The Scottish question

August 5, 2014

First Minister of Scotland Alex Salmond smiles as he watches a diving event at the 2014 Commonwealth Games in Edinburgh

Scottish nationalist leader Alex Salmond and former British finance minister Alistair Darling, who is fronting the campaign to remain part of the United Kingdom, go head-to-head in the first and possibly only live television debate of the campaign. It is a bigger moment for Salmond, Scotland’s First Minister, who must garner a shift in the polls which consistently put his “Yes” campaign significantly behind with the referendum only six weeks away.

At the last British general election, Liberal Democrat leader Nick Clegg was widely perceived to have won the leaders’ debates yet it didn’t translate into votes. There are, however, a large number of “don’t knows” to play for in Scotland and Salmond is by common consent the more charismatic figure and slick orator.
During the two-hour debate, Darling is likely to highlight the uncertainty over whether an independent Scotland could retain the pound and automatically be part of the EU and how the nationalists would fund their public spending pledges.

The “No” campaign can also point to the greater devolved powers all the major parties are promising Edinburgh should the Scots vote no. Overnight, Britain’s three main national political parties all said they would seek further powers for Scotland in the event of a “No” vote, in the areas of fiscal responsibility and social security.

The latest opinion poll, by Survation, showed 46 percent of voters would back the “No” campaign and 40 percent will vote “Yes”, with 14 percent saying they hadn’t decided. Some polls show up to a quarter undecided. Should Salmond win the debate decisively and move the dial it will be interesting to see if markets being waking up to the chance of Britain fracturing after the Sept. 18 vote.

Israel and Hamas have agreed a 72-hour truce mediated by Egypt in an effort to build negotiations on a more enduring end to the month-old Gaza war. After the experience of other truces in recent days, whether it will hold is anybody’s guess. It took effect at 0500 GMT and minutes beforehand Hamas launched a salvo of long-range rockets. Israeli ground troops have withdrawn from the Gaza strip and Jerusalem is expected to send delegates to talks in Cairo to seek a longer-term deal.

Iraq’s Prime Minister Nuri al-Maliki ordered his air force for the first time to back Kurdish forces against Islamic State fighters after the Sunni militants made another dramatic push through the north. On Sunday the Islamic State inflicted a humiliating defeat on the Kurds with a rapid advance through three towns to reach the Mosul Dam, acquiring a fifth oil field to fund its operations along the way. That opened the possibility of the militants flooding major Iraqi cities or withholding water from farms.

The Lebanese army advanced into a border town attacked by Islamists at the weekend in the most serious spillover of the three-year-old Syrian civil war into Lebanon. The Beirut government said the first major incursion by hard line Sunni militants would not go unpunished.

Ukraine said it was in talks with Moscow over the return of 311 Ukrainian soldiers and border guards who had been forced by fighting with separatists to cross into Russia, but Russian border authorities said the troops were seeking asylum as a propaganda tit-for-tat erupted. Kiev’s troops have now all but encircled the separatists’ second-largest stronghold of Luhansk and rebels have declared a “state of siege” in Donetsk, the largest city they hold. Russia has announced military exercises near the border with Ukraine including missile-firing practice and “coordination between aviation and anti-missile defence”.

Service sector PMI surveys for euro zone members and Britain will not be decisive for either the European Central Bank or Bank of England policy meetings later in the week. Both will be on hold. But the data will fill in some of the background noise policymakers are dealing with.

The euro zone seems to be rebounding somewhat from what looked like a very poor second quarter but companies are still cutting costs to attract business at a time when inflation seems to be heading resolutely towards zero.  Britain’s economy is chugging along much more nicely – two consecutive quarters of 0.8 percent growth – yet there is a near total absence of wage pressures which eases any urgency for the BoE to act.

Growth in China’s services sector slowed sharply in July to its lowest level in nearly nine years, suggesting a still-fragile economic recovery which may require further government support.

Hundreds of troops have been deployed in Sierra Leone and Liberia to quarantine communities hit by the deadly Ebola virus, as the death toll from the worst-ever outbreak reached 887 and three new cases were reported in Nigeria. International development banks on Monday committed $260 million in emergency loans for  Liberia, Sierra Leone and Guinea.

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