The Catalan crisis: Referendum may be disaster for European economy

SETH MICHAEL MEYER

Staff Writer

 

The climate is revolutionary for the Spanish region of Catalonia as just last month almost 2 million Catalans voted to completely secede from Spain.

The wealthy part of the Iberian Peninsula has had partial autonomy since 1977 when Spain became a democratic nation, and now it seeks proclamation of its own nation-state.

In late September, 2.2 million Catalans voted on this referendum and the voters were brutally assaulted by federal authorities who tried to prevent the vote from taking place. Government officials claim that under the Constitution of 1978, voting on secession is illegal.

Although the turnout for the vote was low (42 percent), Catalan President Carles Puigdemont believes the turnout calls for a declaration of independence but wishes to negotiate terms with the Spanish government, headed by Prime Minister Mariano Rajoy.

Rajoy has opposed the referendum throughout this ordeal so the hopes for a mutually agreed partition may be unlikely.

The reason behind such strong anti-separatism cannot be found in the constitution, however, as it is a principle rooted in the Spanish purse.

Catalonia is one of the wealthiest regions of Spain with a GDP per capita of $35,000, which trumps countries like Israel and Italy. As a textile and industrial powerhouse, Catalonia makes up 20 percent of Spain’s entire GDP.

Spain has fallen into a near decade-long financial crisis described as the “Eurozone crisis” following a harmful housing bubble. Catalans now feel that Spain has become a burden on their own economy.

With the anticipated declaration of independence, Spain is clinging onto the heels of Catalonia who are trying to walk out with their wealth. The International Monetary Fund already projects a decline in Spain’s GDP growth, but losing a quarter of their economy to the referendum could cripple Spain into a great recession.

If Catalonia does part ways with Spain that will also mean leaving the European Union (EU), which will have unpredictable effects in the EU as well as Catalonia. Geoffrey Minne, an economist of the Dutch bank, ING, reports that, “the EU accounted for 65 percent of exports and 70 percent of foreign investment in Catalonia over the last three years.”

Minne compares the cost of Catalan departure to that of Brexit for the UK which does not bode well for the ambitious region.

Conclusively, he suggests that Catalonia’s success “depend[s] on the goodwill of European governments (the Spanish one included).”

At this point, there are too many factors to accurately predict the outcome of this monumental transition, but it is quite a farce to claim anti-separatism is rooted in Spanish law. The opposition comes from the belief that economic disaster could ensue, an outcome all too possible in this risky referendum.

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