Scotland has punched above its weight for centuries, bringing the
world Adam Smith, the father of the free market, as well as the
steam engine, television and penicillin.
And there are more pressing reasons to pay heed to a Sept. 18 vote
which could see Britain lose 5.3 million Scots.
A lot of energy has been expended arguing whether an independent
Scotland could join the European Union. Even more telling would be
its absence from the debate about whether the rest of Britain should
remain part of the EU.
Overall, Scots are more pro-EU than the English and if they voted to
secede this year would not get a say in a planned 2017 referendum on
Britain's place in Europe.
As a result, the chances of England, Wales and Northern Ireland
voting to quit the EU would rise. Scotland may only account for
around 4 million of the UK's 45 million voters but with opinion
finely balanced they could prove decisive.
Among the international factors here is that of Britain's main ally,
the United States. It has been reserved about its view of the
Scottish debate but has made it abundantly clear that it wants to
see Britain at the heart of the EU.
Secessionists are trying to use the EU question to their advantage
in the Scottish campaign, hoping it will help shift opinion polls
which suggest the campaign to remain part of the UK is holding onto
a slim lead.
Scottish nationalist (SNP) leader Alex Salmond says the biggest
threat to Scotland staying in the EU is Prime Minister David
Cameron's pledge to hold an in-out EU referendum. He can now point
to anti-EU UK Independence Party's win in European elections to
emphasize the threat of Scotland being dragged out of the bloc by
Scottish independence would also alter the calculus for national
politics in the rest of the country.
The opposition center-left Labour party has 41 members of the
Westminster parliament in Scottish seats while the center-right
Conservatives have only one.
Take those out of the equation and the path for Labour to win power
looks daunting, though whichever way the Sept. 18 referendum goes
Scots will get to vote in national British elections next year.
That raises another uncertainty. If Labour won in 2015, it may have
to call an early election once it loses its Scottish MPs if it was
robbed of its parliamentary majority.
"There would probably then be a more or less immediate general
election for the Westminster parliament, probably in late 2016 or
early 2017, with ... a significant probability of a Conservative
victory," Nomura bank said in a recent note.
That loops back to Britain's EU membership since the Conservatives
are committed to holding a plebiscite while Labour is not.
The irony is that the Conservatives have traditionally been the
strongest defenders of the union and Cameron's position could come
under threat if the Scots vote to go their own way, destabilizing
his party as it moves into election mode.
For investors, there are many unknowns to ponder.
What share of Britain's debt would Scotland take? Would it retain
the pound? Would it get the lion's share of oil revenues from the
North Sea, estimates of which vary wildly? Would it follow a
different fiscal policy?
All of the above will lead to nervousness as the referendum nears
though markets continue to price in a "No" vote.
What is certain is that minus Scotland, Britain would slip down the
pecking order from being the world's sixth largest economy.
There could even be questions about whether it continued to merit a
seat on the U.N. Security Council and be a member of the Group of
Seven economies at a time when power is shifting to the world's big
Ratings agency Moody's says an independent Scotland could expect an
investment-grade credit rating but face higher borrowing costs than
the rest of Britain. If negotiations with London on how to separate
proved acrimonious, its rating would be lower.
Rival ratings agency Fitch said the UK would need longer to recover
its triple-A debt rating if Scotland split away.
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The Scottish National Party wants to keep sterling but that is
opposed by all the main political parties in London. On the foreign
exchanges, the pound could slide after Scottish independence.
The $2.5 trillion UK economy is Europe's biggest destination for
foreign direct investment, a key driver of currency flows. Without
Scotland - assuming it did not keep the pound - those flows would
The British Treasury has said it would honor all existing
government debt regardless of whether Scots vote for independence, a
move aimed at preventing bond market volatility.
Oil giants Royal Dutch Shell and BP have said they want Scotland to
remain part of the UK and insurance and pensions heavyweight
Standard Life has warned it could move partly out of Scotland if it
"Given a choice, we want to know as accurately as possible what
investment conditions will look like 10 or 20 years from now," Shell
chief Ben van Beurden said in March.
Britain has four submarines carrying Trident nuclear warheads
operating out of the Faslane naval base in Scotland. The SNP wants
nuclear weapons removed from an independent Scotland at the earliest
Former British defense chiefs warned against such a move last month,
saying it would cost billions of pounds, cut thousands of jobs and
create resentment internationally.
At a time of heightened tension with Russia, NATO allies are likely
to be concerned, although it would likely take years to move the
The future of the nuclear submarines are seen by some as one of
Scotland's main bargaining chips in getting what it wants in the 18
months of negotiations that would follow a "Yes" vote to work out
how it leaves the United Kingdom.
The Royal United Services Institute think tank has warned that
London and Edinburgh would have to work hand-in-glove on security
and intelligence matters.
If they did not, there was a risk that weak Scottish capability
could make it vulnerable to foreign intelligence and terror networks
and provide a route for them into the UK.
SECESSIONISTS IN SPAIN
Europe is watching keenly, none there more so than Spain.
The government in Madrid has refused to allow Catalonia to hold a
vote on independence in November but the region has vowed to press
ahead with a non-binding referendum anyway.
If that is blocked, Catalan President Artur Mas said he would call
an election which would be seen as proxy vote on independence.
A Scottish vote for independence would embolden the Catalans. That
may be one reason why officials in Brussels have told the Scots that
it would be difficult for them to join the EU.
New states have to be voted in unanimously by existing members and
Spain could well block it.
Scottish independence could also have a destabilizing influence on
Northern Ireland which has been thrown into a bout of soul-searching
by the detention of Sinn Fein leader Gerry Adams for questioning in
connection with the 1972 murder of a mother of 10.
He was released without charge.
Though a 1998 peace deal largely ended decades of sectarian
violence, Northern Ireland remains deeply split between Protestants
who mainly want to remain part of Britain and Catholics tending to
favor unification with Ireland.
The unionists have particularly close links with Scotland while
those who favor uniting with Ireland could seize upon a Scottish
"Yes" vote to press their claims more forcefully.
(Editing by Jeremy Gaunt)
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