CATALEXIT, as it has been dubbed, is a big deal all round.
As the country’s most prosperous region, Catalonia is a treasury for 19% of the national economy, and a leader in tourism, exports, manufacturing and industry.
There has been talk of secession since the founding of Estat Catala in 1922, and on October 1 the political party will have its biggest chance yet.
While the movement has peaked and troughed, it has experienced a resurgence over the last few years, thanks primarily to Spain’s economic woes, a 2010 constitutional court decision to lessen Catalonia’s sovereignty and growing distrust of central government in Madrid.
The latter has intensified in recent weeks since Madrid began a campaign to quash the vote – which it claims is unconstitutional – by arresting and charging leaders who support the referendum for ‘disobeying’ national government.
Just this last week, thousands of Catalans protested in the streets after 13 leaders were placed under arrest
While the latest survey at the end of July found that 49.4% of Catalans were against independence and 41.1% supported it, it’s hard to know how far Madrid is helping or hindering the cause.
But if Catalexit became a reality, what would be the economic fallout?
Both parties would lose out in the immediate aftermath.
The establishment of a border would create obstacles to trade while ramping up the spending of the new state, leading to job losses and drops in income.
Just last week, Spanish Economy Minister Luis de Guindos claimed that Catalonia could see its economy shrink by 25-30% and its unemployment double if it splits to form a separate state.
Catalans only account for 16% of the Spanish population but make a huge contribution to the national economy, bringing in €223.6 billion each year.
Experts have claimed the region would gain €16 billion annually in the case of a split, as they would no longer have to pay taxes to Spain – this would axe Spain’s GDP by 2% every year.
Catalonia, however, could also take a hit as 35.5% of its exports are to the Spanish market.
The region would also have pay to create new state structures (embassies, central banks, etc.) which carries a high price tag.
Around €6 billion of this is for long-term securities that have been issued and the rest is loans from different institutions.
It means that Catalonia holds a huge 16.34% of Spain’s debt. Giving that debt back to Spain while no longer paying its taxes to the mainland could inflict a massive blow to Spain’s economy.
While many assume that Spain will take on the debt, the transition would take its toll.
Periods of uncertainty would impact investments and commercial operations and there would be a negative impact on Catalonia’s bid to expand economically.
THE EU QUAGMIRE
Much like Scotland, which faced secession from the UK in 2014, an independent Catalonia would need a unanimous ‘yes’ from EU members, including Spain which is likely to block any membership bid and rally its allies to do the same.
Given that the EU accounts for around 65.8% of Catalan exports, any delayed access or a denied entrance would have severe consequences.
The new state could also face a trade boycott from Spain.
A separation from the euro and increased tariffs on their goods and services could also prove dire.
But Alain Cuenca, an economics professor at the University of Zaragoza, said last week: “The economic arguments will not be the prevailing ones in the debate over Catalonia’s independence, the arguments used by both sides appeal to identity.”
DID YOU KNOW?…
- 16% of Spain live in Catalonia, a total of 7.45 million citizens
- Catalonia makes up 6.3% of Spain’s land mass
- A massive 25.6% of Spain’s exports come from Catalonia – that’s €65.2 billion every year
- It’s main products are cars (17.9%), chemicals (16.4%), food (12.3%), pharmaceuticals (7.4%) and textiles and clothing (7.1%).
- Some 20.8% of Spain’s tax revenue comes from Catalonia
- Madrid collects €37.8 billion from the region each year
- Catalonia currently receives 56.3% of Spain’s investment for startup companies