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19 February 2014updated 28 Jun 2021 4:45am

Leader: The pound and the EU: two political missiles hit Alex Salmond

By New Statesman

When Alex Salmond was interviewed by the New Statesman last June, he remarked: “This is the phoney war. This is not the campaign … The real game hasn’t even started. We are just clearing the ground.” With seven months to go until the referendum, the “real” campaign has begun in earnest. George Osborne’s declaration that the rest of the UK would not form a currency union with an independent Scotland (seconded by Ed Balls and Danny Alexander) and the warning by the president of the European Commission, José Manuel Barroso, that it would be “extremely difficult if not impossible” for the new state to join the EU, delivered within the space of a week, were the most significant interventions to date.

In the context of the debate, both were political missiles aimed at the hull of Mr Salmond’s nationalist vessel. For years, the leader of the Scottish National Party has sought to reassure anxious swing voters, promising that an independent Scotland would retain the pound by forming a “sterling zone” with the rump UK and that it would achieve EU membership. The words of Mr Osborne and Mr Barroso have profoundly undermined these pledges.

The First Minister’s initial response has been to dismiss both interventions as rhetorical bluster. “Enlightened self-interest”, he suggested, would lead the rest of the UK to share the pound with Scotland; the EU, meanwhile, would not countenance defying his country’s “democratic will”. In short, he has suggested that Mr Osborne and Mr Barroso are bluffing. It is remarkably complacent of Mr Salmond to make this assumption.

There is every reason to believe that the Chancellor and his Westminster colleagues, heavily influenced by Mark Carney’s recent speech on the subject in his capacity as the governor of the Bank of England, are sincere when they state that the rest of the UK would not form a currency union with a country with a notably poor fiscal outlook and a banking system 12 times the size of its GDP. Mr Salmond’s claim that English businesses would protest at the transaction costs that would result from two separate currencies was immediately undermined when those same businesses replied that the costs of a currency union would be far greater. Even less credible is his threat to default on Scotland’s proportion of the national debt if Westminster refuses to share the pound, an act that would render his country a pariah, unable to borrow on the international markets except at penal rates of interest.

At no stage did Mr Salmond outline the Plan B that the unionists and some nationalists, such as the Scottish Green Party co-convenor Patrick Harvie, are now demanding. Were Scotland to continue to use the pound without permission, rather than establishing its own currency or joining the euro, it would do so at the cost of having no central bank, breaching one of the conditions of EU membership.

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This is just one of the stumbling blocks to what Mr Salmond insists would be the swift accession of an independent Scotland to the European club. There is no precedent for a secessionist state joining the EU and Mr Barroso has made it clear that Scotland cannot hope simply to inherit the UK’s membership. The danger is that at least one of the EU’s 28 member states, most obviously Spain, would veto Scotland’s application to avoid encouraging separatist tendencies within its own borders.

The effect of all of this on public opinion, which has not been surveyed this past week, is uncertain. Mr Salmond’s claim that “bullying” by Westminster and the Commission will backfire to his benefit could yet be vindicated but surely he will struggle now to persuade Scots to vote for full independence when the prospect exists of further devolution, with the retention of the pound and EU membership.

There is a consistent desire among Scots for greater powers, including powers over taxation and public spending, which no unionist politician can afford to ignore. Whatever the outcome of the referendum, the status quo is unsustainable. Only a reconfigured, more federal Union will settle the constitutional tremors that have led to this moment.

Mr Salmond, who has defied the odds so many times, has earned the right to be taken seriously by his opponents. After the recent onslaught, it is time for him to persuade a sceptical public that he can do so again.