CATALAN INDEPENDENCE: What Will it Mean?

After a long and hard fought struggle beginning in 1922 with the formation of a political movement named Estat Català, Catalonia has finally won its independence from Spain.

For the Catalans, independence isn’t some nationalist fantasy, it’s common sense. Catalonia is the wealthiest of the 17 Spanish regions. It pays more to the central government than it gets back which is why Spanish First Minister, Mariano Rajoy, was desperate not to let it go as loss of Catalan taxes will certainly be detrimental to the Spanish economy.

Catalonia accounts for only 16% of Spain’s population yet it represents 23% of Spanish industry and 25% of Spanish exports. Catalonia exports goods worth 65.1 billion euros, compared to Valencia, the second largest Spanish exporter, which only exports 28.7 billion euros worth of goods.

Despite Catalonia’s successes and wealth, Spanish economy minister, Luis de Guindos, warned that Catalonia’s economy would shrink by 30% if it becomes independent.

Economics professor at the University of Zaragoza, Alain Cuenca, told CNBC that both Spain and Catalonia will initially see negative outcomes after the declaration of independence:

“The establishment of a border would result in a loss of jobs, income and wealth for everybody, whether they live in Catalonia or in the rest of Spain. Those losses would be provoked by the obstacles to trade, by financial problems, by the spending needs of the new state.”

Furthermore, 35% of Catalonia’s exports are to the Spanish market and depending on Madrid’s response, there could be tariffs or boycotts imposed on exports from the region. Also Catalonia has a huge debt for such a small region- it amounts for 16.34% of all Spanish debt. This debt could be imposed on Spain as Catalonia goes independent but right now it isn’t clear whose responsibility it will be. It could be that the independent Catalonia is required to pay its own debt.

However some European and Catalan organisations claim that the region would gain 16 billion euros every year from not paying tax to the central government which would amount to a loss of 2% GDP for Spain.

The European Union could also become an issue for Catalonia. The region does not have the right of automatic member status into the Union and would therefore need to be approved by the EU members- Spain included. Spain and its allies are unlikely to vote to allow Catalonia into the EU. As with Brexit, Catalonia would have to pay large transition costs in the short term and then depending on how well it can negotiate with Spain and the EU, it will either thrive outside of the EU or face some difficulties.

It will be a while before Catalonia begins its transition to independence but we can be sure that this is the beginning of a long and complicated journey for the region and its people.