Reply to The Times editorial. “Mas Uprising”

'The Times' recent editorial on the economic consequences of Catalan independence fails to give a proportionate and neutral account on what’s at stake in Catalonia. 

In summary, the editorial depicts Catalonia as a selfish and rich region trying to avoid its duties toward poor regions in a time of distress. Moreover, it states that an independent Catalonia would be poorer and more heavily indebted. 

It is understandable that in the midst of the worst economic crisis in decades, and with the euro struggling to survive, a political conflict within a European Union member-state is seen as a threat to the EU, and particularly to the Eurozone. However, this is no excuse for misleading the reader. 

First, regional debts are just a small fraction of total Spanish debt. In fact, as of December 2012, regional debts accounted only for 17.6 % of Spain’s GDP, while central government debt was 72.4% of GDP, municipalities' 4% and Social Security's 1.6%, totalling 84.2% of GDP (consolidating all subsectors of the public administration).

Although it is true that Catalonia is one of the most indebted autonomous communities, it is also true that the regions with higher regional debts (Catalonia, Valencia, Balearic Islands) are also those that gave other regions the largest net transfers (between 6% and 14% of their GDPs), and that were underfinanced to provide education, health and social services. 

If Catalonia decides democratically to split from Spain, with a debt of €50bn and a GDP of around €200bn, its debt would account only for 25% of its GDP, i.e. one of the smallest debts in the world! 

Of course, if everything is done in a civilised and negotiated manner, that is, with Spain accepting Catalonia’s referendum result and not blocking Catalonia’s EU membership, Catalonia would assume a proportionate share of Spain’s debt, as well as a share of the Spanish State properties, as stated in the 1983 Vienna Convention on Succession of States in respect of State Property, Archives and Debt. In this case, Catalonia would probably come out of the negotiation with a rate of debt against GDP similar to that of Spain (between 90% and 100% of its GDP). 

As for trade, Catalonia’s international exports were in 2011 for the first time greater than sales to the rest of Spain, and this trend is increasing. Of course, Spain would remain one of Catalonia’s largest trading partners, as the gravity model of trade predicts. Trade boycotts can be a worrisome matter only in the short term. Even among countries that were involved in a war such as between Serbia and Croatia, trade patterns returned to normality after a few years. 

Finally, although the loss of an industrial and dynamic region can be seen as a problem in the short term for Spain, in the mid and long term I am sure it will be positive and would be the key to unleashing Spain’s potential once it undertakes the structural reforms needed, and gets rid of the rent seeking elites in regions heavily subsidized during decades and that have not used the subsidies to increase productivity and competitiveness. Moreover, once Spanish nationalism rids itself of its obsession with controlling Catalans’ devolved powers, it wouldn’t have any further need to duplicate powers and administrations, and it could reform its public administration, which is today one of the most bureaucratic and redundant in Europe. 

I am sure The Times editorial concerns will, in the near future, be devoted to assuring that Spain reacts to this conflict in the same elegant and democratic manner that Prime Minister Cameron used when confronted with the Scottish referendum proposal, that is: "I always wanted to show respect to the people of Scotland - they voted for a party that wanted to have a referendum, I've made that referendum possible and made sure that it is decisive, it is legal and it is fair." 
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Elisenda Paluzie 

@epaluzie
Dean of the Faculty of Economics and Business
University of Barcelona