The Darling gamble: ‘Sterling is Scotland’s mini-eurozone’

By Ian Dunt

Alistair Darling has laid out the extent of the challenges facing an independent Scotland, arguing that maintaining sterling would be like creating a mini-eurozone.

The former Labour chancellor, who some want to lead the campaign against independence, used an interview in the Observer to argue that the risks of independence were "amazing".

If Scotland chose to maintain sterling, as first minister Alex Salmond has suggested, the country would effectively be in a mini-eurozone, unable to set interest rates, tax rates or spending policies.

"This is precisely the argument that is being engaged in the eurozone at the moment," he said. "If you have a single currency area you come back to having an economic if not a political union [with Westminster].

"So you go through all the trauma and expense of leaving the union, only to come back and discover that because you want to be part of this common currency you are back to where you were. I just don't see the sense of that."

Joining the euro would not be an attractive prospect given events on the continent and would anyway force Scotland to accept oversight from Brussels and Frankfurt in exchange for London, Mr Darling argued.

The third option, of creating a new currency, would also be fraught with danger.

"You would be a brave country indeed to say, here is our new currency. We are not actually sure how much it is going to be worth after the first day's trading. It would be one hell of a risk," he said.

He added: "The downsides are immense, the risks are amazing, the uncertainties I just don't think are worth gambling on.

"There are times when you should gamble and there are times when you shouldn't."

The comments come amid continued tensions between Holyrood and Westminster, with both sides trading threats on the timing of the referendum.