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Scots' independence dreams get rude jolt

The Royal Bank of Scotland, the second largest bank in Europe, needed a $61-billion bailout this month to stay afloat.

Associated Press

The Royal Bank of Scotland, the second largest bank in Europe, needed a $61-billion bailout this month to stay afloat.

LONDON — In these tough economic times, Scotland has two coveted commodities — oil and whisky.

The Scots — or at least some of them — also have a desire for independence from England, which has ruled them for 300 years. Nationalists have long argued that Scotland could easily stand on its own as a separate country because of its North Sea oil, thriving tourism industry and all those scotch distilleries that keep 41,000 people happily employed.

Then along came the global financial crisis.

Unfortunately for the Scottish independence movement, two of the biggest casualties have been Scottish banks — HBOS and the Royal Bank of Scotland, the second-largest bank in Europe. British Prime Minister Gordon Brown, a Scot himself, was forced to bail them out this month at a total cost of $61-billion.

The whopping rescue has prompted a lot of "We told you so's'' from unionists, who say it's a good example of why the United Kingdom should remain united.

"It is difficult to argue the Union is a shackle when a great deal of taxpayers' money is heading from South to North to rebuild the balance sheet of Scottish banks,'' the Times of London said. "The Union that has served (Scots) for three centuries may be the only asset in Scotland that has not depreciated sharply over the past two weeks.''

Though part of the United Kingdom, the Scots have distinct legal and education systems and, since 1998, their own parliament. The 5-million Scots enjoy more benefits than people elsewhere in the U.K., including free tuition in world-class Scottish universities.

As the traditional steel, mining and shipbuilding industries declined, Scotland shifted toward a service-oriented economy and now ranks among Europe's major financial centers. That's why the banking debacle has been such a stunning blow to the famously frugal Scots.

The Royal Bank of Scotland, founded in 1727, was initially praised for last year's takeover of the giant Dutch bank ABN AMRO. Analysts called the $93-billion deal a "milestone in banking history'' that made the Royal Bank a global powerhouse and underscored the "vitality'' of the Scottish economy.

Critics, though, said Royal Bank overpaid. And like others that thought the era of steady growth would last forever, the bank became so overextended and so undercapitalized that the British government had to step in Oct. 13 and partially nationalize it. Among those forced to resign was the CEO, Sir Fred Goodwin, who used to visit the bank's far-flung holdings in a $34-million private jet.

The banking meltdown has naturally focused attention on Scottish First Minister Alex Salmond, head of a pro-independence party, who once envisioned an "arc of prosperity'' including Scotland and other small European countries. With nearby Ireland now in recession and Iceland bankrupt, that goal would appear to have lost some steam.

Salmond remains defiant.

"The commentators who have seized on the global financial crisis to talk down Scotland's prospects should remember one thing above all — this happened on the U.K. government's watch and it happened within the Union,'' Salmond wrote last week in the Independent.

"The age of irresponsibility is now over. The new age of responsibility means Scotland taking charge of its own destiny with independence.''

Salmond's Scottish Nationalist Party has called for a 2010 referendum on the issue, although a poll last summer found that only 36 percent of Scots favor leaving the United Kingdom. The recent banking crisis and plunge in oil prices could further dilute support for independence.

But here's something to raise a glass to — Scotland's whisky exports have soared 14 percent this year after hitting record levels in 2007.

As an industry spokesman told the Scotsman newspaper: "Whilst consumers may be reluctant to buy a new car or property, they continue to buy and enjoy premium spirit drinks such as whisky."

Susan Taylor Martin can be contacted at susan@sptimes.com.

Scots' independence dreams get rude jolt 10/25/08 [Last modified: Monday, October 27, 2008 4:50pm]

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