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Spain: Some thoughts on Catalonia and secession

By Edward Hugh

Against a backdrop which offers an eerie parallel with events which took place somewhat to the North more than 30 years ago, Catalonia is now threatening to separate from Spain. In so doing the region seems to be putting at risk both the future of the host country and beyond that the outlook for the Euro currency and the process of European unification.

The parallel is of course with the drive for Baltic independence and its impact on Mikhail Gorbachev’s ill-fated attempt to peacefully reform the disintegrating Soviet Union. In the words of Aleksandr Yakovlev, one of his closest associates at the time, the ideas of those seeking independence were ”out of touch with reality” and any expectation that the Baltic republics could regain the independent status they had before Soviet annexation in 1940 was ”simply unrealistic.” As late as February 1991 Gorbachov himself was still describing the Lithuanian vote – described by the countries leaders as simply a non-binding opinion poll – as illegal, and this a matter of days before it was actually held.

Sound familiar? It should do, since these very same arguments are now being played out in another pole of Europe. Not only is the Spanish administration taking precisely the view that any vote in Catalonia on whether or not to separate from Spain would be illegal, the attitudes of those outside the country are largely being conditioned, not by the merits or otherwise of the Catalan case, but by the fear of what might happen to Spain if Catalonia left.

While Catalans busy themselves assuring each other that any new state would be economically viable, few on the outside doubt that this would be the case. To give but one example, former chief economist at the IMF Kenneth Rogoff recently commented that Catalonia taken on its own constitutes one of the richest regions in Europe. This is simply stating the obvious. What has external observers really worried is the subsequent viability of Spain, and with it the future of the Euro. If Spain is too big to be allowed to fail, then Catalonia is too small to have inalienable rights the argument seems to run.

It is for this reason, I feel, that the Catalan cause is attracting little sympathy beyond the confines of what is often called “The Principate”.

Many feel that Catalonia is being selfish – just as they felt in their day that the citizens of the Baltics were – in putting their own particularist interests (a better fiscal distribution, the right to a national football team) before those of the collective (economic recovery, closer political union in Europe, etc.). But this way of looking at things is essentially flawed, just as it was in Estonia, Latvia and Lithuania. The movement for Catalan independence is primarily, and at its core, a democratic one. So what should matter to the outside world is not whether the vote will be considered legal by the central government in Madrid, or whether the Catalans have a good case. If the Catalans vote peacefully and democratically, and by a significant majority, that they want to form a separate state, then it is clear that the region’s days inside the frontiers of the Kingdom of Spain are numbered. Unless that is the Catalans be retained within those frontiers by the use of force, in which case some of the fundamental principles of the Treaty of Europe will be put in question. Hence the fundamental dilemma which the Catalan independence drive presents to the whole European Union.

Under these circumstances what outside observers should focus on is what the result of the vote, when it does finally take place, will be. After all what the Catalans are demanding at the moment is “the right to decide”, and at the end of the day it is they who will decide. My country, as the saying goes, right or wrong.

Nothing here is either unavoidable or inevitable. As in the case of Greek Euro exit, beyond the expedient there are no ex ante juridical limits to the bounds of the possible. What is important for everyone is that the eventual solution be an orderly one.

In this context messages that the new country, should one be created, would need to apply for membership of the European Union constitute nothing more than mere hot air, just as the suggestions from the Spanish administration that any such application would be met with a veto on their part is no more than an empty threat. Such talk is not in the realm of the real, or the realistic. It is simply an attempt to alter the outcome of the vote, and a bad and ineffective one at that. Not for nothing does Catalonia’s President Mas describe the speechwriters of the Partido Popular as running a production line for manufacturing separatists.

If Spain’s sovereign debt is already on an unsustainable path, then how much less sustainable would it become if the country suddenly had its GDP reduced by 20%? Common sense dictates that negotiations would be held, negotiations in which Catalonia would be asked to accept a proportion of the legacy debt, just as common sense suggests that Catalonia’s financial system, which has assets of around 500 billion Euros (i.e. it is much larger than the Greek equivalent) would be allowed to remain in the Eurosystem. The alternatives – and their consequences well beyond the frontiers of Europe – are simply unthinkable.
Naturally sometimes the unthinkable happens, especially when a majority of the key players assume it won’t. Catalonia has now decided to hold some sort of “consultation” or “opinion poll” during 2014. As in the Lithuanian case the outcome may not be binding, but few should draw comfort from that single fact and assume that the result will not be significant and even decisive for the short term future of Europe.

As I say, nothing here is inevitable, or foretold in advance. But avoiding predestination involves facing up to the facts, and not, as the IMF director general Christine Lagarde recently put it in the Greek context, engaging in wishful thinking. And the facts in this case are that dialogue between Catalonia and the rest of Spain has now broken down. Catalans feel themselves to be tired of not being listened to, while the rest of Spain feels itself tired of the Catalans and their constant demands for more autonomy. At one pole there is “Spain weariness” and at the other “Catalonia exhaustion”. Matters have now past the point where orderly solutions will be sought out and found internally.

Most external observers expected some sort of offer to be made by the central government after the last Catalan elections, but reading the result as a setback and defeat for President Mas the only “offer” which has been sent in the direction of Barcelona is one which involves “Hispanicising” children via the reform of the Catalan education system, a move which has effectively united the Catalans behind their new government. That is why a decisive intervention on the part of Europe’s political leaders is now crucial. Whether they like it or not they have no alternative but to become intermediaries in the search for viable solutions, if not neglect will only produce the result everyone seeks to avoid.

It is no accident that the Baltics saw their chance just in the moment of maximum Russian weakness, and that Catalans see their only realistic possibility of achieving their objective of having their own state just when Spain is effectively on the ropes, and possibly in terminal decline. Some, comforted perhaps by the writings of Francis Fukuyama, feel that what is happening to Spain is simply an unfortunate setback on the bumpy road to becoming a mature democracy, but darker readings are possible. The current economic crisis is not simply cyclical or conjunctural and there is a real possibility that the country’s problems are so complex that it will become impossible for Spain’s leaders to fix them without recourse to an Argentina style default. It is precisely the loss of confidence in the capacity of the Spanish political class to resolve the country’s dire economic situation, and the mounting frustration with their perpetual insistence that all will be well starting tomorrow that has the Catalans running for the exit door. If the building is about to burn down they don’t want to be trapped inside when it happens. As Janice Joplin once put it freedom is sometimes “just another word for having nothing left to lose”.

In the critical weeks and months that are to come, I think it important that all participants bear in mind that once the Baltic vote was taken, and once the demise of Gorbatchev became inevitable, attitudes towards the new countries rapidly changed. All three are now consolidated members of the European Union, and the past is simply that, what is over. Many Catalans tell me they are doing what they are doing, not for themselves but for their children and their grandchildren. Measured on such a timescale a few years of economic turbulence seem as nothing. In the interest of the common good solutions need to be found – solutions which are able to both satisfy the aspirations of the Catalans and guarantee stability in Europe. If this search is not initiated soon, then time will ineluctably run out and the likely will steadily become the inevitable, simple application of the rules of game theory tell us that. There isn’t a day to lose. You know it makes sense.

The above is a short chapter I wrote for the book “What’s Up With Catalonia” published earlier this year by the Catalan Press.

About 

Edward is a macro economist based in Barcelona, who specializes in growth and productivity theory, demographic processes and their impact on macro performance, and the underlying dynamics of migration flows. He is currently working on a book "Population, The Ultimate Non-renewable Resource?" Edward’s analysis can be found on his “Don’t Shoot the Messenger” blog on www.economonitor.com. He is also a regular contributor to a number of economics weblogs, including India Economy Blog, A Fistful of Euros, Global Economy Matters and Demography Matters. He was, in fact, a founding member of all these weblogs.