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Monday
Oct152012

Spain Is Losing Its People, Catalonia Fights For Independence, And The EU Gets Pushed Into The Conflict

“Do you want Catalonia to become a new state within the European Union?” That may be the question on the referendum that is causing a constitutional crisis in Spain even before the final wording has been decided. Efforts by Artur Mas, President of Catalonia, to pry his region loose from Spain are not only shaking up Spain but are pushing the European Union deeper into the conflict—just as Spain is plunging into a demographic nightmare.

A mass exodus. During the first nine months of this year, the number of Spaniards who were looking for the greener grass elsewhere jumped 21.6% from the same period last year to 54,912. And 365,238 immigrants bailed out too, for a total exodus of 420,150 people. After taking into account returning Spaniards and arriving immigrants, net migration added up to an outflow of 137,628 people—25,539 Spaniards and 112,089 foreigners. It was the first time that all 17 autonomous regions booked a net outflow of Spaniards. And Spain’s total population dropped by nearly 80,000 people! In nine months!

They left because things simply keep getting worse. September was a bad month—for the lucky ones who have jobs. They experienced the steepest plunge in purchasing power in 27 years. Prices jumped 3.4% year over year, while wages rose only 1.3%. Unions and employers had signed collective bargaining agreements earlier this year that would freeze wages in 2012 and 2013. Average wages under these new agreements rose only 0.7%—a harbinger of things to come.

This “internal devaluation”—long a factor in many Western countries, including the US—has now hit Spain. Over time, the workforce will become more competitive with cheap countries, like China. Despite its insidious impact on the population (the lucky ones who have jobs) and on consumption, internal devaluation is at the core of all “structural reforms.”

Spain exists in a surrealist new world: a debt crisis that is draining the central government and the autonomous regions, a banking crisis, unpopular “structural reforms,” unemployment of over 25%, youth unemployment of over 50%, a recession, and a population that makes its discontent known with often violent demonstrations. So, 84% of the people have “little” or “no” confidence in Prime Minister Mariano Rajoy. The fate of Alfredo Perez Rubalcaba, leader of the opposition, is even worse: 90% of all voters distrust him! Those are the two top political figures of the two major political parties, and the utterly frustrated and disillusioned Spaniards are defenestrating them both [Punishment Of The Spanish Political Class By The People].

This is the backdrop to Catalonia’s strife for independence. It all came to the forefront on September 11. Between 600,000 and 1.5 million Catalans—8% to 20% of the population!—angered by the stiff austerity measures that the central government had imposed on their bankrupt region, protested in the streets, demanding independence. Nobody could ignore that. And now, 74.1% of the Catalans support holding the referendum, 19.9% are against it, with 6% undecided. And over half of them would vote for independence.

Like the Scots, who were able to negotiate an independence referendum with the British government, Artur Mas wanted to negotiate the referendum with the Spanish government. Catalonia will hold early elections on November 25, and Mas, who is expected to renew his majority, was planning to hold the referendum during the next four years. But Rajoy and his government were in no mood to negotiate. Instead, they promised to lean on the Spanish Constitutional Court to get it to declare the referendum unconstitutional.

Then the shot before the bow. It would be a “crime,” declared Justice Minister Alberto Ruiz-Gallardón, if Mas refused to stop calling for a referendum after the Supreme Court declared it illegal—apparently, a crime of disobedience, as defined by the Penal Code, punishable by up to a year in prison and disqualification form public office by up to two years. María Dolores de Cospedal, Secretary-General of the governing People’s Party, emphasized that the government would use all “legal instruments at its disposal to prevent this situation,” adding that “there are already mechanisms in place to stop the referendum.”

The fear is enormous: Catalonia’s independence “would do away with Spain, because Spain makes no sense without Catalonia,” Gallardón lamented last week. The status of an independent Catalonia with regards to the European Union is uncertain as well. No rules exist to deal with the situation. As different officials say different things, the European Commission is being pushed ever deeper into the conflict. And it infuses the impending bailout of Spain with qualities of a Dali painting.

Neither banks nor public workers have ruined Spain, but politicians, a separate class born out of the “Transition” from the Franco dictatorship to democracy. And the old power structure is thriving under a new “democratic umbrella.” Read.....  Spain’s Unfinished Transition From Dictatorship To Democracy.

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Reader Comments (6)

Most of things said are for the home audience.
Spain cannot reverse Catalunya from becoming independent by force as that would have to lead to a suspension from the EU (and no voting power anymore). The peacelovingfounders of the EU apparently had foreseen this situation.
Anyway kicking Catalunya out of the EU would be highly counterproductive for Spain with roughly 80% of its econicpower and GDP remaining it would have to deal with all the present debt (except the very little comparatively Catalunyan part) at least at first instance and they have some problems with that. And Catalunya has the method subsequently 'in house' to solve its own unemployment problem. Simply by sending all Spaniards there home. Simply therefor hard to see a problem with Catalunya joining the EU.
In other words hard to see how Spain can stop this if Catalunya really puts it to the test and difficult to see that the EU simply has to tell Spain to stop the BS and behave like adults. Otherwise the fall out a dysfunctional skeleton of present day Spain would be part of the PIIGS and PIIGS-problems also for them. So the EU has some selfinterest to deal with it properly (iso being faced with a 100+% debt, 30+% unemployemt and 60+% youth unemployment and all rising in the PIIGnewS. Well like true Europeans there is alwyas a substantial chance it is messed up (simply too busy saving (European word for: 'telling them what to do' ) the rest of the world).

Anyway this opens a lot of cans with each a lot of worms.
Within Spain several other regions (Northern ones) might simply for a mix of financial and nationalistic reasons go for a Spexit. Basically the good money leaving the building (leaving the rest of Spain with Sherry, Beaches and Real Madrid of course (and not much else)).
Plus similar in a lot of other especially Euro countries. Belgium and Northern Italy in particular. Scotland plus oil leaving the UK looks rather unlikley anyway, but always friendly and financially neutral (transfers to Scotland roughly equal oilproceeds). But in Belgium and Italy when the working parts of those countries leave (Flanders resp the North) the rest is simply bankrupt unless they can find some friendly Germans, Dutch and Finns to finance their beachbum lifestyles of course.

Split chances are extremely dangerous for investors. There are 3 huge risks (next to the present ones (which are not unconsiderable imho)).
1. The Wallon and 2 Sicilies parts having a split on nos of inhabitants and not GDP. Which would increase the debt there with 30-40% or more of GDP (and make it Greek or higher aka unsustainable).
2. The former central government get struck will all the present sov debt. Less people (or even no people left) and in general not the most productive ones and the ones with the best tax-morale.
3. By a split even on GDP basis you get a large trunk covered by simply economically dysfunctional states (in case the debt is split over the 2). While in the original set up effectively say in Belgium the Flemish remained a guarantee for Wallon debt. That guarantee would be gone creating a situation similar to one say Germany and the ECB would stop to support say Spain in anyway.
Expect yields for these countries to rise on basis of that. There is simply more risk than before. Of course there are also other factors that influence the price playing (ECB stuff).
October 16, 2012 | Unregistered CommenterRik
No chance at all catalonia will secede; they can hold all the referendums they want, but the Army will not stand for it;

It is quite amazing to see the atomization of everything the EU touches, i.e. the swirling around the drain that the Euro is accomplishing.

Far from pulling them in together, it's atomizing into smaller and smaller pieces all components of the EU

astonishing...

J
October 16, 2012 | Unregistered CommenterJean-Michel gauthier
Please, read Rik's comment, the number 2. It is obviously written by a Catalonia (otherwise he wouldn't wright "Catalunya" - Catalan for Catalonia-.
He or she lives in a dream world whereby Catalonians can fix their unemployment by getting rid of their Spaniards (isn't it ethnic cleansing?). A dream world where he actually believes Spain is nothing important but Catalonia. A 40 million-strong country (Spain without Catalonia) is, aparently, peanuts.
A dreamer who actually believes any EU country would meddle into the internal affairs of any other, as long as this one simply follows its own internal constitutional rules.
A dreamer who believes if Catalonia were to secede, it didn't have to respond for its fair share of national debt.
A dreamer who believes if Catalonia were to secede it didn't have to apply for membership into the EU. And could be vetoed by Spain and by any other country fearing the negative example an independent Catalonia would pose to its restive regions. And we could go on and on.
Anyway. The article today does give an accurate picture of the dark side of Spain now. The situations is difficult, indeed. But countries do not die. There are also some indications the future of the country is being builded up now. The country has had an external superavit in the last months. Exports are growing. There is the chance -we will know in a few weeks time- that the public deficit manages to be put under control; and the banks, despite all the uproar abroad, are now in the process of recovering health they didn't follow earlier. So, chances are, we will manage to move on and survive this terrible ordeal.
But that is no deny it is true the net emigration, the unhappiness with the politicians, the demonstrations (although it is not true they are violent: most of them are not; and, in any case demonstrations are not policy-formulators or framers). And it is true now Catalonia wants to secede.
You fail to mention, by the way, there was a wide and deep disatisfaction in Catalonia with the cuts carried out by the regional government. The Catalonian Government has been the most enthusiastic of cutters. And now, to distract public attention on the results of its policy and to its root causes (Barcelona is free to spend as it pleases, and, unfortunatelly it has actually done so in the most irresponsible way) the regional premier, Artur Mas, says he wants independence.
Well, in Spain we have a Constitution, and we should be supposed to follow it. Or shall we make an exception for voracious separatists like these? But, most important than that. The actual apetite in the rest of Spain for actually doing anything to prevent Catalonians from secede is actually dwindling. There is a long history here. And not exactly as "victims" as Catalonian nationalists wish to present themselves. They have shaped the current political regime in Spain to their liking, and now they pretend to distance themselves from it and not share in its consequences. They always wish to have a law for themselves. While in a variated and plural country like Spain, they are just like any other. Neither better nor worse... until now.
October 16, 2012 | Unregistered CommenterFrancisco
Catalonia's exit from Spain may be inevitable unless Spain itself changes. While I agree that Artur Mas really does not believe in independence and this talk of his about it is to detour public outrage towards deep cuts in such areas as health care, the fact of the matter is that he has now opened a kind of Pandora's box.
Catalans are asking for a deal on par with the Basque Autonomous Community and Navarre in which the local governments are able to collect taxes and them send a part to the Central Government (known as "cupo" in Spanish).
The Basque Government has wisely administered the money and invested in infrastructure and education while the other Spanish regions have invested in airports without planes and roads to nowhere. Admittedly, Catalonia under the tripartit coalition really ran up the deficit and the current Catalan government is at its wit's end. They are bankrupt and need money, lots of money to go on, hence an appeal to a Basque-like deal.
Spain, equally bankrupt, needs the money from Catalan tax payers to pay for the Bankia disaster which has now been foisted on the Spanish public. Artur Mas has nothing to lose. Rajoy cannot give in as he has everything to lose . This is looking bad. Can Spain really afford to occupy Catalonia? With what money? Besides, it would need a very large army to occupy Catalonia. This is not 1934.
We Basques are going to the polls on Sumday and will be turfing out the unionist interlopers who never should been there in the first place. Nearly two thirds of the new Basque Parliament will be Basque nationalist . Some Spanish right wingers are calling for all autonomies to be rescinded as well as the special Economic Agreements of the Basques/Navarrese. If this happens, Basques, maybe even with the Navarrese, will also leave the sinking Spanish ship . Many Spaniards scoff at Basques and Catalans going it alone and how they would lose the Spanish market. Yet, many are now realizing that Spain minus the Basques and Catalans would not much more than a big Greece. Even the minister of justice admitted that Spain would have to pull out of the euro were the despised Basques and Catalans to leave Spain. Yep, interesting times ahead while the whole world sinks in banister- created debt.
October 16, 2012 | Unregistered CommenterMuniategiandikoetxea
Muniategiandikoetxea,
"We Basques are going to the polls on Sumday and will be turfing out the unionist interlopers who never should been there in the first place."
Well, for any interested reader, this is proof of how undemocratic these nationalist-separatist movements in the Basque Country and Catalonia are. You deny your own diversity. You deny, in the Basque case, how many disproportionally Basque is the entire Spanish elite. You demand all citizens of your region to think the same things. To behave the same way. To attach to whatever world view you like. You want them to be "equal", instead of free individuals, members as citizens of one single nation, Spain, under one Constitution. That is the real alternative we have here: either you are just yourself, whatever your views and citizen of a democratic European country (Spain), or you submit to the ethno-nationalism of the Basque Country (or the language-centered one of Catalonia).
Be that as it may. You know, and certainly international readers should know too, that most Spaniards do not oppose either Catalonian or Basque independences. We simply know what is behind those movements, and we certainly do not like them. If the people of your regions have been abducted and made believe what you say, fine. Democracy should and will work this out. But, please, leave us alone and in peace (something the Basque nationalism would never be able to hide: its connections to terrorism)
Basque and Catalonian nationalists did betray the Spanish Republic in the '30s. They have now betrayed again the constitutional Monarchy. It probes to be impossible to organize anything constructive with you. You always have to ruin it! So farewell and good riddance! The country is now the way it is in a great measure due to your interferences and bad influences.
And two more things. What happens to the mutilated Spain after your departure is not your business. Allow me to mention simply that Spain, even the mutilated one is neither Greece nor Germany. It is, simply, itself. You wish to paint a terrible picture of a laid-out country which, actually doesn't exist. But I do not wish to convince you: on the contrary, go on and allow us to surprise you!
The second thing is your special fiscal regime, whereby you collect taxes and, then, allocate a portion to Madrid. The regime itself is part of the Constitution (the more reason to ask you, what else do you want? How many countries do you know that allow you such a degree of home-rule?). But the truth is you do not have enough ressources with your revenues alone, and you have to be subsidized from Madrid. Even worse: the rest of Spain is paying the retirement pensions to Catalonian and Basque grannies... You do not earn enough money to do it yourself! Not a good business prospect for us to keep you in Spain!
October 17, 2012 | Unregistered CommenterFrancisco
Catalonia should leave Spain and create its own high GDP per capita micro state. On the way out they should repudiate all federal debt and keep only their regional obligations. The GDP of the region would be sufficient to make Catalonia a low debt country (<30%) with unemployment more on the level of France then Spain.

The rest of Spain would then have a debt load equal to Greece, a deficit of 15%-20% of GDP and unemployment equal to a poor African country. Barcelona is the only reason to visit Spain anyway.

This would set a GREAT precidence for the rest of Europe. North Italy could abandon Rome and creat a Milan/Venice/Florence micro state. The Greek is lands could split off from the cess pool that is Athens.

The left over dreges old old, lazy, soxialist Europe would drown under their BS policies and debt, eventually reforming and becomimg more like Catalonia etc...
October 19, 2012 | Unregistered CommenterDoug

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