Scotland shouldn’t join the euro

At a time when Alex Salmond is touting Scotland as a progressive model for the UK, we discover that Angela Merkel wants to automatically fine eurozone countries that spend too much, to make what she considers high debt illegal and to empower Euro-judges to rule on the budgets of the 17 euro members.

The treaty would enshrine the German model of fiscal and monetarist rigour as binding on the eurozone, in effect outlawing Keynesian economics.

Goodbye social spending, redistribution or counter-cyclical government policy. Signing up for the euro would be like swapping the influence of London for rule by Brussels.

Scotland’s not going to have much space for fiscal manoeuvre as Salmond pretends. Big tax increases would force businesses south. Hefty tax cuts wouldn’t be sustainable. But Scotland would still have more wiggle-room if it stayed outside the euro and avoided a life-sentence of Germanic austerity.

If Scotland does vote for independence it should keep using pounds (which it could do whatever Cameron says). It does more trade with England than with Europe. Plenty of countries piggy-back on strong currencies like the US dollar.

True, Scotland wouldn’t have a lender of last resort like the Bank of England, and Threadneedle Street wouldn’t want to play central banker for Edinburgh without guarantees on Scottish spending because otherwise it’d effectively be writing blank cheques. But better to negotiate a flexible arrangement with Westminster than submit to the fiscal diktats of Brussels.