The images coming from Catalonia this weekend have been a worrying throwback to less peaceful times in Spain, Europe’s sixth largest economy. An independence referendum, outlawed by the government in Madrid, went ahead despite warnings. The state deployed riot police, the bloody conclusion for which, while of little surprise to anyone, was nonetheless disturbing.
2.26 million Catalans, just 42% of the region’s eligible voter base, cast their ballots. The Catalan government estimates that votes for independence constitute around 90% of them. Carles Puigdemont, the Catalan President, has announced that Catalonian independence will be announced “within days.”
King Felipe VI gave a speech this week, in which he castigated Catalonian officials for contravening the Spanish constitution. “They have tried to break the unity of Spain and national sovereignty,” he said, “which is the right of all the Spanish people to decide democratically.” Members of Spain’s ruling Partido Popular, or “People’s Party”, have loudly denounced the vote.
State-sponsored violence should always be admonished, especially in a nation that only emerged from the military dictatorship of Francisco France in the 1970s. But the economic fallout of Calatonian independence would be huge, for Spain, its want-away region and the entire Eurozone – and not all of it is good news for Catalans.
Catalonia represents around a fifth of the Spanish economy, or €224 billion a year according to local authorities. Barcelona, a city of immense history and whose urban area is home to 4.7m people, is the region’s economic powerhouse. Barcelonan manufacturing, textile and financial industries have all enjoyed recent booms, while 8.2m overnight visitors per year make the city Spain’s most popular, and the world’s 12th-ranked, tourist destination.
In recent years Barcelona has also fostered an exciting tech scene. It is home to important venture capital groups such as Active Venture Partners and Caixa Capital Risc, while startups like Glovo, HeyGo, Badi, Restb.ai and TravelPerk and providing the local scene with much-needed success stories. It is also home to the annual Mobile World Congress, and is a domestic leader in e-government, smart city and–perhaps ironically–voter services.
As with Brexit, there has been much talk in the Spanish media about a Catalonian secession’s effects on its many banking tenants. “Catalan banks are Spanish banks and European banks are solid and their clients have nothing to fear,” said Spanish economy minister Luis de Guindos today. London has not yet suffered the investor flight some predicted after last year’s EU vote. But that is jury is well and truly out, with the full effects of Britain’s decision to drop some time in 2019.
Most significantly, perhaps, is the fact that an independent Catalonia would not be afforded accession to the European Union, owing to its requirement to be ratified by Spain. Brussels has thus far refused to take a position on the matter, adding only that it will abide with decisions made within the boundaries of the Spanish constitution.
Renegotiated trade salaries, visa issues and general uncertainty can do little good to Catalonia’s economy – not least its tech industry, which has benefited from the freedom of movement and ease of business that Spain’s EU membership. It might be set to reap a €16bn bonus in the taxes it would no longer pay to the Spanish state. But that would be offset by a loss in trade: almost 36% of Catalan exports are to Spain. Sixty-six percent of its exports go to the EU.
Losing a fifth of its economy would be disastrous for Madrid, as would the loss of an tech hub in Barcelona that encourages young Spaniards to turn their hand to entrepreneurialism. That could slow Spain’s economic recovery from the 2008 financial crisis, during which it took one of the biggest hits in Europe.
Neither side is willing to back down, with Puigdemont going as far as to say he’s willing to spend time behind bars to ensure Catalan independence. This is a story that will amplify in the coming weeks, as Catalonia announces its unconstitutional split from Spain. The uncertainty might be good for Catalan nationalists. But it is anathema for almost everybody else.