What solidarity?

The Case for Catalonia's Secession from Spain

By Josep Desquens / The Bologna Center Journal of International Affairs

The central argument supporting the past and present fiscal imbalance between Spain and Catalonia is a so-called inter-regional solidarity. There are also other less convincing arguments such as the populist claim that Catalonia has a historical debt to the rest of Spain, or the economically mistaken opinion that such a fiscal imbalance is necessary as a means to finance Catalonia's large trade surplus with the rest of Spain. Let us focus on solidarity. The current inter-regional solidarity system has major structural flaws that have to be recognized.

First and foremost, no solidarity system can compromise the economic health of the 'donor,' as the current one is doing. Second, the current system was designed when disparities between Spanish regions were much higher. Now, after 20 years in the European Union, this has changed significantly. Indeed, in comparing Spain to other E.U. countries we see that the regional differences in Spain are not as abysmal as claimed. Countries such as Germany, France, the United Kingdom and Italy have more substantial inter-regional disparities. Third, supporters of the status quo ignore that Catalonia, though rich, has one of the highest rates of intra-regional income disparity in Spain, both territorially and socially.

These disparities are not tackled effectively under the current system. In this respect, it is important to highlight that if Catalonia were an independent state within the European Union, roughly half of its territory would be designated as a preferential area for E.U. structural funds. Catalonia is currently considered as a single unitary entity by the European Union and thus, given its overall level of income, is not eligible for these funds. It is in this predicament that significant parts of Catalonia that require public investment do not receive public aid neither from Madrid nor from Brussels.

Sala-i-Martín has referred to an interesting example that illustrates well the character of the present Spanish solidarity system. In 2000, the GDP per person in Catalonia was 21.9 percent higher than the Spanish average. In comparison, the GDP per person of the Autonomous Community of Castilla y León was 7.6 percent lower than the Spanish average. On the basis of this income differential, one could argue that there is a need for some kind of inter-regional transfer. The surprise comes when we assess the extent of these transfers: Catalonia's Income per capita (after redistributions) was 4.3 percent higher than Spain's average, while Castilla y León's was 9 percent higher. In other words, despite producing over 30 percent more, the redistribution system results in Catalans ending up with a lower income per capita than Castilian-Leonese people.

This supports the argument that the Spanish inter-regional transfer system is neither fair nor economically beneficial, but creates a welfare dependency that harms entrepreneurship and growth in the poorer regions.