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Treasury warns of risk to sterling if Scotland gains independence

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The Treasury has warned an independent Scotland could have dire implications for sterling, leaving the UK pound vulnerable to speculators.

The warning comes after the Tresaury indicated it may not agree a formal currency union with an independent Scotland unless the country gets its books in order, reins in public spending and cuts its debts. 

According to the Guardian, Chancellor George Osborne has said a currency pact may not be in the UK’s interests, as it could leave the pound exposed to speculators in the market.

“Even with constraints in place, the economic rationale for the UK to agree to enter a formal sterling union with a separate state is not clear,” said the Treasury in a report.

“If financial markets perceive that a currency union (or a fixed exchange rate regime) is not economically or politically durable, or only a transitional arrangement, speculative activity can put immediate pressure on the arrangement.”

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