Over the past week, Scots have vividly seen the institutional boulders the EU and the UK have dropped on Scotland’s road to independence. Manuel Barosso and George Osborne clearly do not believe in facilitating self-determination through cooperation, and are using threats of expulsion to cower Scots into voting for continued Westminster subservience.
While becoming a separate member state within the EU and forming a currency union with the r-UK may remain the preferred objectives of the Scottish government after a ‘yes’ vote, we have seen that the UK is willing to break up its currency and shoulder all of its debt, and the EU is willing to deprive current citizens of their rights to maintain the current borders of their member states. Although we can hope that prudence, reason, and self-interest will prevail after a ‘yes’ vote, last week clearly demonstrates we can no longer count on it.
While the EU and the Sterling Zone have an interest in being expansionist rather than exclusionary, alternate plans must be adopted in case they really are that suicidal. Besides, will Scotland really want to join such dysfunctional institutions if there are alternatives which afford them more liberty?
The Catalans are running out of patience with EU intransigence, and are discussing simply joining European Free Trade Association rather than haggle over EU membership with a Spanish veto. Scots should also consider this option. Currently composed of Iceland, Norway, Switzerland, and Lichtenstein, EFTA members enjoy many of the same rights as EU member states, but their entry cannot be blocked by EU member states because they are not members. Admission simply requires approval of the EFTA council.
EFTA members are not represented in the European Commission or the European Parliament, but inhabit the same economic and social space as the rest of the EU. They must abide by many of the same EU laws and regulations, while only having an advisory role in drafting them. Members have the same rights as EU members concerning the free movement of persons, goods, services, and capital.
Scotland would make no financial contribution to EU, nor be the recipient of any subsidies. Given that Scotland’s vast oil wealth would likely make it a net contributor, Scotland could set up its own system of farm and other subsidies that the EU currently finances.
This may ultimately be a much more appealing option than going through rancorous negotiations with the EU and the UK after a ‘yes’ vote, leaving Spain, the UK, or even Croatia with the option of vetoing Catalan or Scottish adhesion. Why not seek to join the EFTA, and if accepted would thus alleviate the immediate crisis of treaty cancellation after independence. Scotland can take its time and consider whether to join the EU, carefully considering the options as to whether it is in their best interests or not.
In terms of currency, the Scottish government must propose a credible alternative if the UK government insists on blocking a currency union, even though this is the least disruptive option. Scotland can emulate Gibraltar and the Falkland islands, and does not need UK permission set up a currency board and stabilization fund to peg the Scottish pound to the UK pound. Trade and commerce with the r-UK can continue unabated, as Scots consider their longer-term options.
An important consideration of a currency board is that the Bank of England would not be the lender of last resort. However, sound financial regulation can mitigate risk far better that the BoE has shown itself capable of doing. Scotland can establish exemplary banking rules, and a stabilization fund using the oil wealth. Perhaps the EFTA members can seek a closer banking and currency union. Only independence will afford the opportunity.
In any case, the short-term bluster from the EU and the UK must not obscure the magnificent future held by Scotland and Catalonia if they play their cards slowly and carefully, knowing that they are in the drivers seat. When threats of expulsion arise, however improbable and illogical, there must be a credible alternative just in case they carry through regardless of the collateral damage. If the UK and the EU don’t want Scotland to participate as a willful and productive partner, there are other alliances and currencies that can be devised, that are immeasurably fairer and beneficial than what is currently not on offer.
The unionists are rattled, the threats will keep flowing for the next seven months with increasing scope and intensity, and negotiations promise to be a nightmare. The more the Scottish government thinks beyond how they initially envisaged independence, the more leverage they will have, and the brighter future for Scotland they can build.
Bonus: given that George Osborne has stated that Scotland will be expelled from all unions with the r-UK if they vote ‘yes’, that includes the Union of the Crowns. Scotland can go directly to a Republic with an elected head of state. Woo hoo! Freedom!
First published on Newsnet.scot on 18 February 2014 as part of a series of articles on constitutional issues published between July 2012 and Sept 2014.