Declaración de Indendpence?
What’s happening in Spain?
Last week Catalonia voted to secede from Spain. Catalonia is one of Spain’s most economically dynamic regions, with a population of over 7 million—16% of Spain’s 45 million people. It’s in the far north east, with Barcelona as its capital—the site of the 1992 Summer Olympics. Although they are an integral part of Spain now, there have been independence movements in Catalonia since the 17th century. They have their own language, culture, and distinctive traditions.
Regional map of Spain. Source: Ven ami Casa
Last Monday, Catalonia had regional elections with a turnout so high—77%, a record in post-Franco Spain—that they ran out of ballots in some areas. The pro-secession parties won 53% of the seats. The new regional president has a clear mandate to push for independence—this was the cornerstone of his campaign.
This is a massive jolt for the Spanish government. The pro-union party only won 11 seats. Catalonia is now likely to allow a formal referendum. If Catalonia does secede, this would automatically exclude it from the EU and the Euro. But since Spanish citizens “living abroad” can keep their Spanish passports, it’s possible that members of a Catalan Republic could keep their EU-citizenship. Barcelona is one of the richest cities in Europe, and the third-most visited, after London and Paris.
So far, it doesn’t seem that Spain’s stock market is particularly worried that Catalan independence will hurt the economy. The most recent 15% downturn started in April and the IBEX is only 3% below its year-end level. 10-year Spanish government bonds yield less than 2%, more than Germany’s 0.60%, but still pretty low.
Still, it’s worth keeping an eye on what’s going on. Independence movements have fizzled in other places, but the rise of transnational institutions seems to promote these separatist movements. If you’re Catalan and you’re getting your currency and labor laws from Brussels, what do you need Madrid for? Four levels of government bureaucracy (local, regional, national, EU) can get pretty expensive.
Douglas R. Tengdin, CFA
Chief Investment Officer