No winners: lessons from Brexit for the Catalan referendum

No winners: lessons from Brexit for the Catalan referendum

The continuing fallout from the Catalan independence referendum will harm the Catalan and Spanish economies. It also undermines the authority of the political establishment in Madrid and Brussels. As a week of fresh demonstrations approaches, it appears that neither side is in a position of strength.

There are some striking parallels between the proposal for Catalan independence and the Brexit vote in 2016. Carles Puigdemont and his government are about to face similar difficulties to those created by Britain’s decision to leave the EU: an increase in business risk generated by a climate of uncertainty, rising political and social instability, and a fresh challenge to the effectiveness of the European Union. Divorce is never an easy process, and the Catalonia-Spain relationship has several hundred years on Britain’s ill-fated affair with the EU. So are the Catalan prepared for what’s next?

Business on the run

Already, CaixaBank, a financial services company and Spain’s third-largest lender by market value, declared that it would be moving its registered office to Valencia. It said that its priority ‘‘was to protect clients, shareholders, and employees’’ following the eruption of political and social instability.

Companies such as Banco Sabadell and Freixenet also proposed moving their respective headquarters in light of the referendum. The Spanish government, seeing an opportunity, passed a law on 6 October that removed some of the bureaucracy required to change a company’s place of registration. Even if staff and offices don’t move, companies will have the option to pay their taxes outside of Catalonia, with implications for the regional economy.

Nationally, the economic picture is not looking promising either. On top of Spain’s deep debt crisis and high unemployment, Catalan independence would result in a 20% reduction in Spain’s GDP.

Violent consequences

During the 1 October referendum, numerous instances were reported of the Spanish Guardia Civil disrupting the voting, resulting in localised episodes of violent unrest.  Yet the authorities in Madrid commended the police for its ‘‘proportionate’’ response. This has only served to convert more Catalans to support independence and to fuel the perception that the Spanish government does not act in Catalonia’s best interests.

Further unrest and violence could be on the horizon. Any declaration of independence could invoke article 155 of the Spanish constitution, which allows Madrid to intervene in the running of an autonomous region. This may be accompanied by the deployment of the Spanish Army to Catalonia.

Moreover, at the national level, the Spanish government itself is never far from crisis. In 2016, Spain was without an elected government for 314 days. Mariano Rajoy’s minority government now relies on cross-party support to pass legislation. In this situation, a mishandling of the Catalan issue increases the likelihood of political instability and a challenge to the government.

European dis-union

The referendum in Catalonia is the latest in a series of serious challenges that are undermining EU authority, from Brexit to the refugee crisis.

The Catalan government called on ostensibly European values such as ‘self-determination’ and ‘democracy’ to justify its separatist position. Yet the EU rejects the notion of Catalan independence on the basis that the decision to hold a referendum contravened Spain’s 1978 constitution and directly challenged the principle that Europe is a community of law-based states.

Indeed, Catalan secession risks opening a Pandora’s box of sub-national claims to independence, a threat to the spirit of European integration.

Short-sighted populism?

The perspective of former Catalan President Arturo Mas is probably the most realistic: he has stated that Catalonia is not yet ready for ‘‘real independence’’. The economic impact mentioned above, and the low likelihood of EU accession post-independence, are among the factors that would dictate a more tempered approach. Yet both sides are rapidly backing themselves into a corner, with the Catalan leadership overzealously committing to independence, while Madrid sets conditions for talks – the rejection of the referendum result – that will be politically unpalatable to the Catalan side.

The impasse is also partly due to the disproportionate influence of the radical left-wing Candidatura d’Unitat Popular Party (CUP). Although it only has 10 of the Catalan Parliament’s 135 MP’s, its deputies are essential in ensuring a separatist majority in the chamber. Giving in to nationalist rhetoric and populist demands is a very short-sighted strategy, but the only solution to the current impasse may be to offer more self-rule to Catalonia, especially with regards to financial matters.

Categories: Europe, Politics

About Author

Niall Walsh

Niall Walsh is a political risk analyst for GRI. He holds a BA in History and Spanish from University College Dublin and an MA in International Relations from Leiden University. His main focus concerns national and regional political risk in Latin America.