Does Chapter 17 of the EU Acquis Scupper Scotland’s Chance of EU Membership?

What is the Acquis?

The EU's 'acquis' is the body of common rights and obligations that are binding on all EU countries, as EU Members. It is constantly evolving and comprises:

'The content, principles and political objectives of the Treaties;legislation adopted in application of the treaties and the case law of the Court of Justice of the EU; declarations and resolutions adopted by the EU; measures relating to the common foreign and security policy; measures relating to justice and home affairs; international agreements concluded by the EU and those concluded by the EU countries between themselves in the field of the EU’s activities.”

“Applicant countries are required to accept the acquis before they can join the EU. Derogations from the acquis are granted only in exceptional circumstances and are limited in scope. The acquis must be incorporated by applicant countries into their national legal order by the date of their accession to the EU and they are obliged to apply it from that date.”

It is split into 35 chapters, each of which are 'closed' in turn during negotiations. Only once all 35 are negotiated and 'closed' can the application proceed to the next stage.

What is Chapter 17 ?

Chapter 17 of the Acquis is the chapter on economic and monetary policy.

"The acquis in the area of economic and monetary policy contains specific rules requiring the independence of central banks in Member States, prohibiting direct financing of the public sector by the central banks and prohibiting privileged access of the public sector to financial institutions. Member States are expected to co-ordinate their economic policies and are subject to the Stability and Growth Pact on fiscal surveillance. New Member States are also committed to complying with the criteria laid down in the Treaty in order to be able to adopt the euro in due course after accession. Until then, they will participate in the Economic and Monetary Union as a Member State with a derogation from the use of the euro and shall treat their exchange rates as a matter of common concern."

Why wouldn't Scotland meet it?

The SNPs currency policy, suggested in their growth commission report And chief on at their conference is for an period of Sterlingisation. That is: keeping using the pounds sterling outside of a formal currency Union. Until 6 tests are met for a new Scottish currency to be launched. Then the new currency would be, at least initially, pegged to the value of £GBP.

There are a number of reasons why Sterlingisation, and pegging, carries large downside risks, but for the moment we will just look at the technicalities.

The key point about using another country's currency is; you don't control monetary policy. Your monetary policy is set by the country whose currency you are using.

That means an independent Scotland could not have a fully functional central bank, could not set its own interest rates, would not have access to quantitative easing and we could not enter an exchange rate mechanism.

As we would not control our Monetary and economic policies, we couldn't bring them into compliance. We couldn't commit to complying to criteria we didn't control. We couldn't treat our exchange rates as a matter of common concern, and we couldn't establish a stable track record in good management of monetary policy.

In short; under the SNPs currency policy it would be *literally* impossible for us to close Chapter 17 of the Acquis.

Could there be a transitional arrangement? ( Exceptions made to bend the rules)

All chapters need to be closed for membership. It has been suggested by some commentators that we would simply ask for, and get, a 'transitional arrangement'. a temporary derogation from the requirements. However, this would be unprecedented, and there is nothing from the EU to suggest this is possible.

In earlier enlargements short transitional arrangements were allowed on specific policies within the Acquis; namely movement of people, and movement of agricultural produce, in the Eastern Europe expansion. This was designed to stop these countries facing an exodus of labour while their wages and living conditions normalised within the single market.

However, there are a number of significant differences.

First:

Any derogations are always strictly time limited. That could not be done with currency. The SNP plan for 'Sterlingisation until 6 tests are met: is open ended. It could take a decade - or the 6 tests may *never* be met.

Second:

Following on from Greece, and the Eurozone crisis of 2008, the EU has specifically stated that it is interpreting and applying its fiscal and monetary rules on a stricter manner. The EUs priority is to protect their economic stability, still under threat.

Third:

For there to be a transitional arrangement that allowed Sterlingisation, the EU would need to agree to integrate an advanced economy into their market where the monetary policy was controlled by an increasingly divergent Brexit rUK - where major economic changes could be made with no oversight or even notification.

To see why EU stability protection would not allow this think of this scenario - Scotland is an integrated EU economy, and overnight the rUK, for its own non-eu conditions, decides to quantitative ease ; devaluing the currency.

Scotland would not get any benefit from that QE in public spending. The key impact would be that value would be wiped off the value of Scotland's currency holdings, and that would have an impact on Scottish trade with the rest of the EU.

There is nothing to suggest the EU would agree to an open ended transitional currency arrangement where UK unilateral decisions could have such an impact.

Fourth:

A Sterlingised Scotland could not meet the Maastricht criteria for EU membership, so would need to launch a new Scottish currency within the EU. This would carry big downside risk and volatility within the bloc, which would not be welcomed by EU stability measures.

It should be noted as well that the EU have advised, in several occasions, that the normal criteria and process would apply. That while they might be sympathetic to Scotland's application, the rules would still need to be met.

What do the SNP say about meeting chapter 17?

Nicola Sturgeon has claimed in interviews that we would join the EU while still using the pound but has shown nothing to back this up.

The SNP *do* have a detailed feasibility study which outlines the expected timeline and requirements to meet each chapter of the Acquis including chapter 17, however when it was requested under FOI they initially denied the research existed, then delayed answering the FOI over 2 years, then 'released' it with all the timelines and requirements redacted.

They refuse to say if, how and when we would meet these and other criteria.

CONCLUSION

If Scotland does ever become independent, it can apply for EU membership, but it would not be a quick, easy or certain process.

If the SNP were to campaign for independence by appealing to disgruntled Scottish remain voters, and promising them a quick return to the EU, they will be doing so under a pretence they know is false.