Olli Rehn, vice president of the European Parliament and former commissioner for economic and monetary affairs, said in a letter to chief secretary to the Treasury Danny Alexander the use of sterling in Scotland is prohibited unless Westminster grants explicit permission.
All three main political parties have already refused to allow Scotland to retain the pound in case of a ‘Yes’ vote, making this option illegal under EU law, which requires a country to have access to an independent central bank to use a currency.
Alex Salmond, Scotland’s First Minister, argued this would not stop the country from using the existing currency, but Rehn has moved to prevent that option.
He wrote: “As to the question whether ‘sterlingisation’ were compatible with EU membership, the answer is that this would simply not be possible since that would obviously imply a situation where the candidate country concerned would not have a monetary authority of its own and thus no necessary instruments of the EMU.”
Sterling fell by almost a cent against the dollar on Tuesday, as the latest YouGov poll showed growing support for the ‘Yes’ campaign.
The currency moved below $1.65 to trade at $1.6468, while its volatility saw the biggest rise since 2008.
Meanwhile, asset managers have been turning to US-dollar denominated assets in anticipation of further falls in the British pound as the Scottish referendum looms.