eurozone

The Spanish Bank Association (AEB in Spanish) and the Spanish Confederation of Saving Banks (CECA in Spanish) warned about the “risks” of Catalonia’s independence. In an official announcement made this Friday, both associations assured that all banks with a presence in Catalonia “would face severe problems of judicial insecurity” in the event of a Unilateral Declaration of Independence after the 27-S elections. They outlined that “any political decision which would imply breaking the rules in force” would result in “exclusion from the EU and the Eurozone” for Catalonia. The Catalan Finance Minister, Andreu Mas-Colell, described the Spanish government as “being irresponsible” for pushing the banking sector to be against the independence of Catalonia. He regretted that such “a delicate sector” was used as an “artillery weapon”. 

The Secretary General of the Diplocat, Albert Royo, expects the European Union and Spain to embark on discussions about Catalonia’s independence and its membership of the EU and the Eurozone if pro-independence groups win a “democratic mandate” in the next election, to be held on the 27th of September. During a conference at the Catalan Summer University in Prada, Royo warned that “it’s in no one’s interest” for Catalonia to be expelled from the EU. The diplomat emphasised that Catalonia represents 2.1% of the European GDP, “more than Finland or Greece”, so its expulsion could potentially lead to “the collapse of the euro”.

International experts have participated in a day of debate over the hypothetical scenarios and the possible consequences regarding membership or expulsion from the European Union of an independent Catalonia. The panellists ruled out automatic expulsion, as well as automatic membership, in any scenario. Graham Avery, Senior Adviser of the Brussels-based think tank European Policy Centre (EPC), underlined that "the most important" element in deciding what would happen to an independent Catalonia would be "the process" through which it achieves this independence. If it was carried out with the agreement of the Spanish Government, the transition towards full EU membership would be quite fast and smooth. If it was done unilaterally, then a wide range of scenarios are possible, with risks and costs rising. However, a majority of experts have stated that even in the worst case scenario, the costs would not be as high as the Spanish Government is saying. In addition, they affirmed that the EU is likely to adopt a pragmatic approach and that a transition regime is likely to be set up, with basic policies and freedoms not being interrupted.

The International Monetary Fund (IMF) has reviewed and improved its economic growth forecasts for Spain, going from a 2.5% growth rate for 2015 forecast in April to a 3.1% one foreseen this June, and from 2% to 2.5% for 2016. However, the IMF has also issued recommendations and warnings, emphasising that Spain will have to carry out "additional fiscal efforts" and "structural reforms" in order not to jeopardise the country’s economic recovery. The IMF recommends that Spain reduce the costs of public healthcare and education by making users pay for part of the services. According to the international organisation, Autonomous Community governments – such as Catalonia's – should have greater fiscal responsibilities in such systems since they exclusively manage them. In this vein, the IMF has praised the fiscal consolidation efforts undertaken over the past few years by regional governments and has asked for an increase in their funding and fiscal powers, as well as for the adapting of the deficit targets to their needs.

The price competitiveness index for Catalan industry in relation to other industrialised countries improved by 0.4 points in the last quarter of 2014 compared to the same period of 2013, according to figures released on Monday by the Statistical Institute of Catalonia (IDESCAT). This improvement is particularly noticeable when compared against newly industrialised Asian countries, over which Catalan industry held a 2.7 percent advantage in competitiveness. A recent decline in the Euro's value has aided in facilitating the attractiveness of Catalonia's industrial products in the market. The favourable exchange rate has helped offset the loss of competitiveness of industrial prices compared to other industrialised countries.

Catalan GDP grew by 1.3% in 2014 and will increase by 2.5% in 2015, claims Barcelona’s Chamber of Commerce. “The Catalan economy had a very good performance in 2014, even better than that of Spain as whole, and this acceleration will continue during 2015”, stated the President of the Barcelona Chamber of Commerce, Miquel Valls, on Wednesday. The day before, the Spanish Prime Minister, Mariano Rajoy, announced a revised economic forecast for 2015 and stated that Spain’s economy would grow by 2.4% in 2015. Valls highlighted that all the macroeconomic indicators show positive figures for the first time in the last 7 years, which makes him think that Catalonia’s “recovery from the crisis is a fact”. The industrial sector, exports, construction and job creation are the main reasons behind those predictions, which also benefit from external factors such as the fall in oil prices.

Exports from Catalonia increased by 3.1% in 2014, reaching €60.2 billion, meaning that more than 30% of the Catalan GDP is sold outside of Spain. Furthermore, Catalan exports grew more than those of Spain as a whole, which increased by 2.5% last year, reaching €240 billion. This means that 25.1% of all Spain’s exports come from Catalonia’s economy, some way ahead of the Madrid region, which produces 11.7% of Spain’s total exports. In addition, the growth rate of Catalan exports was much higher than the Eurozone average (exports from which grew by 1.8%) and also higher than that of EU Member States such as France (-0.2%), UK (-11.1%) and Italy (+2%). The figures posted this Wednesday confirm the good health of Catalonia’s export sector and the high degree of internationalisation of its economy.

According to a study by the Professional Association of Economists of Catalonia (Col·legi d’Economistes), an independent Catalonia would obtain a much better grade from rating agencies than it currently gets, taking into account its diversified economy and higher GDP per capita than the European average. Specifically, it would obtain an A+ rating, 7 levels higher than the current BB ‘junk bond’, using Standard&Poor’s classification. The study highlights that without the current fiscal deficit with the rest of Spain, the rating would be “at least” that of the Basque Country and would enable the Catalan Government to access the international financial markets. Catalan taxpayers pay much more to the Spanish Government than the amount they get back in terms of services and infrastructure; a fiscal deficit equivalent to between €13bn and €17.5bn per year.

The former European Commission’s Spokesperson for Economic Affairs during the Eurozone crisis, Amadeu Altafaj, is to become Catalonia’s Permanent Representative to the EU institutions. This position has been created as a way to increase the political weight of the already existing Catalan Government Delegation in Brussels in the middle of the debate about independence from Spain. Altafaj, who has also worked as Deputy Chief of Cabinet of the Commission’s Vice President for Economic and Monetary Affairs, Olli Rehn, since 2012, will now direct this delegation and become Catalonia’s voice in the EU institutions’ offices. On many occasions, Altafaj has been vocal about Catalonia’s self-determination, supporting it and emphasising that an independent Catalan State would be economically viable.

The Catalan economy’s indicators are posting positive figures and the research department of the BBVA bank has reviewed its growth forecast for Catalonia for the current and the next years. According to the report issued on Thursday by the BBVA, the Catalan economy will grow by 1.3% in 2014 and by 1.8% in 2015, which are higher rates than those initially predicted. On top of this, 140,000 new jobs will be created in those two years, which represents a 4.3% employment growth. In addition, it puts an end to the negative trend that destroyed 17.3% of the existing jobs between 2008 and 2013. The BBVA also praises “the very significant effort” made by the Catalan Government to reduce public deficit in the last few years, although they will not be enough to meet the strict deficit objectives for 2014 and 2015, unilaterally imposed by the Spanish Government.

Furthermore, the Catalan Executive regrets that the Spanish Prime Minister, Mariano Rajoy, has not made any political proposal in his answer to the letter sent by the Catalan President, Artur Mas, after November 9’s symbolic vote on independence. Rajoy answered Mas’ letter and highlighted that Spain’s “sovereignty” cannot be negotiated, therefore rejecting the possibility of any discussion about a mutually-agreed referendum on Catalonia’s independence. Coinciding with the Spanish PM’s trip to Barcelona on November 29, the Spokesperson for the Catalan Government, Francesc Homs, stated that Mas “would be delighted to welcome Rajoy at the Generalitat Palace”. He “has the doors open” to talk with Mas about the demands of Catalonia’s society. However, Homs also warned the Spanish PM that such dialogue should not become “a monologue”.

Figures released by the Barcelona Chamber of Commerce on Monday showed that the economy of Catalonia is set to grow by 1.6% in 2014 and 2.1% in 2015. The Chamber also predicted that by 2015, there will be a 2% rise in Spain’s GDP and 1.4% in that of the Eurozone countries average. According to the President of the Chamber, Miquel Valls, the recovery of Catalan and Spanish economies is "solid", but he stressed that the "austerity in wages" must be maintained. This report comes after the success of all Catalan banks passing the stress tests issued by the European Banking Authority and the European Central Bank, which 25 banks across Europe failed. Related economic news is that the unemployment figures released for third quarter of 2014 set Catalonia’s rate at 19.1% and Spain’s at 23.67%.

King Juan Carlos' succession process is not explicitly backed by the Centre-Right pro-Catalan State Coalition Convergència i Unió (CiU), which played a crucial role in Spain's Transition from dictatorship to democracy and guaranteed on many occasions Spain's stability. However, this time, the CiU has decided to abstain in the vote on the Law on Juan Carlos' abdication, as it was announced last week. The CiU accused Spain's two largest parties – the governing People's Party (PP) and the Spanish Socialist Party (PSOE) – of having excluded them from this and previous processes. The bill was approved on Wednesday by 85% of the Spanish Parliament, but only with the votes from the PP, the PSOE and the Spanish nationalist and populist UPyD. The Catalan and Basque conservative nationalists have abstained, while the left-wing Catalan parties have voted against it. The CiU was an essential part of the consensus of the 1978 Constitution, which once again proves to be broken.