Spain – Implications of Catalan Independence Referendum

Event

Spain faces political and economic turmoil as one of its most economic bulldozers is seeking freedom. Catalonia on 1th October 2017 went ahead with their quest for independence against the wish of the central government of Spain, by holding a referendum voting which aims at giving them freedom as an independent's State as asserted by Beasley & Kaarbo, (2017). The “yes” won it. 

Significance

Beasley & Kaarbo, 2017) claims that the quest for freedom by the Catalonians is not a minor issue. It has political and economic implications for many stakeholders involved for instance Spain, the Catalan itself and the entire Europe. The implication can be positive or negative for either of the parties involved in this delicate issue at hand (Orriols & Rodon, 2016). 

Analysis

Effect on Spain

The central government of Spain, through its actions and words, has indicated that they are not ready for the the referendum. The Spanish Prime minister Mr. Mariano Rajoy through Television gave a clear statement asking the Catalan Pro-independence leaders to willingly "stop this escalation of radicalism and disobedience once and for all," (Whigham & May 2017). This came in the wake of vigorous protest by the Catalonians on the main streets of Barcelona to shun away the Spain governments for attempting to stop the referendum from taking place. The central states in the regions of Madrid Spain have taken aggressive steps to prevent the voting from taking place (Lepič, 2017). The question remains why the government of Spain is so mad at this issue of secession? What effect is waiting for Spain should they fail to contain the Catalans?

Spain is facing a massive economic challenge if Catalan wins their independence. Catalonia is a significant part of the Spanish economy. The region has a population of about 7.5 million residents (Sant et al., 2016). This is an estimate of nearly 16% of the total population of the entire Spain (Muñoz & Guinjoan, 2013).Losing this community means losing potential markets for the country as asserted by Muro & Vlaskamp, (2016). Furthermore, Catalonia as a region accounts for nearly 21% of the entire Spain Gross Domestic Product. The Catalonia region is the heart of the Spain industrializations (Verge & Alonso, 2015). The regional economy is anchored on wealthy industries which are based on the areas. The regions have manufacturing industries, Agricultural industries and Constructions industries and much more (Trillas et al., 2014). This is probably too much for a country to lose, and Spain is not willing to let it go. This was demonstrated by their actions on Sunday 1th of October 2017, which was the day the Referendum voting to give Catalonians their freedom was to take place. The police were instructed to disrupt the voting process to stop what they termed as "evil", and they were given instructions to seize voting materials "especially ballot boxes, computers, ballot papers and election documents and propaganda" to make sure that the process was not fruitful. 

Moreover, Spain governments are in big worry as they think that the exit of the Catalans would also lead to the departure of other regions which are also crucial to the economic stability of the country. An example of such part is the Basque regions. 

Furthermore, the state is scared of the political image and damage the secession will bring about for the entire country. The country will be seen as weak with no ability to manage its regions. This will bring about political unrest in the entire country. This will further bring economic instability within the state. 

Lastly, Catalonia is likely going to leave all its taxes deficits and debt to Spain and will probably move without paying any. Guibernau et al., (2014) reveal that if a country is lefty with such debt, it will be a big blow. What of Catalonians? Are they safe in case they may quench their freedom thirst? Can they do it alone? And what is waiting for them?

Impact on Catalonia

Catalonia seems to be regions which can sustain themselves economically. The parts seem to be productive on their own. The areas account for nearly a fifth of the entire economy of Spain. It is also the leading producer of the Spain exports with 25% of the total exports coming from this region (Bourne, 2014). Moreover, the area contributes more taxes to the Spain central governments than it gets back. It produces an estimate of 21% of the total taxes in Spain. The supporters are now arguing that in case the regions stop transferring their charges to the Madrid's governments, the budget deficits of this areas would likely turn into the surplus. This would be a positive implication for the regions. However, this is not all, the region may not just smile, they may struggle too (Martí, 2013). 

First, in case they successfully gain their independence, Catalonians will have to install a new border, they will new rules, and there is likeliness that the country would immediately have a negative impact on jobs and business as a result of the new laws and borderlines. This would be a significant blow to their seemingly balanced economy and production rate. According to Rico, (2012), new country will always face economic crisis in case they boundary change. This is a justification of the challenge facing Catalonia. 

Furthermore, the region, upon separation from Spain may take some years without joining the Europeans Unions. According to (Orriols & Rodon, (2016), it takes many years to join EU mostly when some members are not giving the support. To join EU, Catalonia as a state will have to convince the entire EU blocks and countries to be part of them (Crameri, 2014). The list of the countries which will have to sign this agreement will include Spain! You can bet your life that Spain may not sign this contract immediately. This is an indication that it will take Catalans sometime for them to be a member of EU. This is also an indication that trading with EU members may not be possible for that long. This will be a significant blow to the entire country of Catalonia. What about EU? Are they safe? What is the implication to EU?

Impact on EU

According to Elias, (2015) the main issue of creation of Euro as a currency was to unite countries together for business and political purposes. However, the Catalonian turmoil has just deepened the cracks on Euro. "The Catalonia referendum has deepened cracks in the EU's plan for greater integration, driving debate around identity across the continent. Among the policies implemented in the earlier days of the EU was the adoption of the euro, intended to provide a common currency and link the European nations together." The cracks in the Spain and other countries have shown that unity which was much anticipated has not been achieved by EU. The brake of Spain and Catalonia is going to expose the crack in EU, and this is a negative implication. So, what next?

What next?

The Investor’s buzzword is uncertainty. "As with Brexit, we believe that any Catalexit would plunge the region into a long period of uncertainty and would most probably be negative for the private sector," this was the comment of an economist by the name GEO Minne that shows that uncertainty will be created by this Catalonia exit (Tobeña, 2017). Moreover, the Euro may decline by nearly 5 %, and this was indeed on the Monday after the referendum when Euro declined by 0.3%. Also, according to the experts, "a decisive "yes" vote is unlikely to result in Madrid or the EU recognizing Catalonia as "independent,". "The Catalan government will instead attempt to use a positive referendum result to increase its leverage in future negotiations with the Spanish government" (Leonard, 2017).

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