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Economist warns Scotland 'to be afraid of independence'


Scotland has been warned of the dangers of 'going it alone' regarding its independence vote by Professor Paul Krugman

Scotland has been warned of the dangers of 'going it alone' regarding its independence vote by Professor Paul Krugman

Scotland has been warned of the dangers of 'going it alone' regarding its independence vote by Professor Paul Krugman

A Nobel prize-winning economist has warned Scots to "be very afraid" of independence. The risks of going it alone "are huge", particularly if it follows the "recipe for disaster" of keeping the pound without a political union with Westminster, Paul Krugman wrote in the New York Times.

Better Together said his "expert intervention exposes the risks of leaving the UK", but Yes Scotland responded with the opinions of two Nobel prize-winning economists who said sharing the pound is "the best option" for Scotland and the remainder of the UK.

Prof Krugman said: "Polling suggests that support for independence has surged over the past few months, largely because pro-independence campaigners have managed to reduce the 'fear factor' – that is, concern about the economic risks of going it alone. At this point the outcome looks like a toss-up.

"Well, I have a message for the Scots: Be afraid, be very afraid. The risks of going it alone are huge."

Canada "probably" pays a price for its independence from the US, with lower labour productivity, but one of the reasons it remains prosperous and economically stable is because it has its own currency, he said.

Scotland would find it hard to maintain a separate currency in a highly integrated British market, but the SNP's plan A to keep the pound is "a recipe for disaster", he added.

He contrasted the support Florida received from the US federal government when its housing boom crashed with the "horrific depression" created by a similar crash in Spain, which shares a currency but no shared institutions of government with the European Union.

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"Everything that has happened in Europe since 2009 or so has demonstrated that sharing a currency without sharing a government is very dangerous," he said.

"In economics jargon, fiscal and banking integration are essential elements of an optimum currency area.

"An independent Scotland using Britain's pound would be in even worse shape than euro countries, which at least have some say in how the European Central Bank is run.

"I find it mind-boggling that Scotland would consider going down this path after all that has happened in the last few years.

"If Scottish voters really believe that it's safe to become a country without a currency, they have been badly misled."

Commenting on behalf of Better Together, Scottish Labour MP Ian Murray said: "We are being asked to vote for separation without even knowing what currency we would use.

"A currency union would be bad for Scotland and it would be bad for the rest of the UK. That's why it would not happen. We need to know Alex Salmond's Plan B.

"This really matters to families in Scotland.

"This isn't some theoretical exercise – it risks the wages, pensions and benefits people are paid.

"It means big cuts to the money we have to spend on our NHS. And it means higher costs on the everyday things like shopping and energy bills.

"Leaving the UK would put at risk the livelihoods of families in Scotland."

A Yes Scotland spokesman said: "The (Scottish Government's) Fiscal Commission contains two Nobel Laureate economists – Joseph Stiglitz and Sir James Mirrlees – and they have published a hugely detailed report recommending sharing the pound as the best option for both an independent Scotland and the rest of the UK.

"That also means Scotland being in control of 100% of our revenues, rather than the 7% under devolution at present, enabling us to build a stronger economy and fairer society.

"Scotland is in the top 20 of the world's wealthiest countries. We are rich in terms of the skills of our people, entrepreneurship, innovation, life sciences, and technology, and we are blessed with an abundance of natural resources including huge reserves of oil and gas and a quarter of Europe's renewables potential.

"We have more top universities per head of population than any other country in the world. Even David Cameron accepts that Scotland can be a successful independent country.

"Scotland undoubtedly has what it takes to be a vibrant, successful nation in which the benefits of our vast resources are shared more fairly.

"After independence a currency union will be agreed because it's undeniably the best and most sensible option for the rest of the UK as well as for Scotland.

"By voting Yes on September 18, we'll be voting to share the pound in a currency union."