An
independent Scotland "would fail within a year" if it kept the pound
informally and refused to take on its share of the national debt, according to
an influential think-tank.
The
National Institute for Economic and Social Research warned that such an
approach would lead to "unprecedented" austerity in a
newly-independent Scotland. Meanwhile, any attempt to effectively default would
see Scotland get a "junk" credit rating from international investors,
who would then push up borrowing premiums or bar Scotland from capital markets.
The
think-tank also indicated that it either risked isolating Scotland in Europe or
setting off a "domino effect" of other European nations defaulting on
their debts.
The
think-tank said: "If Sterlingisation is combined [with] repudiating
Scotland’s fair share of UK debt, we expect this regime would fail within a
year."
This
comes as Mark Wilson, the head of insurance giant Aviva, warned that the cost
of borrowing would "almost certainly go up to cover the increased risk of
being a smaller independent country".
The
three main Westminster parties have ruled out sharing the pound in a formal
currency union arrangement, but pro-independence campaigners have insisted that
an independent Scotland would still use it informally, which has sparked
warnings that it would need to make drastic cuts or tax rises to build up
sufficient currency reserves.
Meanwhile,
Alex Salmond has reportedly laughed off questions of how the UK government
would react if a newly independent Scotland refused to shoulder its share of
the national debt, saying: “What are they going to do – invade?”
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