Joseph Stiglitz warns Nicola Sturgeon against independent Scotland adopting pound or euro
By Simon Johnson – August 30, 2016
A Nobel-prize winning economist who advises Nicola Sturgeon has argued that the SNP’s pledge in the 2014 referendum campaign that an independent Scotland would keep the pound may have been a “mistake”.
Joseph Stiglitz, who sits on the First Minister’s Council of Economic Advisers, also warned Ms Sturgeon she should also have “strong second thoughts” about Scotland leaving the UK and joining the EU if that means adopting the euro.
Instead, he argued that a separate Scotland should if possible adopt a free-floating Scottish pound, which he said could be used to stimulate the economy and lower the country’s enormous deficit.
He said he hoped the EU would be willing to admit a new member state without it adopting the euro but admitted that a Scottish pound may only be a “transition” to the single currency if no opt-out was agreed.
In a dire warning against joining the euro, Prof Stiglitz warned it would mean a separate Scotland’s economy being “ruled by Frankfurt” and this was “too high a price” to pay.
His outspoken intervention was seized on by opposition politicians as evidence that Scotland was better off staying in the UK and keeping the pound.
It came the week after it emerged that Scotland’s public spending deficit hit nearly £15 billion last year, which at 9.5 per cent of GDP outstrips even crisis-hit Greece.
Ms Sturgeon has pledged to keep Scotland in the EU despite the Brexit vote, even if that means calling a second independence referendum, but critics have pointed out that membership requires a deficit below three per cent and a commitment to join the euro.
Prof Stiglitz, who has also advised Bill Clinton and Jeremy Corbyn, won the Nobel prize for economics in 2001 and has recently published a book describing the euro as a threat to the future of Europe.
During the 2014 referendum campaign, the Columbia University professor said a currency union between an independent Scotland and the rest of the UK could work and claimed the Chancellor was bluffing by ruling one out.
But Alex Salmond, the First Minister who appointed Mr Stiglitz to be a Scottish Government advisor, has since admitted that this stance allowed him to be “gazumped” by his Unionist opponents and has called for fresh look at a separate Scotland’s currency options.
Reflecting on the nationalists’ currency union plan on BBC Radio Scotland’s Good Morning Scotland programme, Mr Stiglitz said: “They wanted the smoothest transition possible.
“They wanted to say that we could move from the current economic arrangement to another one while keeping our currency and keeping other forms of institutions. I think, in hindsight, that may have been a mistake.”