Catalonia: Europe’s Next State?

By Glòria Pallarès 

A pro-independence movement has surged in Catalonia, Spain’s most economically powerful region. Over half of Catalans are now in favor of secession, about twice as many as in 2008. Mass rallies have pushed for a new Catalan state within the EU framework— with claims that the territory’s political and economic demands have been systematically brushed aside by the Spanish government. Madrid will now have to tackle Catalan grievances in order to break the current political deadlock and avert instability that could hamper Spain’s recovery from an ongoing and savage recession.

Following an appeal by the ruling Popular Party (PP), in 2010, Spain’s Constitutional Court annulled key articles of Catalonia’s statute of autonomy, which had been agreed to by the Catalan and Spanish parliaments and approved in referendum in 2006. In response, hundreds of thousands took to the streets to protest against the striking down of Catalan as the preferential language in public media and government administration and to defend autonomous judiciary and fiscal power. Again in 2012, on the national day of Catalonia – the Diada – a peaceful mass rally caught politicians unaware. A week afterwards, Spain’s prime minister, Mariano Rajoy, turned down a longstanding request to balance Catalonia’s contribution to the state with what it receives in public spending, denying the fiscal autonomy granted to the Basque and Navarra regions. In response, the center-right Convergence and Union (CiU) leader of the Catalan government, Artur Mas, called for early elections. This vote resulted in parties favoring a referendum on independence representing 80 percent of the regional assembly.

Mas fashioned a political alliance with the pro-independence Republican Left of Catalonia (ERC) that included a pledge to hold a referendum in 2014. Pressure to make good on his commitment increased at the 2013 Diada, when a million people formed a 250-mile human chain across the region and rejected a back-up plan for plebiscitary elections in 2016. Madrid has squarely refused the possibility of a referendum vote —even a non-binding one— and the Catalan cause seems to be at a deadlock. But the pro-independence movement is now too large to be repressed or ignored.

The surge in nationalist sentiment was triggered by the failure of the 2006 statute and fiscal pact, and exacerbated by the 2008 financial crisis. Though fueled by economic, political, and identity arguments, the independence movement has taken on a moral aspect—championing self-autonomy and free will. With an economy roughly the size of Portugal’s, Catalonia accounts for 18.9 percent of GDP and 16 percent of its population. Its location in the northeast of the country makes it a key logistic hub in the Mediterranean, linking Africa and Europe and acting as a bridge between Asia and America. But despite being recognized by the EC as one of Europe’s most dynamic economic forces, Spain’s investment in the region amounts to only 9.6 percent of its total budget for 2014 in the region. The Catalan government has calculated the state owes it 9.4 billion euros in fiscal disadvantages and unfulfilled investments, including 5.8 billion of infrastructure spending.

Catalonia is the third largest Spanish autonomous region in terms of tax payment, but the tenth in per capita income after the money has been redistributed to less productive regions. In other words, Catalonia ends up receiving less expenditure per person than the autonomies it subsidizes. This has led to Catalonia accumulating a fiscal deficit of more than 16 billion euros in the last three years, equivalent to 8.5 percent of the Catalan GDP and its budget on health, education, and social welfare combined.

The Catalan language, banned during General Francisco Franco’s 40-year dictatorship, is constantly contested and brought to court, and the new Spanish education law plans to curtail its use in public schools, shattering the consensual model in place in Catalonia since the advent of democracy. Citizens are made to feel like strangers in their own land, their culture routinely disdained and derided as not truly Spanis.

On the ground and at political institutions, the prevailing feeling is that Catalans have exhausted all means to reason with the central government. The 2006 statute was the final attempt to address their grievances while remaining a part of Spain. Even so, Catalan nationalism remains a social force striving for political functionality, with a disagreement among politicians in favor of a referendum — whether federalists, confederates, and pro-independence – over how far the sovereignty drive should go. Catalonia is also trapped between the aspirations of civil society and Madrid’s unwillingness to improve the status quo.  

But secession is not the answer to all the problems of Catalonia, which is crippled by a 57 billion euro debt and tapping the state’s emergency fund after being shut out from financial markets. Independence will not solve economic woes arising from a wrenching crisis and the mismanagement by previous Catalan administrations, just as it will not automatically mend a social welfare system strained by austerity cuts and a 23% unemployment rate. It is not the remedy, either, to the corruption scandals spanning Catalan and Spanish parties, including Mas’s and Rajoy’s.

If a new Catalan state was excluded from the EU after a veto by Spain, the region might face a Dante-esque scenario of tariffs, lack of fiscal covenants, a consumer-led boycott similar to the one inflicted on Cava wine during the negotiation of the statute in 2005, and a flight of foreign multinationals. “Many companies are here for a 47 million people market, not a 7.5 one”, warned the Chamber of Commerce of the US in Spain, reminding Catalonia that foreign firms, such as Cargill and Pepsico, employ more than a million people in the region.

As for Spain, independence would leave the central government to deal on its own with a debt nearing a 100% of the GDP, an unemployment rate expected to be above 25% for the next five years, and projected growth close to 0% until 2017, according to the IMF. That would be the case if Catalonia finds a political way into the EU, on account of it being the second most attractive region for foreign investment in Europe and the  future “eighth state in terms of GDP”, as defended by Mas.

There is no easy way out for Catalonia or Spain. The messy internal politics of the region converge with the state’s inflexibility and the worst financial crisis of the democratic era. But a significant number of Catalans have decided that enough is enough. Rajoy has assured the leaders of his party he will not make concessions to Catalonia and is using a wait-and-see strategy, hoping that an eventual recovery and internal conflicts within the Catalan front will do the job for him. But he may have to consider the effect that major frustration and subsequent social and political unrest in the richest and most industrialized region of Spain could have on the struggle to pull the country out of recession. At a time when markets and states are on the closely watching Spain’s economic and democratic performance, it is up to Madrid to prove, as it claims, that it does care.



Glòria Pallarès is a staff writer at the Economics section of Europa Press –Spain's leading private news agency– in Barcelona, where she has also written about social movements and immigration. She was part of the team that covered last year's Catalan elections.

[Photo courtesy of wikimedia]


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