Independent Scotland faces decade of austerity, NIESR warns The report, titled Scotland's Currency Options, also estimated that the devolved country would require minimum spending cuts and tax rises of 5.4pc of GDP in the 10 years from independence to bring its debt levels towards the Maastricht Treaty agreed debt limit of 60pc of GDP. Based on rough estimates, this equates to a one-off fiscal shock of about £9bn in 2016, or 5.1pc of GDP, which Mr Armstrong said represented a "significantly" larger tightening than Chancellor George Osborne's current austerity plans. The Coalition government is expected to implement £27bn of cuts in the 2015 financial year - equivalent to 1.5pc of GDP. Mr Armstrong said it would be more likely that Scotland would introduce gradual cuts over 10 years, but at a far greater cost because of higher debt interest payments. Mr Armstrong also said that the fiscal adjustment left little room to manoeuvre for Scotland, and warned that the economy could quickly descend into a Greek-style "downward spiral" in the event of a recession or sudden fall in the oil price . "Given that bad things happen - you go into recession occasionally or oil prices just drop - you need to have enough degrees of freedom so that if this happens, you can react with policy," said Mr Armstrong. NIESR said Scotland's best option would be to create its own currency and tie it to the pound, enabling it to control its own monetary policy, such as interest rates, to stabilise its finances. Mr Armstrong also warned that Scotland should not rely too heavily on oil revenues. "People don't know how much oil there is down there, but they do know it's going to run out," said Mr Armstrong. The oil economy is growing at a slower rate each year, so the rest of the economy has to grow faster and faster to achieve the same growth rate. The report suggested that Scotland should agree to swap its oil and gas reserves for a reduction in its debt burden. "An oil for debt swap - where the oil revenues would pass over to the UK in exchange for a large write down of the debt that Scotland would otherwise assume - would greatly reduce the economic risks of independence, although there may be significant political limitations to this possibility," it said. The Scottish government insisted that an independent Scotland would be in a "stronger financial position than we are at present." A spokesman said: "Scotland is currently paying for Westminster's economic mismanagement. The reality is that if we remain under Westminster control, Scotland will by 2017/18 see £6bn of our revenues go toward paying the debts built up by the failure of successive UK governments to properly manage the economy. Mr Armstrong also noted that splitting off to become a smaller, more stable economy not burdened by huge financial institutions could also brings benefits for Scotland. "Let's not pretend that the UK does everything right," he said. Just look at what happened to our financial system.