Indyref: Nobel Prize Winner's Currency Warning

A Nobel prize winning economist is warning Scotland could end up like Spain in the event of independence and a currency union.

Professor Paul Krugman has written in the New York Times that without a separate Scottish currency the country could physically run out of money in a financial crisis.

The economist, who is a left wing commentator against the type of austerity measures taken by Westminster, believes it is "mind-boggling" that Scots would entertain the idea of sharing a currency after what happened in the Eurozone crisis.

He said: "In short, everything that has happened in Europe since 2009 or so has demonstrated that sharing a currency without sharing a government is very dangerous. In economics jargon, fiscal and banking integration are essential elements of an optimum currency area. And 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."

The White Paper on independence outlines a Sterling zone between Scotland and the rUK, with the Bank of England as lender of last resort and owned by both countries on a shareholder basis.

That way both iScotland and rUK would be helping pay for a bailout, if a Scottish bank or English bank failed.

The three main UK parties have ruled out a currency union. But the Scottish government has branded that a campaign tactic, and intends to use the a Scottish pound tied to the GBP without a formal currency union.

Labour MP Ian Murray welcomes the analysis: