During the Scottish referendum debate in 2014, we heard a lot of discussion of what would happen to monetary policy.

Scotland already issues its own banknotes, backed by the Bank of England.

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Issuing Welsh money would be a new development in Wales, but it’s an area where independence would allow us to make the choice that’s right for our own economic circumstances.

There are at least currency options, each with their own pros and cons:

Keep the pound in a formal currency union:
This would cause minimal disruption, but it would mean retaining the Bank of England as the lender of last resort and BoE's interest rates.

As it would require a fiscal union with England, would Wales be truly independent?

Keep the pound (or another currency) as a substitute currency:
A substitute currency is used instead of/in parallel with local currency.

The main global currency substitute is the US dollar, while Montenegro use the euro without being in the eurozone or EU.

A Welsh currency pegged to the pound (or another currency):
It would require Wales to establish its own central bank with sterling remaining legal currency.

This means that the Welsh currency value rises and falls in line with sterling, regardless of the Welsh economy.

This is in line with what Ireland did for many years, and then over time let their currency free-float with sterling - until Ireland finally joined the Euro.

A Welsh currency + exchange rate
Wales has complete control over monetary and fiscal policy, setting interest rates and controlling money supply.

The benefits of having monetary sovereignty are vast, as Wales is not constrained by the need to run a balanced budget over time.

In the short-term, to avoid large currency fluctuations, it may be expedient to peg a new Welsh currency to an existing currency.

Switzerland (a member of the Single Market via its bilateral trade agreements) has its own currency, which is largely pegged to the Euro to avoid large increases in the valuation of its currency, and is seen as a safe haven for money during financial difficulties in Europe.

Join the euro
This would be an option if Wales decided to be a member of the EU, but would require a Welsh currency in the interim period, with controls on public spending deficits and voluntary membership of the European Exchange Rate Mechanism (ERM II) for 2 years.

It would make trade with the EU easier, and may boost foreign tourism; but it could also mean being dragged into a European fiscal union and highly-charged referendums on Wales both re-joining the EU and the euro itself a potential rerun of the 2016 EU referendum campaign.

At the end of day, currency would be a matter for us all to decide, as part of independence negotiations.

Making the right choice would be about choosing what best suits our economic circumstances at that time.

But the point is that there are *plenty* of options available.

There’s no need to listen to scaremongering about Wales being forced to adopt an unsuitable currency against our will.

Independence is about using the tools we have to help us choose the option that works best for Wales.


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