You Can't Argue with the Facts

Spain is strongly limiting growth and development opportunities for the people living in Catalonia, both at the individual and collective level. We will try to summarize the most relevant issues involved in this situation. Here are the facts ad the figures.

 

Taxation deficit
A taxation deficit occurs in a particular territory when taxes raised and collected within this area overcome the investments carried out by the State in the same territory. Since 1986, Catalonia has suffered a taxation deficit of 286,000 million €. This means it has delivered this amount to the Spanish State without receiving any investment in return.

Therefore, Catalan companies and workers suffer from lower employment rates and purchasing power, less wealth created and lost competitiveness. Several economic studies have concluded that over 300,000 jobs would have been created if the Spanish State had carried out its investments according to the previously mentioned figure. These jobs are nowadays located elsewhere outside Catalonia.

Mediterranean Rail Corridor
This rail infrastructure connects Andalusia, Murcia, Valencia and Catalonia to Europe. These regions generate 40% of the state’s overall wealth and host the same proportion in population. This corridor would considerably decrease transportation costs and consequently reduce time and energy resources. It would also agilize access to Europe for Catalan companies and products, it would increase their competitiveness, and promote new opportunities. The various Spanish governments, rather than investing in such infrastructure, have prioritized the construction of highways and AVE (high-speed-trains) which are, in turn, not sustainable due to their low economic output and performance. In addition, the central government's plan is, in opposition to the EU, to build this rail corridor via Madrid and connect it to Europe through an enormous giant tunnel to be digged in the central Pyrenees. The target of such strategy is clear: to keep Catalonia isolated from the main European transportation networks.

Barcelona Airport
Multinational companies, congresses, and fairs choose their location according to ease of connection. Barcelona has repeatedly demanded its airport to become an international connection hub in order to attract foreign investment, tourism, and all kinds of events. All Spanish governments have consistently prevented Barcelona from competing against Madrid’s airport, resulting in an increasingly growing number of foreign companies settling down in Madrid (85% in 2011). Consequently, Catalonia is progressively being isolated from major intercontinental air routes, losing its attractiveness to investors, which, in turn, results in less occupation and economic activity.

Port of Barcelona
This harbor is of vital importance for the development and growth of Catalonia, along with other infrastructures such as airports, highways, and rail systems. The Catalan Government has invested greatly to develop so that it becomes the gateway to Europe for maritime transport arriving from Asia. However, constraints on permits and, in general, the overt lack of investment willingness by the Spanish State have brought this project to a standstill. The strategy is clear and conspicuous: enhance the port of Valencia as Madrid's connection to the sea and, at the same time, undermine the potential of the port of Barcelona. Since 2006, the government committed to invest on transportation networks around the port, but still none has materialized. In addition, all operations in the port of Barcelona are taxed (rate per kg). This situation is not applied in any other Spanish ports, and it handicaps even further Catalan companies.

AENA - Spanair
The centralized Spanish airport system is conceived to turn Madrid into Spain's economic capital, leaving Barcelona's airport as a simple secondary and "feeding" infrastructure. Only Spain and Romania currently maintain such centralized systems while major airports worldwide have their own management capacity. The Spanish State has boycotted the launch of Spanair, preventing Barcelona to become an international hub capable of competing against Madrid. In 2011, 900,000 passengers had to pass-by (or were forced to fly to Madrid) in order to arrive to Barcelona. Barcelona is already called as "the dry port."

Highways
Catalonia and its people have been forced for ages to pay toll when driving on highways. The succession of concession extensions to private companies is endless. The extension of the concession passed by law in 2012 helped funding free highways all over the rest of the Spain and, more recently, has served to wipe out losses in Madrid's highways (above € 200 million), which, in turn, will be paid by extending private concessions in Catalonia. The construction of free motorways all over the rest of Spain is continuously growing. In the past years, only 20 km have been built  in Catalonia, compared to more than 600 km in Madrid.

Greater Barcelona rail system
An agreement was signed some years ago to improve wiring  systems, security measures, platforms, etc. of the rail systems in metropolitan and surrounding areas in both Madrid and Barcelona. The allocated budgets were 6,000 and 4,500 million € respectively. Madrid's budget and works execution has been fully met (100%) whereas Barcelona has only met 15% of what was budgeted. Incidents such as brake failure, delays, accidents, etc. happen on a daily basis in Barcelona. The Catalan traveler's security is not an issue. While the AVE (high-speed-train) will soon connect to the new T4 terminal in Madrid's airport, this connection is being denied in Barcelona on a regular basis. On top of this, the construction of the AVE line Madrid-Galicia and the Madrid-Portugal border (the Portuguese Government has already confirmed it will not build any connection) goes on with an expected investment of 28,000 million €.

 

N-II Girona
Also known as Road of Death, it accounts 15 to 20 deaths per year. Back in 2006 it was agreed to double its capacity in order to carry up to 30,000 vehicles per day. Those construction works are not finished yet and the current Spanish government has recently cancelled any further construction. Landowners have not received any compensation either. While Spain is full of free highways, drivers in Girona put their life on stake every day. Thanks Spain.  

Infrastructure
According to the Additional Provision 3bis in the recently passed Catalan Statute of Autonomy, the governments of Spain and Catalonia agreed that investment in infrastructures in Catalonia should equal the generated GDP. Reality shows that it only reaches 67% on average whilst it has always been around 110% in Madrid. That is, every third year is lost in terms of investment and the Spanish State saves the funds from that year's investments. In 2011 only 35% of the infrastructure budget materialized. This investment decrease seriously damages our businesses and condemns our economy to lower competitiveness.

Student Scholarships
Catalonia accounts for 16% of the population. However, Catalan students receive just 8% of the total allocated grants by the Education Ministry. In turn, Madrid gets 58%. Is it fair to influence on the youth's development opportunities depending on the place of birth?

Foreign Investment
Companies having their headquarters located in Madrid obtain 85% of all official subsidies and funds while those based in Catalonia only receive 5% of the total. No comments. This is just another example of plunder and unfair treatment to bear in mind.

Constitution Act - Art. 8th
None of the western democracies consider armed supervision of its political power except in Spain where the Spanish Constitution supports it. This article is a latent threat to all democratic people. For those who don't know it, article 8 of the Spanish constitution grants the army the powers to intervene should a region choose to secede.

Catalan Statute of Autonomy judgment and ruling
How can a court cancel or modify any fundamental law if it is up to the people who have made good such deal with their votes? This court sets itself automatically as a political tool. This politicized court is not competent to cancel or modify any law enacted and passed by a referendum. The only desire behind such judgment and ruling can only be to stop Catalan ambitions. We have lost trust on this body, it does not generate any confidence. It only guarantees the centralized power.

Fiscal Balances
Catalonia has insisted over and over again in the obligation to inform all citizens on the distribution of taxes paid by all. Finally, these figures were published in 2005 and show a 286,000 million € accumulated deficit (1986-2009), taxes that the Catalans paid without getting anything back. Moreover, ever since 2005 these data have not been published any longer, which contradicts the law that was passed to ensure its publication. In 2009 the personal contribution per inhabitant in Catalonia (regardless of age) was 2,251 € per year. Therefore, a 4 member family contributed 9,004 € without receiving anything in return. Consequently, the same family has contributed 179,740 € in total between 1986 and 2009, which is equivalent to a 2-bedroom apartment.

Endesa case
We should not forget all the cheating, deceptions and falsehoods that were thrown around by the centralist parties in Madrid against the takeover of this company by Gas Natural. The central government mobilized all its resources to prevent Endesa to be controlled by a Catalan company. It should always be remembered the sentence that was used for this: "We'd rather be German than Catalan," which in the end turned out to become "Italian before Catalan" but still with its headquarters located in Madrid. Ironically, 60% of its customers are Catalans which shows that being in Spain does not imply any particular advantage.

Violence
All different Spanish governments have always argued that all kinds of negotiations should take place in peaceful, democratic conditions—without any threat of violence involved. Now that 83% of Catalans are peacefully and democratically requesting a referendum, the answer is that it is not legal. There will always be an excuse against Catalonia. As a matter of fact, this referendum is indeed legal as it is stated in the Spanish Constitution Art. 92 in the following terms: it is called by the King after a proposal by the Primer Minister, previously authorized by the Congress. This way they manage to keep any majority silent. Long live democracy!

These are facts that cannot be disregarded. The different Spanish centralist governments want Catalonia to be a slave of their centralism, preventing harbors, airports and railways to be internationally connected, thereafter reducing its competitiveness and so to stifle its economy and submit Catalonia to its power. Catalonia is the enemy and is a threat at the same time. The target is to keep Catalans away from main communication hubs, for goods, people and knowledge. Indiscriminate investments elsewhere are performed only for the sole purpose of attracting votes that keep rulers in power.

Threats are the only argument against the democratic demands by the Catalan people. The majority of its inhabitants are fed up with this situation. There is no other way than to take our own path if we do not want our individual and collective future to be threatened. Spain's strategy is very clear: to strengthen Madrid's power at the expense of Catalonia, removing its economical power so as to eliminate its political power. All Spanish governments have had in their hands the chance and the tools (political, economical, financial and legal) to modernize the country. They all have been unable to do so and their incompetence has been demonstrated. Their models have always failed. Nobody values the what Spain has to offer to the world anymore. Here is the result of their policies: five million unemployed, thousands of bankrupt companies, thousands of families have lost their home and are drowning in debt, welfare state cuts, young people looking for a job abroad, retirement pensions at risk. These figures can not be manipulated nor hidden. Spain stands for unemployment, everyone knows about it, being always on the top of the highest unemployment rate per country lists.  Unfortunately, reality is harsh.

Constant and repeated breaches of agreements and manipulations have ended the patience of many people who, in turn, have come to the conclusion that there is only one way out of this situation: independence.

We want to be independent in order to build a modern, prosperous and fair country, full of opportunities for all who live in it. It is not a project born out of greed (many Spaniards conveniently cling on to the cliché that Catalans are greedy), it is a project to improve our lives as a community for the future.

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Spanish Government rules out a new inter-territorial fiscal scheme, despite the current one having legally expired

Spanish Finance Minister Cristobal Montoro

On Wednesday, the Spanish Finance Minister, Cirstobal Montoro, refused to start negotiating and launching a new funding scheme for the Autonomous Communities before 2016, even though the current model had to be reviewed before January 2014. The Catalan Government has been insisting on its review since 2012, since the system does not properly fund basic public services such as healthcare and education in times of economic crisis, areas which are entirely managed by the Autonomous Communities. In addition, Catalonia suffers a permanently high fiscal deficit: each year Catalan taxpayers have to give away some 8.5% of Catalonia’s annual GDP to fund services and infrastructure in the poorer regions in Spain, a transfer equivalent to some €17 billion per year. The problem is that after such annual transfers, public services in poorer parts of Spain have more money per inhabitant than those in Catalonia. 

In addition, the Spanish Government does not invest enough in productive area such as Catalonia, which receives investment way below its population and GDP share. Therefore, the public services in Catalonia are under budgeted compared to other parts of Spain and basic infrastructure is not built which slows down the economy. The Spanish Government has been postponing the new model, despite the territorial tensions and the self-determination demands. Now, Montoro has definitively shut the door and Catalans will have to wait at least a year and half more.

In front of the Spanish Parliament, Montoro announced that the current model funding the Autonomous Community government will not be changed in the current term, which ends in one year time, neither he will start negotiating a new scheme. According to the law, the current model had to be reviewed before January 1st, 2014, which has not been the case. The Spanish Government has been postponing the revision with the argument of the economic crisis, saying that now it was not the time since revenue and spending are not at regular levels. In addition, they added that there would not be enough consensus among the different government levels and Autonomous Communities, even though most of them are ruled by the People’s Party, which also runs the Spanish Government.

However, at the same time, the Catalan Government was urging the Spanish Prime Minister, Mariano Rajoy, to do so because basic public services such as healthcare, education and social affairs are under severe stress and cannot withstand further budget cuts without their quality being seriously damaged. Since such services are managed by the Autonomous Communities, which can then be blamed by the citizens, Rajoy has not authorised reviewing the current model.

Montoro repeated on Wednesday that with the current economic context, a change is not possible. In addition, he also argued that the current political atmosphere would make such a change “unviable”, regardless of the fact that the Catalan Government has been requesting it since 2012, almost 2 years before the current model was about to expire. In fact, legally speaking, the new model should have entered into force on the 1st January 2014 and therefore should have been negotiated throughout 2013.

The Finance Minister argued that launching such a revision now would trigger “grievances among Spaniards”. Instead of a new model, Montoro emphasised that the Spanish Government is “sharing the debt” among the different government levels to fund public services. Once again, he defended the Liquidity Fund for the Autonomous Communities (FLA), which issues loans that later individual regional governments have to pay back with interest. This mechanism transforms the Spanish Government into a bank that earns money instead of being a coordinator that distributes resources without taking advantage of it. On top of this, Montoro is presenting such loans as a basic assistance to governments such as Catalonia’s, while at the same time the Spanish Executive does not allow the Autonomous Communities to access financial markets and to obtain alternative funds.

Therefore, Montoro is not allowing the Autonomous Communities to get additional funds, neither does he agree on reviewing their current funding scheme, one that cannot provide enough funds for their needs any longer, and, instead, it issues loans out with which the Spanish Government will make money. Through this system, Rajoy is recentralising power and putting the Autonomous Community system under severe stress. In the current political situation in Catalonia, with demands for independence shared by a large part of society, Rajoy’s attitude is far from easing things and, instead, it adds further tension.

On top of this, the Spanish Government refuses to recognise Catalonia’s historical fiscal deficit and it has been denying it or downplaying it. Such an attitude irritated the main business associations in Catalonia, who urged Rajoy to admit the fiscal deficit and to partially correct it, funding infrastructure that is essential to ensure the competitiveness of the Catalan economy, which is Spain’s main economic engine, leading exports, industrial production and tourism industry.

ACN

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How much will Catalonia pay for Spain's Economic Policies

The budget for 2013 will be difficult due to the economic and financial context in Catalonia and the whole Eurozone. But it will be even worse due to certain decisions taken by the Spanish government that will further negatively affect the budget.

A list of these decisions will be useful to understand why they will all damage the Catalan government's accounts, which it should be remembered is the administration that delivers the public services inherent to the welfare state: education, health and social welfare.

Non-payment and unfulfilled commitments to Catalonia by the Spanish government:

- Outstanding payments corresponding to unfulfilled commitments to investment in infrastructure in 2008, 2009 and 2010 as established by the Third Additional Provision of the Catalan Statute of Autonomy, to the amount of almost €1.7bn.

- Non-compliance of the same Additional Provision corresponding to the budget for 2013, to the tune of €661m.

Provoked increased expenditure

- Assigned revenues (that the Spanish state transfers for specific expenditure items, many of which are committed by laws passed by the Spanish government) which have been cut back and which the government of Catalonia has had to compensate in part, with a negative impact of €296m.

- Raised VAT paid by the government of Catalonia, and which will be collected by the Spanish state (for the Spanish state, an increase in VAT has no impact as it pays itself): negative impact €66m.

Boycott of the Catalan government's tax autonomy

- Appeals before the Constitutional Court against certain taxes and fees approved by the Catalan government under the tax autonomy allowed by the Constitution and the Statute of Autonomy, which are suspended during the hearings. Just the suspension of the Bank Deposits Tax payable by financial institutions cause a negative impact of €500m on the 2013 Budget in lost revenue.

Appropriation of debt through taxes collected in Catalonia

- Establishment of a deficit cap of 0.7% of a total of 4.5%; contrary to recommendations of the European Parliament and inversely proportional to the participation by the Regions in the overall expenditure. Applying the criterion of proportionality, the deficit should be 1.7%, which would avoid cuts to the sum of €2bn.

If you add up, you will see that the result is over and above the amount they say is to be axed (€4bn) in order to balance the Catalan government's 2013 budget.

Pere Aragonès

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Catalonia in the International Spotlight

It seems that The Times has begun a media crusade against the possible independence of Catalonia. Two days ago the headline of its Editorial cried out that the separation from Madrid would be at least as bad [financially] in Catalonia as in the rest of Spain. A few days earlier, the same newspaper published an article by journalist Matthew Parris along the same lines, with an explosive title "Catalonia is a bigger time bomb than Cyprus".

Although it is widely known, it is worth remembering that The Times is a British newspaper of conservative bent that has Spanish ex-president Aznar of the conservative Popular Party as a consultant.

What is surely not as well known is that Mr Parris, in addition to being a journalist, was also a member of the British Conservative Party. A man with an interesting curriculum with a few peculiarities like the fact he received a medal from the Royal Society for the Prevention of Cruelty to Animals from the hands of the recently deceased Margaret Thatcher for jumping into the river Thames to save a dog. We are not talking about the typical correspondent who works in Madrid and does not have a clue of what is happening in Catalonia; Mr Parris lived and worked in our country and, therefore, one assumes he would possess some knowledge of our reality. And I say that one assumes this, because it is obvious that either he does not possess this knowledge or for some reason he is not interested in divulging it.

“The damage Catalan separatism could do to what would be left of Spain is an argument against separatism”.

“If the separatists get the referendum and win, this could devastate the entire region”.

Are we to understand that the Spanish State has the right to consider its own interests, that Europe has the right to consider its own interests, but if we, the Catalans, dare to consider our own interests, then the Apocalypse will come upon us?

Let’s take this step by step. It is interesting that a publication of such prestige as The Times reveal that without Catalonia, the Spanish State will go under. What I do not find acceptable from any point of view is that we, the Catalans, have to hold ourselves responsible for the economic feasibility of a country that for years has suffocated us economically. And it seems to me equally intolerable and irresponsible to affirm so strongly that Catalonia without Spain would go down.

On one hand, not only does this kind of psychological blackmail not work with us, but it deeply outrages a country that has been suffering a bleeding fiscal plundering for years, contributing to the misconstrued autonomic solidarity, trying to find a mechanism to suit the Spanish government, while receiving negative replies, insults and abuse in return.

What answer can we give our public employees who see their salaries cut for the third year in a row? And to the 100,000 Catalan families who live below the poverty threshold? And to those 860,000 unemployed Catalans? And to the Catalan companies to whom credit for export is being denied?

And on the other hand, the Mr. Parris overlooks the fiscal deficit—whereby Catalans pay more taxes than they receive in reciprocity—that year after year Catalonia suffers (€16bn, 8% GDP) or the chronic deficit in infrastructures that reduces the economic potential of the country. Without this deadweight, Catalonia would not only be limited to surviving, as the editorial of The Times implies, but would instead be a middling economy within the European Union, with a welfare state equivalent to that the Dutch or Danish citizens have.

The problem with the future economic viability of Spain in the event that we become independent would be for the Spanish State and the European Union. Not for Catalonia. It is not fair to impose this responsibility upon us, especially when we are striving to do our homework, adjusting our budgets and improving competitiveness. Everyone is responsible for themselves and we must all together make the common welfare possible. Catalonia wants to contribute to the European coffers as would correspond it, because we are convinced that Brussels, with all its problems and imperfections, administrates the resources better than Madrid. At least its sense of justice and democracy makes it more trustworthy before the Catalans.

The international concern should place more emphasis on urging the Spanish Government to do its homework, to negotiate the holding of the referendum in Catalonia and to search for the means which would allow self-determination in a territory where the majority of its population is crying out for its right to vote in order to decide its own future.

Would it not be much easier to insist upon the need to agree, negotiate and reach an agreement, instead of threatening us with the economic and financial bankruptcy of the entire Iberian Peninsula?.

Read this article in German, Spanish and Italian

Elisabet Nebreda, Secretary
for Intl. Policy. ERC

Cesc Iglésies, Asst. Secretary General
for Political Action. ERC

Cesc Iglésies, Assistant Secretary General for Political Action ; Elisabet Nebreda, Secretary for International Policy.

Esquerra Republicana de Catalunya (pro-independence Republican Left of Catalonia)

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"The Mediterranean Corridor": A key infrastructure for Catalonia

The Mediterranean Corridor is a trans-European rail line that provides faster, more economical and cleaner transport in comparison to sea and air freight.

The Mediterranean Corridor is of crucial importance for the future of Catalonia because it is a means of opening up its trade to the European market, driving Catalan exports to Europe and Africa, making Catalan companies more competitive.
Furthermore, it will reactivate the ports of Barcelona and Tarragona and will generate wealth and jobs for the Catalans.

The Mediterranean Corridor has been approved by the EU instead of the Trans-Pyrenean Corridor option, which is promoted by the Government of Spain, despite the fact that the Mediterranean Corridor is much more profitable with advantages including:

The areas traversed by the Mediterranean Corridor are the most economically dynamic, the cost of transport is cheaper, the investment needed is much lower, it is the shortest way to central Europe from any point on the track, and it is the natural passage of entry for goods from Asia.

However, the Spanish government continues to call for the Trans-Pyrenean Corridor to be built, along with an infrastructure based on a radial system centred on Madrid. The Ministry of Development has never clearly committed to the Mediterranean Corridor and has never rejected the construction of alternatives, and there are many short- and long-term investment shortfalls for the Mediterranean Corridor as projected by the Spanish Government.

If Catalonia had had decision-making power over the Mediterranean Corridor, this would have been deployed 20 years ago, with the economic advantages that this would have had for Catalonia. It would have been possible to find private operators such as SNCF and Deutsche Bahn to finance the Catalan section and accelerate the works by mean of the huge logistical savings obtained, thus avoiding the Spanish government's obstruction.

If Catalonia were an independent state, it would be able to drive, jointly with its neighbours Spain and France, a single managing organization for the ports of the Mediterranean, from Marseilles to Algeciras, passing through the ports of Tarragona, Castelló, València, etc.—with Barcelona operating as a multimodal airport, seaport, road and rail hub.

Joan Cabanas

CCN

Article related: The Western Mediterranean branch of Freight Rail Great Axis

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Andorra and the Euro

I always say that reality is stubborn and its head sticks out when you least want it to.

One of the great threats Spaniards make to pro-independence Catalans is that Catalonia will not be able to use the euro if it becomes independent. Well, I have attached the entry of the Official Journal of the European Union from 17 December 2011 about such a powerful statement in which the monetary agreement between the European Union represented by the European Commission and the Principality of Andorra is published (2011/C 369/01).

Through this Andorra will issue euros coined in the Principality of Andorra as they are already doing in Monaco, San Marino and the Vatican City.

Due to technical problems, in October 2012 the Government of Andorra delayed their entry into the euro currency to January 2014 and the banknotes for later on.

Jordi Colomines

 

Spanish Version

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Els de “la pela és la pela”

It is no news that in Spain, the Catalans are said to be stingy. We are a people who, unlike other societies, have for centuries based a great part of our economy on foreign trade. That explains why we were pioneers of the Industrial Revolution in the Iberian peninsula, or why the word peseta (the currency in Spain before the Euro) comes from the Catalan language. Curiously, this account jelled and we ended up being described as penny-pinchers, with the hackneyed phrase la pela es la pela (a penny is a penny).

In this “penny-pincher's” country, nevertheless, over 3,000 tonnes of food were collected during the GranRecapte food drive this year, food delivered to the needy throughout Catalonia. This record figure was achieved thanks to the participation of over 20,000 volunteers, with donations from many families, mostly from the middle class in over 250 towns across Catalonia.

Every year since 1994, Catalans also Get (their feet) Wet for MultipleSclerosis, jumping into hundreds of pools throughout Catalonia when summer comes, to collaborate in the fight against this disease. This event is the second most massive charity event in Catalonia.

And what is the top charity event? La Marató de TV3. Catalan Public Television organizes a telethon every weekend before Christmas, held simultaneously with dozens of events organized throughout Catalonia to raise funds to assist in disease research. Since 1992, La Marató has collected around €120 million.

Consciously or not, these events and acts of solidarity supplement the work of national and local governments, which instead of investing in research and meeting the needs of its population, rely on the goodwill of the people. The Catalan people get involved in numerous acts of solidarity every year. Just for this single reason, Catalans deserve to clear themselves the “penny-pinching” tag, because la pela és la pela applies to everyone, and maybe there should be more self-criticism and analysing of who does what with their own – or with other people’s – money.

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Catalonia in Contention

On September 11, during the eve of the Scottish independence referendum, another Western European independence movement was brewing 1,300 miles to the south. Hundreds of thousands of residents of the Autonomous Region of Catalonia gathered in the streets of the capital city of Barcelona to demand a vote for their region’s independence from Spain. As many as 1.8 million people participated in the demonstration, making it one of the largest the nation has seen this millennium. The historic turnout made at least one thing clear: the lid could no longer be kept on the Pandora’s box of socioeconomic grievances that Catalonians have been voicing for decades. But behind the romantic notions of separatism that have engulfed the Spanish northeast lie a set of concrete, legitimate economic incompatibilities driving the push for an independent Catalonian state.

It is important to acknowledge the plethora of social and political factors associated with the recent spike in the desire for Catalonian independence. These include the region’s long history as a sovereign entity, its own language, spoken alongside Spanish by a vast majority of residents, and its unique culture, which, for example, denounces the popular Spanish tradition of bullfighting as inhumane. But perhaps the most important considerations for the independence movement are the potential economic consequences of independence for the area.

If Catalonia were to form its own sovereign country, its 7.5 million residents would make it the 99th most populous in the world. The gross domestic product of the region—$314 billion—would rank it as the 34th largest economy, with a GDP exceeding those of Portugal, Hong Kong, and Egypt, to name a few. Its GDP per capita, at $35,000, is greater than that of South Korea, Israel, and Italy. It’s therefore likely that an independent Catalonia would fare better than many on the global economic stage. That fact alone, however, isn’t enough to justify outright separation. The relevant question is whether or not the region’s fiscal relationship with the rest of Spain is more of a detriment than a benefit.

A Parasitic Relationship

Leonid Peisakhin, a political science professor at New York University, discussed Catalonia’s economic prospects with the HPR. “Catalonia is the economic engine of Spain in many ways: certainly when it comes to established industries, but also in the service sector,” he said. “It’s just a lot more diverse than many other regions [of the country].”

To give some numbers, Catalonia serves as home to approximately 20 percent of Spain’s total economic activity, and contributes roughly 25 percent of the central government’s tax revenue.

Madrid, however, directs a mere 11 percent of its spending back toward the region. Some officials in Barcelona claim that their constituents pay about $19 billion more to the nation’s capital each year than they receive in return. An economically imperiled Spain has no choice but to redirect some of the revenue from its most booming region toward its struggling ones. Nevertheless, the current system seems to unfairly and ironically punish Catalonians for their relative success. It’s easy to see why 60 percent of the area’s population wants out.

Artur Mas, the region’s right-leaning president, has been pushing for a fiscal pact with Madrid, by which Catalonia would be allowed to collect and manage its own taxes. Spanish officials, however, have been turning a blind eye toward the issue. “Basically what the central government is doing right now is pretending the problem doesn’t exist,” Peisakhin explained. “They are trying to establish tough credentials early on in the negotiations and say that whatever concessions [they] do make won’t be substantial.” Mas has declared that without an agreement, he will be forced to support a referendum on secession.

Even under the current system of tax collection and redistribution, what little money the region does receive from Madrid is invested unwisely. The central government directs funding without consideration for Catalonia’s export economy, which is based largely on small- and medium-sized enterprises. The rest of Spain’s economy, excluding the agricultural sector, tends to rely on large corporations with strong ties to the state. Therefore, business leaders in Barcelona claim that much of Madrid’s spending decisions are politically rather than economically motivated. A popular example is the €41 billion bailout of Bankia, an entity formed through a state-sponsored merger.

If Catalonia wants to reach its economic potential, investment in infrastructure is crucial in order to facilitate international trade. The region is currently responsible for 35 percent of Spain’s exports, including 45 percent of high-tech exports. The direction of state funds toward small-scale firms is also a priority for the city’s commercial elite. Unfortunately, Catalonians can no longer rely on the Spanish government, which has political interests and an economic model different from their own, to invest responsibly in their regional economy.

Dídac Querlat, a political scientist at the Juan March Institute in Madrid, told the HPR that “the Catalonian authorities have reached the conclusion that the promises and commitments that come from Spain are not credible anymore. They [no longer] believe that they can reach a better economic and political agreement [through cooperation with Madrid].” Without control of its own taxes, remaining politically attached to Madrid only hinders Catalonia’s progress as a region.

Even so, anti-separatists point toward the region’s massive debt, the largest of any territory in Spain, as a reason to keep the country unified. While Catalonia’s debt is sizeable, it amounts to only 80 percent of its GDP—less than the EU average. As an independent state controlling its own tax program, therefore, the region would have the ability to gradually repay what it owes. It certainly would not be able to do so with Madrid continuing to siphon off its economic resources.

The EU Question

However, one major reservation many Catalonians still hold is the uncertainty of the would-be new nation’s entrance into the European Union, especially with Spanish officials fervently declaring that they would block its incorporation. The region’s export-driven economy relies on easy access to the markets of other EU member states. Additionally, since 70 percent of imports to the other 16 regions of Spain flow through Catalonia, a healthy economic relationship with Spain is particularly crucial to the area’s commercial success.

But it is exactly this codependence that would preclude the Iberian nation from blocking Catalonia’s entrance into the European Union. Unless an already financially crippled Spain would be willing to pay higher tariffs for goods passing through a non-EU member, it would have no choice but to accept the new country into the union. Furthermore, if Spain refused to officially recognize Catalonia, the latter would carry no responsibility for assuming a portion of the former’s debt (as other nations in the Eurozone currently do). In its current state, Spain would have almost no hope of reducing its more than $1 trillion debt without its economic powerhouse. Transferring some of its financial obligations to Catalonia—and thus recognizing the new state—would be critical to Spain’s own self-interest should the region break away.

Moreover, many other EU powers have a stake in Catalonia’s quick entrance into the union. Over half of Germany’s investment in Spain, for example, is directed toward Catalonia. Berlin surely would like to avoid exchange fees in its transference of capital to Barcelona. Furthermore, even if Catalonia were initially unable to enter the EU after secession, the effects, according to Queralt, would not be catastrophic. “There are many other countries with close ties to the union, who have various trade agreements and pacts. In the first couple of years, the GDP would drop,” he acknowledged, “but only by maybe 2 or 3 percent.” Queralt, like many in Spain, speculates that the EU member states wouldn’t allow Catalonia’s absence from the free trade zone to persist for more than a few years.

Nevertheless, Catalonia’s potential membership in the European Union is far from guaranteed. Application to the European Union requires adherence to complex set of political and economic regulations as well as a unanimous approval by member states. Although no nation besides Spain presently appears intent on blocking an independent Catalonia’s entrance into the union, a variety of economic and political factors could motivate such action. For instance, a country might aspire to move into the market space once occupied by Catalonian firms. Even so, Catalonian leadership evidently feels confident that the interests of the entire continent would encourage a smooth transition into the Eurozone for the nascent nation.

A Forced Detour

A consideration of the economic rationale behind the growing sentiment for Catalonian independence, without even delving into the wide array of sociopolitical concerns in play, is enough to see why many in the region want secession. Understandably, however, Spain won’t easily let go of 16 percent of its population and one-fifth of its GDP. Central authorities have been resisting regional officials’ call for a November 9 referendum on independence. They claim that the maneuver would be unconstitutional and plan to block it in court.

Queralt proposes a likely solution: “The [Catalonian] government would call for a new regional election, which is completely legal and constitutional. The parties that favor secession would add the statement in their party manifestos, and so people would know that by voting for these parties they are voting for secession.” Queralt calls the method “imperfect,” but says it’s an acceptable alternative to calculate the popular support behind the independence movement.

The droves of Catalonians who occupied the streets of Barcelona on September 11 weren’t just there for show. It’s becoming clear that the secessionist movement that has long been building in the Spanish northeast is reaching its boiling point. In recent months the region’s leaders have demonstrated focus, determination, and a strong case behind their cause. The very foundation of liberal democracy is the citizenry’s right to abandon a government that fails to serve their interests and construct another, more effective one. There are few better contemporary examples of such a situation than Catalonia’s one-sided economic relationship with the central Spanish government. Whether they decide to stay or to leave, therefore, Catalonians should at least be given the power to choose their own fate.

By Ali Hakim

Image source: The Guardian

Source: Harvard Political Review

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If I Were Swedish

If I happened to be Swedish and I was watching one of the TV reports these days about those people with tall hoods and all the typical religious celebrations in the streets of Spanish towns, which are so baroque flavoured, as if time had stopped and stood still right there, my first thought would probably be to go there some time and attend some such exotic event as a tourist.

Then perhaps I would have a look at the weekly press only to find out that serious allegations had been made in Andalusia of an outrageous €2 billion fraud committed by regional authorities and derived from recycling courses for unemployed workers; that would remind me of the last EU report on unemployment, published recently, according to which Spain, together with Greece, is not only the country with the highest unemployment rate in Europe but also seven of its regions are among the top ten by unemployment, led only by two regions in Macedonia and by the remote Reunion island in the Indian ocean. Which means that even most of the French overseas colonies have better unemployment rates than they have in Spain.

I would then look at the map, also provided by the EU, and would soon realize that this structural problem is related mainly to the regions in the South, as is also the case in Italy; in the Northern regions unemployment rates are just one third of the highest ones. In Spain, though, the equalizer system of the so called State of Autonomies has reached an outstanding record: even the most developed, economically driven regions —such as Valencia, Aragon, Catalonia and the Balearic Islands— go beyond the ominous red line of a 20% unemployment rate.

There is still more. As a Swede, if I was keeping an eye on both the youth- and long-term unemployment rates, I would see that Ceuta and Melilla (Spanish cities on the Northern African coastline), the Canary Islands and Andalusia are on the front line with rates of over 55%, together with the French overseas colonies of Guadalupe, Martinique and Guyana.

Not knowing of any official explanation for this picture, I would think that all these Spanish territories, parallel to the French ones overseas, must still be colonies of the old Kingdom of Castille that were submitted 500 years ago to the dominant oligarchic class which is now also stopping the most industrious territories within the peninsula from developing any further.

If I went on revising last week's news I would gather information that Spain also leads the ranking of students dropping out of school, just as it leads the ranking of best paid footballers.

Anyway, it has the longest high speed train track and also the highest and most expensive energy costs too. Then, as a Swedie, I would scratch my head in astonishment and would say to myself: why should I contribute at all to that 1.27% of the European GDP to be sent deep down into any dark bottomless pit like Spain? Being a fair Swedish citizen I wouldn’t be happy if I knew I were to keep paying even one cent devoted to maintaining such an immense absurdity called Spain any longer.

But if I were Catalan instead of Swedish, my contribution to the absurdity of Spain would be so great it would reach between 8% and 10% of GDP. Then I would probably begin to wonder if Europe is really able to fully understand that such extractive oligarchic economies —of which Spain is the most prominent— must be profoundly changed and thoroughly reoriented; so if Europe was not to comprehend why a nation like Catalonia —one of the few territories able to react against such absurdity— really needs emancipation, then maybe Europe does not deserve Catalonia’s interest in being an active part; why should Catalonia remain in Europe if it only backs the strong and allows oligarchic minorities to maintain their wealthy lifestyle on the back of the productive hard work of other less eminent people? If I was considering all this as a Catalan, I am not sure I would be dreaming about being Swedish. Maybe being Norwegian would be better.

Josep Huguet Biosca, former Minister of the Government of Catalonia (2004-2010).

@josep_huguet

President of the Irla Foundation.

Industrial engineering.

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European Parliament demands improvements to the nomination process of Guindos and express 4 reservations

MEPs expressed reservations about:

- the selection procedure,
- ender balance within the ECB,
- procedure,
- the timing of the appointment and the political independence of the nominee

MEPs want the Council to engage with the Parliament to improve the process for future appointments. The committee decision will have to be confirmed by Parliament as a whole, in a plenary vote planned for March.

Parliament is consulted on the appointment, but cannot veto it. Mr Guindos became the only contender for the top post when  the only other candidate, Irish central banker Philip Lane, withdrew his candidature last week wit no clear reason.

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How will Spain pay her debts? Japanese investors deserve to know

Rajoy's recent trip to Japan featured bland smiles, diplomatic niceties, and the customary announcements about closer cooperation. It is clear, though, that the Spanish prime minister failed to address some key issues of interest to Japan. Among them, the fate of the Spanish national debt. Faced with Catalonia's decision to resume sovereignty, clear in the 1.6-million “Catalan Way” human chain on 11 September, the Spanish leader needs to articulate a strategy to protect the legitimate interests of foreign investors holding Spanish bonds.

NO RECOGNITION, NO DEBT SPLIT: SPAIN'S CHOICE

To date, faced with Catalonia's relentless march towards a resumption of sovereignty, the Rajoy administration's response has been rather dull and predictable. Appeals to the Spanish Constitution (largely drafted by the Spanish military shortly after Dictator Franco's death) and not always disguised threats of armed intervention. These may work when a minority is involved, but jailing or shooting millions of people is rather a tall order, and by stressing the possibility Madrid is just losing what little credibility she has left. The Spanish Government has also threatened to not only withhold recognition of the new state but to block Catalan EU membership. Any informed observer can see through such threats. The reason is clear: unless Catalonia is immediately recognized by Spain, she will not be bound to take up a share of the Spanish national debt.

A deal is thus a must, in particular in view of Spain's bailout. Will the IMF and the EU stand idly by, while Spain goes bankrupt due to her stubborn refusal to recognize Catalan independence? Does anybody seriously think that Madrid can deal with a 125% debt to GDP ratio (the rough estimate once Catalonia leaves) on her own? Furthermore, will the international community look the other way while Spain not only sinks but drags down the euro down with her? A most doubtful proposition.

THE TIME HAS COME TO OPENLY DISCUSS THE DEBT ISSUE

Thus, one would expect Spanish authorities to start openly discussing this. They cannot prevent Catalonia from leaving, but they can try to minimize the resulting short-term economic disruption on Spain proper (in the long run, losing Catalonia would not necessarily be bad for Spain, since it may force the implementation of long-delayed reforms and the growth of a stronger work ethic). They could also try to ensure continued access to the international financial markets.

International investors, in Japan and other countries, mostly do not care whether Catalonia is part of Spain or not. However, they do care about getting their money back. With interest. On time.

Thus, refusing to openly discuss this leads nowhere. Catalans are not changing their mind to make Rajoy's life abroad easier.

SCENARIOS: INTERNATIONAL INVESTORS THE DAY AFTER

It may be tempting, very tempting, for Catalonia to simply forget about the Spanish national debt. After all, the funds were not invested there. According to official statistics Catalonia runs a primary surplus and forcibly contributes 8.5% of her GDP to the Spanish coffers. Therefore, if Madrid was right and a new state was not part of the treaties signed by the parent state (Spanish commentators are saying this to frighten Catalans with the specter of exclusion from the European Union), then the same principle would mean that the new state would not be liable to repay any portion of the parent state's national debt.

International lawyers may well argue about this, and as always both sides may have a point (that is how lawyers earn a living, after all), but let us be realistic. Foreign investors are not interested in technicalities and legal debates. What they want is an assurance that they will  get their money back, that political developments and in particular the (re)emergence of a state will not interfere with their legitimate rights and expectations. In other words: they are concerned about predictability and the rule of law.

Since Catalonia needs the recognition of other states to regain her independence, and Spain needs the continued goodwill of those same states to keep functioning, there is really no alternative to a debt-splitting deal. We may argue about the precise share that Catalonia is to take and the technical aspects of the split, but the leading powers of the world are not going to sacrifice their economic interests at the altar of Spanish pride. That goes for Japan as well.

WHAT SHOULD RAJOY HAVE TOLD HIS JAPANESE COUNTERPART?

Let us thus go back to the Spanish Prime Minister's trip to Japan, which according to his own administration was centered on economic issues. What would have been a responsible attitude by the Spanish leader? First of all, an open acknowledgment that Catalonia is leaving. They already know, of course. In the Internet era you cannot hide 1.6 million people peacefully holding hands to demand independence, and shooting them does not look too good on CNN. The world already knows. The time has thus come to arrange the details, and to do so in a civilized manner, if at all possible.

After acknowledging this, change is after all part of life and should not be feared, a true statesman would have sought to allay any fears by his hosts. In this case, any fear that Spain proper may be forced to default. These fears are understandable. Madrid would have already defaulted without the EU-IMF bailout, but she has not learned the lesson and is still engaged in self-destructive economic policies. Spain is still blocking fast train connections between Barcelona Harbor and France (which private companies are offering to build at no cost to taxpayers) while building new railways to nowhere. Foreign investors and governments are aware of the political difficulties involved in expanding financial assistance of Spain. For example, a growing chorus of British voices is calling for a boycott of Spanish goods and a refusal to grant more assistance to Madrid, due to Spain's harassment of Gibraltar and transfer of Mirage warplanes to Argentina. In the Northern European countries, more and more people are openly stating their opposition to more handouts and subsidies to Spain. Others do not dare say it in public, but privately express their anger.

Unfortunately, Rajoy persisted in ignoring reality, and in sugarcoating his country's true state of affairs. Time is running out to persist in such attitudes. Reality has a nasty habit of catching up with rhetoric. Much better to take the lead and avoid surprises in the bond market by launching negotiations and assuring investors that they will not suffer any losses.

CONCLUSIONS:  A MISSED OPPORTUNITY

From the above we can conclude that his trip to Japan was a missed opportunity for Rajoy. A missed opportunity to appear as a true statesman, realistically examining the consequences of his country's impending loss of Catalonia (you cannot shoot 1.6 million people in front of CNN's cameras) and dealing with the consequences in a civilized manner, minimizing any resulting disruption to Japanese and other international investors. He can still change course, but time is running out. If he does not take the lead, it will be those same international investors and their governments who will. Some are already speaking out. 

Alex Calvo is currently a Guest Professor at Nagoya University, and a Professor of International Relations and International Law at European University (Barcelona Campus). An expert on Asian security and defense issues, he got his LLB from the School of Oriental and African Studies (SOAS, University of London) and is currently doing an MA in Second World War Studies at the University of Birmingham. He is a former teaching and research fellow at the OSCE Academy in Bishkek (Kyrgyzstan).

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