Artur Mas’ nationalist gamble is risky business for Catalonia
On Sunday, Spain’s economic powerhouse is taking its quest for sovereign independence to the polls backed by unprecedented nationalist support- and the Spanish central government is watching closely.
The election will test the nature of the Catalan identity, the power struggle between Madrid and Barcelona at a time of economic uncertainty for Spain, but also Artur Mas’ political ambitions as president of Catalonia.
In a surprise political stunt, Mr Mas called for a snap-election following a fall-out with Spanish Prime Minister Mariano Rajoy over regional budgeting that would have allowed Catalonia to create its own tax redistribution system without Madrid’s supervision. For Mr Rajoy, this was out of the question and his administration made it clear that no concessions would be made.
Mr Mas accused the Spanish PM of wasting a “historic opportunity” to mend the relations between Madrid and Barcelona. Days later he vowed to call a referendum on Catalonia’s independence backed by opinion polls signalling that 51 per cent of Catalans would vote in favour of self-determination according to the Barcelona-based Centre d’Estudis d’Opinio.
So could Catalonia become an independent state? Not according to Article 2 of the Spanish constitution which describes Spain as a single, unbreakable nation, making a referendum on independence illegal. Of course, separatists could argue that the voice of the people should prevail over the Spanish constitution so that a new, independent Catalonia no longer abides by Article 2.
With a population of 7.5 million people, a 200 billion euros (£161bn) economy and its own police force, Catalonia is bigger than Belgium and richer than Portugal and Andorra combined, all of which are independent states recognised by the European Union.
However, Mr Mas, leader of Convergència i Unió (CiU) and president of Catalonia’s regional parliament, must first win an absolute majority on Sunday’s elections, which seems unlikely according to most polls. Mr Mas is set to win 62 to 64 seats out of a total of 135 parliamentary seats, falling short of a 68-seats majority that could weaken his party’s bid for independence and put his political career in jeopardy.
Throughout the campaign, Mr Mas has used Catalonia’s wealth and distinct history as leverage against Spain’s central government, which monitors the regions’ budget to ensure fiscal discipline. Catalonia is Spain’s wealthiest and most industrialised region accounting for almost 19 percent of the Spanish GDP and is home to some of Spain’s largest companies including global retailer Mango and Caixabank, the country’s third largest lender.
But, as Spain’s biggest economy, Catalonia is also highly indebted and was recently forced to seek a five billion euros bailout from the central government. It is also heavily exposed to Spanish domestic demand and this could lead to an economic boycott of Catalan products as seen in 2005 when sales of cava, a popular sparkling wine produced in Catalonia, fell 6.6 percent from the previous year according to the Cava Regulation Board, after separatists introduced a new and more autonomous self-rule charter.
Swiss bank UBS said in a research note entitled ‘Can Catalonia leave? Hardly’ that secession could translate into a four percent budget surplus for Catalonia and a 78 percent debt-to-GDP ratio- a good deal for the region considering that Spain’s debt is set to widen to 90.5 percent of its GDP in 2013, according to the country’s finance ministry.
The flip side? Catalonia may have to exit and re-access the European Union. In this case, the new state would be shut down from its main market- Spain and the EU account for 63 percent of its exports- while facing large debt redemption due in 2013. This could ignite uncertainties over Catalonia’s future among investors and trigger a “sovereign default, bank runs and a huge drop in wealth and income” according to the UBS report.
Similarly, JPMorgan estimates that, while an independent Catalonia could be “fiscally credible”, the economic benefits would remain scarce- assuming that transition costs are “minimal” and there are “no significant disruptions” in trading with the rest of Spain-an unlikely scenario.
So far, Mr Mas has capitalised on passionate nationalistic feelings for political reasons but he may have to tame his separatist rhetoric for economic ones. Separatists often argue that Catalonia is Spain’s cash cow and this has fueled a fiscal deficit of approximately eight percent of the Catalan GDP. This means that taxes collected in Catalonia are used to fund nationwide services and support weaker regions in what the Spanish government calls the principle of ‘national solidarity’.
However, this is not exclusive to Catalonia as Madrid, Valencia and the Balearic Islands also make a greater contribution to the country as a whole based on what they receive in return from the central government. Madrid runs a fiscal deficit accounting for approximately five percent of its regional GDP, while Valencia, the most indebted region alongside Catalonia, runs a six percent fiscal deficit.
But perhaps the greatest obstacle for Catalonia’s self determination lies at the heart of European politics. Last week, Jose Manuel Barroso, president of the European Commission, implied that Catalonia as an independent state will not be automatically granted membership of the EU nor the monetary union.
Under the Lisbon Treaty, states that secede must re-apply for membership. Mr Mas has repeatedly said he wants Catalonia to stay in the EU and keep the single currency. The integration of a new member must be approved by all existing member states, including Spain, which would surely use its veto to block any attempts at enlargement.
Catalonia’s nationalist movement could turn into a pan-European headache for the EU, triggering a domino effect among Belgian-Flemish separatists and Italy’s Northern League. The EU would want to avoid this at all costs as it battles the worst economic and financial crisis since World War II. Locked out of the Spanish market and isolated from Europe, Catalonia may soon find out that Mr Mas’ nationalist gamble is an ill-handled political manoeuvre.Tagged in: artur mas, Barcelona, catalonia, Madrid, spain
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