Osborne questions currency of an independent Scotland

LONDON (AFP) - British finance minister George Osborne cast doubt on Sunday on whether Scotland could keep the pound as its currency if voters opt for independence in a referendum next year.

The Chancellor of the Exchequer said a currency union could only work as part of a political and economic union, as he made his case against a separate Scotland ahead of a key report on the issue this week.

A referendum is set for Sept 18, 2014, when Scottish voters will be asked the yes/no question: "Should Scotland be an independent country?"

Scotland's First Minister Alex Salmond and his Scottish National Party (SNP) want to keep sterling in the event of a "yes" vote.

However, in an article published on Sunday, Mr Osborne and his Treasury chief secretary, Danny Alexander, said it was "not as simple and straightforward as Scottish government ministers pretend it is".

Independence proponents were "tying themselves in knots", they said.

"They know in their heart of hearts that the economic and political union we have across the UK does work. And that a formal currency union can only work with political and economic union." "The conclusion is clear," they wrote in a joint article published on the Treasury's website.

"The pound we share now works and it works well. Under independence all the alternatives are second best."

The British government is set to publish a report on the implications of Scottish independence for Britain's currency on Tuesday.

London's political parties including Prime Minister David Cameron's Conservatives want Scotland to stay in the United Kingdom, arguing its 5.3 million people are better off within the Union.

Scottish Deputy First Minister Nicola Sturgeon defended her devolved government's intent to keep the pound, saying it was "every bit as much Scotland's currency" as the rest of Britain's.

"An independent Scotland will keep the pound because it is in everyone's best interests, and to try and suggest otherwise simply flies in the face of the fact," she said.

"For a start, the pound is every bit as much Scotland's currency as it is that of England, Wales and Northern Ireland, and as such, it is simple common sense that we should continue to use it as an independent country." In a blog on his party's website this week, Salmond insisted that independence would boost Scotland's economy, arguing that it would reap the benefits of increasing investment in North Sea oil.

Salmond's economic advisers said in a report published Feburary that Scotland should keep the pound if it votes to split from Britain in the 2014 referendum.

The alternatives would be adopting the euro or a new currency.