Economics

TOP 5 Facts We Need to Know About the Referendum in Catalonia

The tension in the Catalan region is growing. A clear answer about the independence of the region was expected on Monday, October 16th. Instead, the Spanish prime minister Mariano Rajoy received a letter from the head of Catalonia Carles Puigdemont with a negotiation proposal. The Spanish government announced a new deadline — Thursday, October 19. Otherwise, it will use the article 155 of the Constitution, which can displace the local government and appoint new elections in the region.

The whole world was divided, supporting one or another side. What can we expect from this conflict? What has led to this course of events? What are the threats of this situation? The TOP 5 facts about Spanish-Catalan relations will help to answer these questions.

The Catalan problem has deep historical roots

In the Middle Ages, Catalonia was a famous part of an Aragon kingdom and showed itself as a great maritime and trading power. But in 1714 it lost its self-sufficing and was joined to Spain because of the crown conflict. In 1871, this region is trying to break away, but after the parley, everything remains the same. A new attempt to secede was in 1934. But, it failed, and the ideological organizer Lluís Companys was shot.

However, Catalans did not stop. They finally got an autonomy in 1979, the same year their language got the official status. Today we are witnessing a new chapter of this story.

Catalonia is one of the most prosperous areas of Spain

The GDP of this Spanish autonomous region is greater than the whole Portugal GDB. Catalonia has a developed economy and is characterized by one of the highest indices of socioeconomic development in Spain. Supporters of the department traditionally believe that Catalonia “feeds Spain”, in particular, the most backward regions — Andalusia, Valencia, Murcia. The snobbery of Catalans only increased after the Olympics in Rio 2016, where the third part of all Spanish medals was taken by athletes from Catalonia. If to speak in figures, 16% of the population of Spain are Catalans, this region occupies 6.3% of the country’s territory, Catalan GDP makes up 19 percent of the total Spanish GDP, almost a quarter of the total tourist flow falls on this region, more than quarter of the Spanish export comes from Catalonia, 14% of external investors invest here.

The crisis has become a catalyst for separatist sentiments

The crisis of 2007-2015 exacerbated the conflict between Catalonia and the Madrid officials. Employees of the Barcelona Department of Economics have estimated that Catalonia as a subject of the kingdom was exposed to fiscal discrimination. Thus, in 2010, the Catalans made taxes to the budget of Spain in the amount of 118.5% to the national level but received subsidies amounting to 98.9% of the national average.

After this exposure, the number of supporters of Catalonia’s separation from Spain has exceeded the psychological bar in 50% of the total electorate.

Separation will have negative consequences for both parties

The situation with Spain is clear — they will lose the feeding region. Farewell to a significant part of the GDP, goodbye to the tourist and investment attraction. Also, Spain will have to say goodbye to most of its chemical and pharmaceutical industry, the production of plastic, the textile industry, the production of automotive products, the production of household appliances and electronics. 35.5% of Catalan exports goes to the Spanish market, so, the severance of these relations will be costly to both sides.The country will obviously face a deep economic crisis and will need subsidies.  Spanish stocks have already fallen in price significantly, the future falls are unpredictable.

The consequences for Catalonia will also be serious. According to the Madrid edition of ABC, the state debt of the region can grow to €265 billion — it is 124% of GDP (with a significant part of the debt in the hands of Spain). Separation from Spain will mean for Catalonia and exit from the European Union, and accordingly — from the euro area. The EU representatives have already announced, that Catalonia can not hope to join the union. According to the legislation of the European Union, joining the community must be approved unanimously by all members. This decision will not be supported, at least, by Spain and all countries that have regions with separatist sentiments. Also, Catalonia will not be able to receive the recognition of foreign states and international organizations, like the UN.

Football fans are in panic

There is another popular argument against the separation — FC Barcelona will leave the Spanish football league. This was confirmed by the president of the league Javier Tebas. He stressed that the clubs never had the opportunity to choose a league. Even for Barcelona, they will not make an exception. Paradoxically, but this fact most of all afflicts the Spaniards.

Today we all keep our hands on the pulse of this region. Experts believe that any conflict outcome will determine the political vector of Europe for the next decade. So what awaits us? Toughening of central politics or a wave of historical divisions? The whole world has frozen in suspense.