Spain
The second fiscal shoe to drop. Solvency or not?

The Catalan Revolt of 2017

10/30/17
from MAUDLIN ECONOMICS,
10/30/17:

Catalonia is vying to become Europe’s newest nation-state, but this is a battle Catalonia ultimately can’t win. On Oct. 27, Catalan lawmakers voted to declare independence—barely. Only 51.8% of members in the Catalan parliament supported the declaration. That means even Catalans themselves are divided over whether Catalonia should secede from Spain. Spain has threatened to do whatever is necessary to maintain the rule of law in Catalonia, and it has both the will and the means to follow through on that threat. Catalonia also has very little international support it can depend on. Even so, the Catalan revolt of 2017 will have ramifications in Spain and in Europe For many observers outside of Europe, the Catalan issue came out of left field. Sure, the Catalan government said it would hold an independence referendum, but it held a similar referendum in 2014 and nothing came of that. Surely, all the Catalan government wanted was a bargaining chip it could use in its negotiations with the Spanish government over taxes and other issues related to the region’s political autonomy. Catalonia has more to gain economically by remaining a part of Spain, so why would it want to embark on the arduous and violent process that usually accompanies declarations of independence? But no one should be surprised that Catalan independence has become a major issue—it has been for many centuries now. It is a product of Spain’s geography and Catalonia’s unique history.

“Spain” was always a grand bargain between disparate regions and distinct peoples, not a coherent national entity. ... The grand bargain did not always hold, especially in Catalonia. ...

the region’s gross domestic product accounts for 20% of Spain’s GDP, and its GDP per capita is higher than the EU-27 average. The 2008 financial crisis hit Spain particularly hard. Youth unemployment spiked to over 50% in 2014 and remains around 40% today.

{A} grand bargain that was reached in 1978 has failed to hold up in a post-2008 world. This explains why Spain has reacted with such force to the Catalan regional government’s moves—even though only 42% of Catalans showed up for the vote, not exactly a ringing endorsement for the separatists. Catalonia is just one of 19 autonomous communities in Spain. ... If Spain does not crush Catalonia’s independence movement now, it could open a Pandora’s box, with other regions demanding more autonomy or even separation, and Spain can’t allow this to happen. This is where things get complicated for the European Union. On the one hand, the EU remains steadfastly in support of its member state, Spain. But Spain will now have to use force to maintain its writ in Catalonia. That will put the EU in a lose-lose situation: It can either support a member state using force to quell a political rebellion that seeks the very thing the EU was designed to protect—national self-determination—or it can support the right to self-rule for the people of Catalonia but, in so doing, completely undermine the position of the Spanish government.

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