A leading economist has advised Alex Salmond to ditch his plans to share the pound and warned he needs to start planning now for a new Scottish currency.
DeAnne Julius of the Bank of England’s Monetary Policy Committee said SNP hopes to set up a sterling zone would cancel out the economic benefits of independence.
The former CIA analyst said negotiations would likely lead to strict controls over a separate Scotland’s spending and borrowing by the Treasury in London.
Instead, she said only by having its own currency, the Scottie, would a separate Scotland be able to control its own economic levers.
However, Ms Julius warned there would be “clear costs” establishing a new currency and said: “Transaction costs would increase for Scotland’s trade, including that with the rest of the UK.
“The Scottie’s exchange rate could fluctuate wildly if the new country’s government lacked or lost credibility in international markets.”
She admitted there are successful examples of other small European countries with their own currencies, such as Norway, Sweden and Denmark.
A Scottish Government spokesman said: “An independent Scotland will keep the pound and a sterling area, with the pound as a shared currency, will be in the overwhelming economic interests of the rest of the UK.
“It would be impossible for Scotland to face tighter budgetary controls than we do today when our overall budget is set by Westminster.”