it comes to the accession of an independent Scotland into the EU. Furthermore, it is unclear what the path to such membership would involve, as Scotland would after all have to embark on the usual EU accession process, which could take time. Indeed, what currency would the Scots use in the intervening period? The Scottish government intimated in 2014 that the country could initially remain under the umbrella of the Bank of England and that pound sterling would therefore be retained as the means of tender. David Cameron’s government rejected this completely. The alternative would of course be the reintroduction of the pound Scots. However, it is unclear how the Scottish government could succeed in furnishing a new Scottish central bank with sufficient funding to guarantee the currency’s stability.

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