It's September 11, 2012. The National Day of Catalonia. And an
estimated two million people are on the streets of Barcelona waving
banners "Catalonia -- The next state in Europe" and "Independencia."
Separatist Catalans are calling for sovereignty from Madrid and the
rule of the conservative People's Party, led by Prime Minister Mariano
Rajoy.
Losing 20% of the economy is the last thing the Spanish government
needs right now. But if those calling for Catalan independence get
their way, that could be exactly what happens. Catalonia -- a region
in the northeast of Spain and home to global brands and tourist
attractions including Barcelona Football Club and the Gaudi House
Museum -- represents one fifth of the Spanish economy. The Catalan
independence question comes at an inconvenient time for Rajoy's
government. Spain, part of the eurozone mainstay, is grappling with
unsustainable borrowing costs and a soaring public deficit while
trying to placate public anger over a lack of jobs and stringent
austerity.
Out of the hardship, regional disputes in northern Spain have started
to resurface, particularly in Catalonia. Economists at Deutsche Bank
say the political turmoil in such a prosperous region could be the
catalyst that forces the Spanish central government into seeking aid
from Europe's permanent bailout fund, the European Stability
Mechanism.
As the industrial heartbeat of the eurozone's fourth largest economy,
Catalonia is the most populous and affluent region in Spain. Situated
on the Mediterranean and bordering France, the area is home to seven
million people and made up of four provinces: Barcelona, Lleida,
Tarragona and Girona.
Calls for independence
The debate over Catalan independence is not new. Strained tensions
between Madrid and Catalonia have been around for centuries.
Spain's indebted regions. But Salvador Giner, sociologist and
president of the Intitut d'Estudis Catalans, told CNN the vehemence of
the debate fluctuates depending on the political and economic
zeitgeist.
Artur Mas, head of the Catalan government, has announced a snap
regional election on November 25. If his nationalist CiU party win, a
referendum on Catalan independence is expected to follow shortly
after, according to Gilles Moec, co-head of European economic research
at Deutsche Bank. Giner told CNN that a victory for Mas and CiU should
be considered a certainty. He said: "The socialist party in Catalonia
is in disarray. He [Mas] knows that he'll win hands down."
However, Xavier Sala-i-Martin, a professor in economics at Columbia
University, says that Mas is simply "following the crowd" on calls for
sovereignty. He said: "Up until September 11 his strategy was to go to
Madrid and ask for a better financial deal or "fiscal pact" as he
called it. I guess that the massive demonstrations convinced him that
his people no longer want a better financial deal from Spain. They
want independence. And he joined the bandwagon... Mas doesn't lead. He
follows."
Catalonia's neighbors, the Basque country, and Galicia in the
Northwest of Spain also have self-governance mandates under the
Spanish Constitution of 1978. And while not wholly independent from
Spanish state law, they are still considered autonomous.
Spain protests turn violent
For over 50 years, the Basque region was home to a paramilitary group
known by the acronym "ETA" and in English "Basque Homeland and
Freedom."
Does Spain need a bailout? The terrorist group -- formed in 1958 --
carried out a number of attacks on Spanish citizens in the name of
sovereignty and only ceased armed operations in 2011. Giner says such
activity failed to help the Basque country's cause and he would like
to see Catalan independence achieved peacefully. He told CNN: "I
believe full sovereignty for Catalonia is absolutely possible and we
can achieve this in a civilized manner, without the use of terrorist
groups."
Spain's austerity drive
Today, Spain is suffering. The Madrid-based People's Party is
introducing deeply unpopular policies. These include a fiscal cocktail
of severe budget cuts and rising taxes on a population already
afflicted by the highest rate of unemployment in Europe at 25.1%,
according to Eurostat figures. The CiU is raising the debate on
sovereignty at a time of public frustration over taxes in Catalonia.
Moec said in a note that the CiU blames the central government for
disproportionate taxes levied at Catalans -- with the wealth then
re-distributed to Spain's poorer regions.
Salvador Giner says he understands the need for Spanish solidarity and
to help struggling regions, but says a large proportion of the revenue
generated from taxes is not being reinvested in Catalonia. He added:
"Catalans are fed up with the current situation on taxes. Catalonia
gets back only about 19% to 21% of our contribution to the central
government." According to Sala-i-Martin, taxes and regional
distribution of wealth are a large part of the problem for Catalans --
but the biggest tensions are steeped in the country's modern history.
Catalonia's past
After the country's military dictator, Franco, died in 1975, Catalans
thought that they could be part of a country that recognized its
different cultures, languages and nations, Sala-i-Martin said.
Initially, that looked possible. But then: "In 1981, after the
military coup attempt, the monster woke up," the Columbia professor
added. "All the Spanish institutions reinterpreted the constitution in
ways that did not allow Catalunya to feel comfortable within that
country."
In 2010, the Spanish constitutional courts ruled that although the
term "nation" could be applied to Catalonia, the description had no
legal validity. The recession and financial crisis of 2008 then
exacerbated the tensions between Catalonia and Madrid, Sala-i-Martin
said. This forced the Catalan administration to make a plea to the
central government in Madrid for a regional bailout of five billion
euros from an 18 billion euro credit line set up for debt-ridden
Spanish regions.
Employment in Catalonia is also causing a political headache for the
CiU and the national governing People's Party. According to a report
by the Organization of Cooperation and Development [OECD],
unemployment in Catalonia has jumped by 8.6% to 16.3%, since the
collapse of the housing market and the global financial crisis began
in 2008. Salvador Giner says the unemployment rate is in part due to
immigrants -- largely from Southern Spain and North Africa -- settling
in the region. The situation has been aggravated by an extended period
of low economic growth.
The Catalan people are becoming steadily disillusioned with the
economic management from Madrid, says Sala-i-Martin. He said: "If
Spain came back today with an offer to solve the financial problems,
most Catalans would still like to be given the right to vote for
independence."
http://edition.cnn.com/2012/10/12/business/catalonia-independence-spain/index.html
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