Alex Salmond's Kamikaze Negotiating is a Millstone Round Scotland's Neck

John Swinney, the Finance Secretary for Scotland has repeated the SNP government's threat to walk away from Scotland's share of the UK debt.
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2014-08-27-400927395_ff8dacf934_o.jpgImage courtesy of goforchris

John Swinney, the Finance Secretary for Scotland has repeated the SNP government's threat to walk away from Scotland's share of the UK debt. Let me repeat that again: the man who is currently in charge of Scotland's economy, who in an independent Scotland would be charged with selling Scottish government debt to the bond markets in order to fund hospitals, schools and pensions is, like his boss Alex Salmond, stating that Scotland would refuse to pay its share of the national debt if there was no currency union.

Part of that debt was, of course, incurred as a result of the UK government's decision to bail out Royal Bank of Scotland after its near collapse at the hands of Fred Goodwin, a burden shared between taxpayers in all parts of the UK.

Leaving aside the question of whether bond purchasers would wish to buy Scottish government debt when the political leaders responsible for Scotland's economy are making such wild statements, and leaving aside how the credit ratings agencies would respond, there is an equally important point here about Scotland's prospects of EU membership. An issue that was underlined this week after Ruairi Quinn, a former president of the EU's finance council predicted that Belgium and Spain would block an independent Scotland's application to join the EU.

This is where the Spanish government in Madrid might just have something to say about the debt default threats being made by the current leaders of the Scottish government.

In the stand off between Catalonia and Spain over whether the Catalans can become independent, the shoe is rather more on the other foot compared to the Scotland and UK situation. Catalonia is one of the wealthiest parts of Spain and is one of the largest tax contributors to the Spanish economy. As a matter of pure national self-interest, can anyone imagine the Spanish government doing anything domestically or internationally to encourage any part of its territory, whether Catalonia or the Basque region, to secede and then (adding insult to injury) to renege on paying its share of the national debt?

Of course not, which is why domestically Spain has refused to allow Catalonia to hold a referendum on independence. The Catalan independence project recently suffered a blow after Jordi Pujol, the six term leader of Catalonia, who "became a master at convincing Catalans that they were victims of Madrid" (remind you of anyone?), admitted that his family had hidden money in Switzerland for the past 35 years. However, the separatist issue is not going away and Artur Mas, the current Catalan leader, has vowed to go ahead with an independence vote regardless.

What happens in Scotland may well affect the fate of separatist movements across Europe, the integrity of EU member states, and the fate of the European Union itself. Anyone in the Yes Campaign in Scotland who thinks that the relationship between Catalonia and the Spanish Government will not affect Madrid's negotiating position on whether and on what terms Scotland can join the EU is deluding themselves.

Which brings us back to whether it is a very sensible negotiating strategy for Messrs Salmond and Swinney to threaten a debt default if Scotland fails to get its way on a currency union.

Self-determination for Scotland is not a one way street. Mr Salmond and the Yes Campaign cannot say 'we should get our own way' on independence, a currency union, and a host of other issues, and then issue threats if other people in the rest of the UK (rUK) don't want to enter a currency union, just as people in rUK have shown no wish to enter the euro (as I've discussed previously here). Indeed, Scottish voters have been just as much against joining the eurozone as people in rUK which is why Mr Salmond no longer chooses to characterise the pound as a 'millstone round Scotland's neck'. It would be up to the will of people in the rest of the UK through their representatives in Parliament to decide whether they wish to participate in such a currency union, just as it is the right of other member states of the EU to decide the terms and timing of Scotland's eventual EU membership.

Every issue which has been brought up in this surreal debate on Scottish independence would be subject to negotiation, but it is not a very sensible negotiating strategy in the real world for Mr Salmond or Mr Swinney to be issuing threats on debt default. Responsible governments seek to reassure sovereign debt buyers and the credit ratings agencies so as to ensure lower mortgage payments for their citizens and lower borrowing costs for the state. Only Alex Salmond seems to think that unnerving bond markets is good strategy.

Throwing the debt dummy out of the YeSNP pram and threatening to default may get Mr Salmond applause from his supporters but it is unlikely to impress either grown-up buyers of sovereign debt or the leaders of other EU countries whose goodwill would be crucial for an independent Scotland to prosper.

David Miles is a Carnegie Scholar at the University of St Andrews researching American, British and German constitutionalism. He is a contributor at the Scotsman, the Daily Beast and Huffington Post.

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