So what would have happened to the Royal Bank of Scotland and HBOS had Scotland been independent? The Scotsman quotes an anonymous Edinburgh banker saying “HBOS would have gone bust and RBS would have followed five days later. The Scottish state simply wouldn’t have enough money to rescue two banks of that size as Iceland has done. As it would have been a Scottish problem rather than a British one – they’d both have gone to the wall.” In The Times, Jenny Hjul seductively argues that Iceland’s bankruptcy and Ireland’s woes expose the dangers of the small country model. Salmond even mentioned Iceland as a lodestar. He floated £100m – yes, million – as a HBOS bailout package, bless. With HBOS and Bank of Scotland about to be nationalised, doesn’t it show that you need a big country as a safety valve?
As a proud unionist, I’m all up for arguments that weaken the cause of Scottish nationalism. But I can’t see the credit crisis as one of them. If Scotland was independent, Brown would probably nationalise RBS and HBOS anyway as their network – is of course –British. He’s doing this in the name of stability of Britain, not Scotland. Given that the Icelandic mess will cost the UK taxpayer more than Northern Rock, the odds are that England would have to be as least as generous to Scotland as has been is to Iceland. And if Scotland was in the Euro, per Salmond’s plan, the ECB would be in there like a vulture trying to nationalise the banks of Scotland for the everlasting glory of Brussels.
Salmond can say he’d borrow his way out, or that he would have plenty in his oil fund. And which country is the most solid now? Norway, with its budget surplus of 160% of GDP. Its currency will withstand the onslaught which the pound will be facing soon enough.
Scotland’s independence, of course, ended with the Darien Disaster which led to Icelandic-style bankruptcy and union with England (a fate that may await Iceland at gunpoint, if tensions get much worse).
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