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'Sterlingzone' must cut both ways: EU official

BRUSSELS--England would need to grant Scotland oversight powers over London budgets and taxes if an independence referendum leads to a new “sterlingzone” currency union, a top eurozone official said.

“If you had a 'sterlingzone' of England and Scotland, you'd need probably a joint process of scrutiny of budget plans — so that Scotland [too] could veto aspects of the English budget,” leading European Union official Thomas Wieser told AFP in an interview.

A cross-party campaign to keep the United Kingdom a unitary state will be launched later Monday, and the question of how an independent Scotland would share the use of sterling with the British state will be a key theme.

Unionists argue that keeping the pound would leave an independent Scotland under London fiscal control.

U.S.-born Austrian Wieser suggests that the eurozone crisis shows markets would demand the rules underpinning a sterling union to cut both ways — Edinburgh and London sharing rights as well as responsibilities.

Wieser, who chairs the Brussels-based Euro Working Group that prepares Eurogroup finance ministerial talks, said both partners in a sterlingzone would need to hold powers to “put a brake on any behavior that may lead to deficits or debt being created.”

Referring to huge variations in eurozone borrowing rates, he said: “The problems we have at present show very clearly the degree of financial market supervision and fiscal union that are required in order to retain or run successfully a monetary union.

“We are at the beginning of a debate — how much of a fiscal union is possible, how much is desirable and how much is necessary? We simply don't know,” Wieser said.

EU leaders are to meet at a summit in Brussels on Thursday and Friday in an attempt to hammer out a roadmap towards banking and fiscal unions within the eurozone amid negotiations over bailouts for Greece and Spanish banks.

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