Welsh and Scotish independence..?

Question

If Wales, NI and Scotland became independant and joined the Euro, would the Pound become unstable?

Would the situation, of nearly 20 million (out of 60) people leaving the pound affect it's value considerably and would its value drop by about a third?

The point i'm getting at is, economically would there then be just too many rich people in england to sustaint it's currency if the pound was abandoned by the scots and welsh - in so far as pay and poverty from these nations puts donward pressure on inflation?

9 million scots, 3 million welsh..
still a lot of people to walk away from a currency..

Answer 1

The Pound is a Reserve Currency. It is used throughout the entire world. Even during the Bretton Woods period where the official standard was pegged against dollars or gold, the Pound in the "Sterling Zone," remained the reserve currency. Additionally, Scotland does in fact print its own money or rather Scottish banks do and always have. The British Pound is also used in Scotland and the two trade at parity.

Wales, NI and Scotland could without declaring independence switch to the Euro. The reason is that people use whatever works and people could spontaneously switch. There are places in the United States that accept Canadian currency and show dual prices on their menus for goods and services.

Actually, there are a lot of reasons to reject the Euro as the official currency of Wales, NI and Scotland. First, as many European states have come to regret, they no longer control the monetary policy of their own country anymore and fiscal policy has no impact, anymore than the fiscal policy of New Hampshire impacts the United States much. It is true that Wales, NI and Scotland do not control their own destinty directly, but as a proportion of total representation there is a much larger voice in the pound than there ever would be in the Euro.

Finally, the value of the Pound would not likely drop by a third. If it did it is the people of NI, Scotland and Wales who would pay for it. Those are the people who have to exchange their money in pounds for euros. Imagine the value of the pound fell 1/3 and the Bank of England refused to defend the exchange rate. NI, Wales and Scotland would lose 1/3 of the value of everything they own but could not take advantage of that in increased exports because of monetary union. They would just be poorer. At the same time, the pound would be devalued so exports would skyrocket and British exports in local terms would be 50% more valuable. In effect, Britain would become rich from it and the separating nations in that scenario would bear the entire cost of the transaction.

Answer 2

The population of Wales, Scotland and N.Ireland is more like 10million and it would be unlikely to destabilise the Pound too much. It would be good to be independent though.