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Catalonia: independence or more autonomy?

The essential

The elections held in Catalonia have delivered a clear verdict: the separatists have gained ground and were even victorious at the polls. Today, hopes/fears surrounding Catalonia's succession from the Kingdom of Spain have to be taken seriously.

This situation is obviously a real cause for concern in Madrid. However, the path to independence is complicated and strewn with hazards. How to secede? How to reconcile both pro-independence parties on the matter of Europe? Why should Madrid accept Catalan desires for independence, which go against the Constitution? How will the other European countries react? Will the separatists be happy with wielding increased negotiating power in the aftermath of the elections: more autonomy but no independence?

 

 

Publication

The elections held in Catalonia have delivered a clear verdict: the separatists have gained ground and were even victorious at the polls. Today, hopes/fears surrounding Catalonia’s secession from the Kingdom of Spain have to be taken seriously. A number of questions now have to be answered:

  • Will the vote provide enough room for manoeuvre to the pro-independence parties? The answer is no. There is no question that they won the elections: the Junts Pel Sí (Together for Yes) party won 62 seats, and the Popular Unity party won 10. That represents a total of 72 seats out of 135, i.e. an absolute majority of seats. On the other hand, they won “only” 48% of the vote. In other words, they did not win an absolute majority of all votes cast.
  • Do both pro-independence parties speak with one voice? The answer is no. The largest party (“Junts Pel Sí”) is pro-independence and pro-European. It is mainly a coalition of the Democratic Convergence of Catalonia (CDC), the centre-right party of outgoing Catalan President Artur Mas and the proindependence Republican Left of Catalonia (ERC or Esquerra Republicana de Catalunya). The second pro-independence party (CUP or Candidatura d'Unitat Popular) is a far left party that is anti-capitalist and anti-European. Simply put, it is a party in favour of exiting the European Union. We add that this party wants a unilateral declaration of independence for Catalonia within the next three months, the proclamation of the Democratic and Social Catalan Republic...and the departure of Artur Mas, the leader of Junts pel Sí! In other words, their views differ. So we have two parties that reject Spain, but only one that rejects Europe, too. We add that many voters saw the election as a way to win more negotiating power to reduce the influence 
  • of Madrid in local affairs without really calling for complete independence.
  • How can independence be achieved? Most media and analysts are all abuzz about holding a referendum in Catalonia. Why not? However, it should be mentioned that holding a referendum is against the Spanish Constitution. Therefore, Madrid would not recognise the results of a referendum on independence. The Catalan Government could also declare independence. Simply put, either the Catalan Government negotiates with Madrid on holding a real referendum on self-determination for Catalonia, similar to the one that was held in Scotland, or its starts down the path toward unilateral secession.
  • What can the pro-independence parties actually do? Declaring independence like some former Socialist block countries did, hoping the new state would be recognised by its partners, would first require creating a Catalan State, Catalan administrations, a Catalan currency, a Catalan central bank, and so on. In short, a long, particularly dangerous road...in the knowledge that such a declaration would have no legal value in the eyes of Madrid.
  • Would Spain recognise a Catalan State? The answer is no. The Spanish Constitution prohibits the secession of any part of the Kingdom and any measure in violation of the Constitution would be challenged before the Constitutional Court. The Spanish Parliament, it should be reiterated, recently passed a reform of the Constitutional Court that allows it to remove “outlaw” officials from office. This reform could (should?) target the outgoing President of Catalonia, Artur Mas, who, as we remember, organised an illegal popular consultation on Catalan independence (80% of the voters voted “yes” to secession) in November 2014. Lastly, we add that the Spanish Government could legally annul Catalan political autonomy (in virtue of Article 155 of the Spanish Constitution).
  • Does the fate of Catalonia hinge on the upcoming Spanish elections in December? If the People's Party (Partido Popular or PP) is returned to power, then any and all discussion between Barcelona and Madrid will be
  • impossible. Mariano Rajoy has already demonstrated his intransigence on the subject of Catalan independence. But if the Spanish Socialist Workers' Party (PSOE) is victorious at the polls, then dialogue between Madrid and Barcelona would be much easier. The PSOE is in favour of federalism but not independence. Will federalism be enough to satisfy the separatists? Not as far as the CUP is concerned but perhaps for Junts Pel Sí.
  • Would Europe recognise Catalonia as an Independent State? That does not seem likely as Spain is an integral part of Europe. It would never recognise a Catalan State unless Spain itself does so first. The issue concerns the European Union, and not the ECB, which is not a political institution and has no role in recognising a State. Morever Catalonia should be excluded from European Union as long as it is not recognised as a country.
  • Would Catalonia be allowed to join the EMU? The answer is yes, if it meets the criteria for membership (Maastricht criteria) and if it is recognised as a full-fledged State.
  • Would Catalonia stir up separatist yearnings? The answer is yes and the Basque Country immediately comes to mind, where a portion of the electorate and the political spectrum have similar aspirations.
  • Can Catalonia prosper on its own? The answer is yes. Catalonia is the roughly the size of Belgium or Netherlands in terms of area (Catalonia's 32,000 km2 vs. Belgium 30,500 and Netherlands 41,000) and population (7.5 million inhabitants compared to Austria's 8 million and Denmark's 5.6 million). In terms of GDP, Catalonia is on par with Finland or Denmark. Its per capita income is above that of the European Union median which ranks it No. 14 in Europe. Moreover, Catalonia is particularly well-integrated into the EMU as far as its economy is concerned: nearly 6,000 foreign companies have established branches there (1,700 French companies and 1,000 German companies are located in Catalonia), while 25% of all direct investment in Spain is funnelled to Catalonia). Its industrial base includes the automotive, pharmaceutical and biopharma sectors (45% of Spanish output), plus chemicals, agribusiness, and capital goods, to mention only few. Tourism and services (particularly banks) are also important sectors of the Catalan economy. Catalonia received 25% of Spain’s foreign direct investment, 34% of Spanish exporters are found in Catalonia and 5,600 foreign countries have established branches there. In short, the Catalans are sitting on a gold mine. The proponents of independence argue that if Catalonia were to cease contributing to a redistribution system designed to balance the Spanish regions, it would have a budget surplus of 11.5 billion euros. Overall, Catalonia accounts for no less than 20% of Spain's GDP and 25% of all Spanish exports. It's also the wealthiest region of Spain and its main economic engine.
  • Would Spain suffer if it loses Catalonia? The answer is yes. Like the Basque Country, Catalonia is the wealthiest in Spain and therefore has a very high ability to repay debt. Catalonia is however the region with the highest public debt. Without Catalonia (and its GDP), debt-to-GDP ratio in Spain would automatically increase by 20 points.
  • What lesson related to the building of Europe should be drawn? It is eye-opening to see European integration, based on the notion of the demise of the State, re-ignite separatist impulses in some regions. Perhaps it is failure on which we should meditate.

Overall, the political situation in Catalonia is obviously a real cause of concern in Madrid. However, the route to independence is very complicated (How do you secede? Why would Madrid validate aspirations running counter to the Constitution? How do you reconcile both pro-independence parties on the matter of Europe?) Will the separatists be happy with wielding increased negotiating power in the aftermath of the elections: more autonomy but no independence?

 

 

 

The Catalan separatists won an absolute majority of seats, but not of all votes cast

 

Two pro-independence parties but two different opinions on Europe

 

Toward a referendum on self-determination or unilateral secession?

 

Spain can legally invalidate Catalan political autonomy

 

November's general elections could prove decisive

 

Catalonia: an example for the Basque Country?

 

Catalonia is as wealthy as Denmark or Finland

 

Spain without Catalonia would undoubtedly be less wealthy and more fragile

 

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Cross Asset of October 2015 in English

Cross Asset d'Octobre 2015 en Français

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Philippe ITHURBIDE, Global Head of Research, Strategy and Analysis at Amundi
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Catalonia: independence or more autonomy?
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