globalEDGE Blog: Freedom for Cataluña? The Economic Fallout of a Possible Secession

Freedom for Cataluña? The Economic Fallout of a Possible Secession

After a tedious war that took a toll on its people, Chechnya remained under the control of Russia following its annexation. After a very close outcome on the 2012 referendum, Scotland remained a loyal entity of the Queen’s monarchy. While both attempts of secession were predictably unsuccessful, it seems Spain’s biggest problem isn’t going to be a gruesome war or rioting masses in the streets. If Cataluña is successful in efforts of secession from Spain, it’ll be out of the frying pan and into the fire for the Iberian democracy.

Technically defined as an ‘autonomous community’, Cataluña might be one of Spain’s wealthiest regions, but it’s also heavily responsible for the nation’s spot in the PIIGS acronym. The acronym might be outdated, but Cataluña’s debt is very much an issue of the present. So outstanding is the nature of the region’s fiscal obligations, that austerity measures taken since the global financial crisis have only enforced separatist sentiments of Cataluña’s very own. But after the recent election that gave separatist parties majority representation in Cataluña’s parliament, fear of an economic disruption is growing.  

Cataluña, although only 16% of the population, represents a quarter of all Spanish exports. This ratio is bound to get heavily damaged if Spain no longer included Cataluña in its citizenship. The region, although highly diversified, mainly employs those in industrial manufacturing roles. Moreover, debt reallocation in the case of secession might push Spain’s debt-to-GDP ratio to levels of unsustainability, if the debt was matched by population size.

It’s not just the threat of deadweight debt that Cataluña’s exit poses, it’s the intrinsic value of the region as well. The region has historically grown and developed far quicker than the rest of the country, and so Spain would be losing a driver of GDP, growth, and jobs. Ostensibly, this would cripple hopes of economic growth in Spain, but it would also cause ripples in the Eurozone trade web. Countries like France and Germany, which rely heavily on Spanish exports, would likely be left looking to reliable trade partners not within the reach of the EU.

At this point in the timeline of Cataluña, it is safe to say that secession is more than just a Cataluñians’ pipe dream, but a quickly approaching reality. The history, culture, and experiences of the Catalunian people is far displaced from the rest of Spain, and with the economic prowess and proven leadership potential, Cataluña may yet just come out a separate nation. Its economy would be substantially stronger than that of Spain’s, and its potential for growth far more promising. 

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