Catalonia and Spain - Separation or Divorce. TraugottL-libre

8/10/2019 Catalonia and Spain - Separation or Divorce. TraugottL-libre

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Catalonia and SpainSeparation or Divorce?

By Leopold Traugott

Maastricht University


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CATALONIA AND SPAINSEPARATION OR DIVORCE?

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Table of Contents

1.Introduction p. 3

2.The Catalan Claim to Independence p. 8

3.Revisiting the Statute of Autonomy p. 13

4.Catalan Independence p. 17

5.Conclusions p. 34

6.Bibliography p. 39


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1. Introduction

It was chosen to be 9 November 2014 the day on which the Catalan people should be

able to finally seal their own faith. The history of political dispute between the Catalonia

and Spain is a long one it basically is as old as the two nations' union. It was already

with the annexation of Catalonia by the Castilian Kingdom in 1711, that the struggles

about political, cultural and economic powers and rights should beginand they are still

present today. Yet, even though these struggles run like a golden thread through the two

nations' common history, they took a sudden leap in the 21stcentury. There has always

been a power play between the powerful Spanish centre of Madrid and the Catalan

capitol Barcelona, marked by the constant endeavour of the latter to extract promises of

further autonomy and self-determination from the Madrilenian elites. However, the

solutions and wishes proposed had always seen the two nations in a unit, and had focused

rather on the decentralization and federalisation of Spain than on a complete separation of

their political ties. It was therefore not until the last two decades, that the Catalan claim

for more autonomy and economic freedom had finally transformed in a claim for full-

fledged independence and a complete secession from the Spanish state (Guibernau, 2002,

p. 21). Yet, as soon as the Catalan government around President Artur Mas had made its

plan for a referendum on the secession from Spain public, similar to the Scottish

referendum planned for September 2014, Madrid stepped in and announced said

referendum illegitimate (Spain says no, 2013). The young dream of an independent

Catalan state, so it seemed at least to outsiders, was meant to stay a dream. Yet, although

Madrid put a legal stop to the Catalan demand for independence, the real impact was

rather low. While it made Catalonia once again aware of the fact that Madrid was not

willing to negotiate independence for its separatist region, the Catalan fight for

independence still goes on.

As the power play between Barcelona and Madrid can be assumed to go on, and

with no final solution being in sight so far, this paper sets out to examine what actually

constitutes the best solution for the small nation of Catalonia. Is it really and only the

complete secession from Spain that would solve the Spanish-Catalan problems? Or is it


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rather a fair renegotiation of the statute of autonomywith numerous models possible

that would improve the situation the most? In order to find a sufficient answer, this paper

looks into several scenarios possible for the future of Catalonia, orienting itself by current

models which were and still are used by countries all over the world. Furthermore it will

take into account numerous important factors, and explore as well as present the

previously mentioned possibilities under the light of broader economic and political

issues, such as possible solutions for currency problems, national debt, European Union

membership and international recognition. Therefore, this paper uses an analytical

framework to assess current political and economic realities. It examines the current

economic situation based on published quantitative data and comparable developments in

the past, and draws conclusions for each possible scenario. Furthermore it analyses the

political situation based on national and international legal frameworks and the results of

public elections as well as surveys. This analytical approach was chosen in order to

eliminate the risk of an ideological assessment of the situation, and to guarantee that the

final conclusions are based on economic and legal facts instead of political and

sentimental claims from either side. Due to language limitations, it was merely possible

to work with English and German sources on the topic, preventing the usage of an

extensive body of Spanish material.

So far, there exists only little literature about the latest Spanish-Catalan problems

in the English language, with most of it being focused on specific parts of their

relationship, rather than giving a more general overview and outlook. There has great

work been done from scholars such as Eric Guntermann (2013) on the relationship

between the rise in Catalan independence and the economic situation in Spain, from

Bardo Fassbender (2013) and Emmanuel Dalle Mulle (2013) on the implications of a

possible Catalan independence on its standing with the European Union, and from

Giacomo Delledonne (2011) on the last failed negotiations between Madrid and

Barcelona. Yet, although these works give great accounts of different problems of the

Catalan situation, the scholarly debate lacks a comprehensive and analytical account of

the general situation, which does not only pay attention towards the detailed implications

of different scenarios, but also keeps in mind possible solutions for on-going and

increasing tensions between Madrid and Barcelona. Although Montserrat Guibernau


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(1999, 2002, 2004, 2012) has proven herself a great scholar on this topic, and has

delivered a great array of works on the origins of Spanish-Catalan tensions, on Catalan

national identity and also the quest for Catalan self-determination, her latest works

neglect a concrete account of the implications of Catalan independence. This paper uses

selected primary sources, as well as a wide array of secondary sources. The primary

sources consist mainly of government releases, treaty provisions, constitutional chapters

and public statements of government officials, and as such serve as a foundation for

further research and interpretation. For secondary sources, the paper makes use of several

books on the topics of Catalan history, federalist theory and practice, as well as on the

broader topic of independence movements in the twentieth and twenty-first century.

Furthermore, it is based on numerous scholarly journal articles, such as from the authors

mentioned above, which concern themselves in detail with parts of the debate about the

Catalan situation within Spain. Lastly, this paper takes into account several newspaper

articles from renowned sources, mainly in order to deal with the most current events on

the topic. Although scholarly sources are preferable, the currentness of certain events

prevents the availability of an abundant pool of high-class work on the latter. In addition,

for some topics, such as the detailed economic consequences of a possible Catalan

independence, there are only very few English sources available, creating difficulties in

the presentation of a diverse body of sources.

During the last century, the number of countries worldwide has been constantly

growing. Whereas merely 53 countries did exist in 1900, this number nearly quadrupled

until today - reaching a number of 193 states currently recognized by the United Nations.

While those numbers can never be completely precise, facing the difficulties of changing

and ambiguous definitions of statehood and independence, a clear trend towards a strong

increase in the number of states can not be denied. Yet, how and why did this change

come about? Scientists have offered different explanations for different sets of time,

mostly focusing on specific 'waves' of state and nation building. This approach does

history justice in so far, as the rise of new states indeed was not a fluent and consistent

development, but instead characterized by several distinct events and changes in history.

If we set the beginning of the relevant timeframe for this paper with the start of the 20 th

century, the first big event which should lead up the creation of numerous new states,


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especially in Europe, was World War I. As an aftermath of this international conflict old

and multi-ethnic empires were destroyed, and new states took their places. The

dissolution of the Russian, Ottoman and Austro-Hungarian empires led to the creation of

a whole wave of new states ranging from clear cut nation states in Finland and the

Baltic up to new multinational entities such as Yugoslavia, Czechoslovakia, and Syria.

Yet, this development was mainly, although not exclusively, taking place in Europe and

its closer periphery. Whereas the losing states of the war where often forcefully broken up

and reorganized, none of the winning states thought about voluntarily changing its own

structures even the colonies of the Central Powers were merely transferred instead of

freed. It was therefore only after World War II, from the late 40s until the 60s, that the

time of decolonization began, and the possibility of self-determination and independence

was brought to the continents of Africa and Asia. During this time the world saw over

thirty new countries coming into existence; most of them emerging from former colonies

who either had their independence granted peacefully by their colonial power, or had

fought with military power in order to obtain it. The third wave then again did to some

extent resemble the first one the fall of a huge multinational construct gave place to

numerous smaller nation-states. When the Soviet Union and its communist power bloc

started to disintegrate in the beginning of the 1990's, over a dozen of smaller and bigger

national groups saw this as a chance. This third wave saw Kazakhs, Uzbeks, Ukrainians,

Latvians, Armenians and many more national and ethnic groups breaking free and

reorganizing in their newly created borders. Even though the political elite of the Soviet

era had tried for decades to erase nationalist ideas and identities from among its

population, ethnic and cultural groups were suddenly fighting to set up their own nation-

states in this vacuum of power and where there was one unitary state before, fifteen

new ones were created to replace it (Bishai, 2006).

Today many political scientists believe to be in a time where this development has

stopped the time of multinational empires is over, and the model of the nation-state

seems to have established itself in most places of the world. Yet, this appearance is

deceptive; the Western model of the neatly organized nation-state is under threat. While

the repercussions of globalization are diminishing the importance of the nation-state on

an economic and political level from above, the demand for autonomy and self-


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determination by minorities and smaller nations is threatening the nation-states' moral

support from below (Guibernau, 1999, p. 16). Numerous ethnic and national groups all

over the world are trying to get their recognition as distinct nations or even states. Instead

of having their fate dictated by a parent state dominated by the national majority, they

demand the freedom to decide for themselves not least because this is what the western

tantra of democracy and self-determination has told them to be their right. Experts on the

topic of secessionism, such as Lea Brilmayer, even go as far as comparing the current

development to a second wave of decolonization (Brilmayer, 2000, p. 283). However,

whereas the real decolonization took place mainly on the continents of Africa and Asia,

liberating the natives from their European conquerors, the new wave is represented

equally on all continents not least in Europe. Instead of fighting a foreign colonial

power, current secessionist movements, or such with a strong strive for autonomy, are

trying to claim their right for self-determination from a majority with which they often

lived together for centuries. Nations that were once conquered by a powerful neighbour

and consequently assimilated are now trying to fight their way back to the independent

status of their ancestors. Most of the times, these abstract theories and claims, based on

often by-gone eras, attract little attention in public debatesthey are topics which seem

to be reserved for minorities, populists and political scientists. However, during the last

decade the world has seen two cases in which such cases managed to stir up international

discussion, namely when Kosovo and South Sudan declared their independence. Both

countries split off from their previous parent state Kosovo from Serbia in 2008, and

South Sudan from Sudan in 2011 and are now considered independent and sovereign

countries by the UN. And while those two cases took place in what Western critics may

dub conflict areas, a third case might soon happen in the very centre of the Western

hemisphere. Scotland, until now a part of the United Kingdom, is the first European

country after Norway in 1905 which has the chance to secede from its parent state via a

public referendum. Should the Scottish people decide in this referendum to become

independent and have success with it an even stronger surge of separatist tendencies

in Europe can be taken for granted.

These cases are the shining examples of an enormous, but often neglected,

movement. All over the world, there are more than fifty different groups fighting for


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more independence from their current state. Quebeckers are demanding independence

from Canada, Kurds from Iraq, Syria, Iran and Turkey, Tamils from Sri Lanka and India,

and Chechens from Russia. Yet, they are also numerous in Europe, where they exist not

only the Basque Country, Flanders or Corsica, but also in Southern Tyrol, Wales and

Northern Italy (Beary, 2011). And even though most of these movements are merely

aiming for a higher level of autonomy, the number of groups favouring the solution of

complete secession is not to be neglected and the possibility of it never to be

completely excluded (Bishai, 2006). With the case of Catalonia, the final trend is not

really clear yet. An age old demand for more autonomy and internal reformation has,

under the influence of economic instability and perceived Spanish oppression, led to a

situation in which now the complete separation from the Spanish state is the goal for a

majority of the Catalan population. However, with the stakes as well as the goals being

more than unclear, it is hard to say what is really going to happen. The only thing that is

clear is that the current status quo is no longer acceptable to the Catalan people

negotiations between Catalonia and Spain have gone through many stages, and have

hardly ever led to a satisfying result for Catalans in the long run. So while Spain might

think that their constitution and their laws might be able to force Catalonia to accept this

situation, they would be naive in relying on this. For even though their constitution might

legally oblige Catalonia to rest with Spain, the region's president Artur Mas already stated

that the will of Catalonia cannot be stopped by a vote in congress (Hedgecoe, 2014).

2. The Catalan claim to independence

After the Habsburg loss of the War of Spanish Succession, the region of Catalonia, which

previously had belonged to the Crown of Aragon, became officially part of Spain, and as

such was since then subject to the rulings of the Spanish monarchy in Madrid. Over the

course of time, the relationship between the old Spain and Catalonia went through many

different stagesfrom subtle attempts to Spanish nation-building in the eighteenth and

nineteenth century, to complete suppression of Catalan culture under the Franco regime,

and to the heated-up disputes over mostly financial and political issues since the end of

the 1970s. During most of this time, there has always been the feeling of a certain


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disctinctivess and resentment on the side of Catalonia (Hoffmann, 2014). Partially

because of the situation of Catalonia as a cultural and national minority in the Spanish

nation-state, but also because of the decisive will of the Catalans to insist on their special

status. This part of the paper assesses and presents the three key reasons for the difficult

relationship between Madrid and Barcelona, and sheds a light on the recent developments

which led to an even further split between these two actors.

The roots of the Spanish-Catalan problems can be traced back to the Middle Ages,

and partially lie with the independent history of Catalonia itself. Whereas many people

perceive Catalonia as an integral part of Castilian Spain, this argumentation neglects

important aspects of history. Over several centuries, the region of Catalonia, first

established as a province in the Frankish Empire in the ninth century, was known as the

mainstay of the Crown of Aragon. With Barcelona as one of the main ports of this empire

encompassing not only parts of Spain and Greece, but also Sicily, Corsica, Sardinia and

the Balearic Islandsthe city as well as the whole region surrounding it profited greatly

from its cultural and financial wealth (Greer, 2007, p. 16). With the modern concepts of

nation-states and territoriality being non-existent in Middle Ages, the County of

Barcelona, encompassing the Catalan counties, was free in its cultural development and

its domestic affairs. During this time, Catalonia developed not only an extensive cultural

life of its own, but also experienced the creation and spread of its own language, which

was used extensively in the whole region of Catalonia (Etherington, 2010). To this day,

the history of Catalonia is regularly adduced as a reason for Catalan autonomy and

independence, and has so far gone through several periods of revival. The renaixenca of

the nineteenth century, the Catalan equivalent of the European-wide renaissance

movement, reinvigorated the identification of Catalonia's inhabitants with their perceived

common past, and led to a vivid revival of the regional culture. It modernized the Catalan

language, making it widely used in all spheres from literature over theatre to music, and

therewith placed it at the very centre of Catalan daily life (Hoffmann, 2014, p. 52). This

was also the time during which the notion of Catalan history was finally deeply

entrenched with the notion of Catalan self-determination. In this time of romanticism

Catalans created themselves as a distinct national group, and discovered and emphasized

what they thought to be their common heritage, and the basis on which they would create


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their common future. Next to an emerging feeling of belonging together and sharing the

same past, Catalan identity soon started to base itself on the idea of Catalonia's claim to

be politically autonomous (Greer, 2007, p. 17f.).

Yet, as soon as Catalonia and Castilian Spain were united, Madrid tried to erase

the notion of an independent Catalan national and cultural identity. Already early into the

union, the Castilian crown started to spread its own culture into the periphery, and to ban

regional traditions in favour of a large-scale Castilianization of the territory, as part of a

greater effort to centralize the state, and to spread the idea of a common Spanish identity

(Hoffmann, 2014, p. 50). While this nation-building on the side of Madrid was, and still

is, an object of dispute in the Spanish-Catalan relationship, its intensity has varied over

the years. Only several years after Catalonia was granted its first Statute of Autonomy in

1932, leading to more cultural and political freedom, the situation in Spain began to

change rapidly to the worse. The Spanish Civil War, which took place from 1936 until

1939, saw the rise of a new nationalist and autocratic regime in Spain, led by General

Francisco Franco. Franco's troops had fought for the old image of a centralized and

united Spain, opposing the planned and partially already realized plans of devolution of

power in the country (Guibernau, 2002, p. 11). Following the cleansing of former

opponents and political enemies after the war, Franco soon aimed at the rescission of

most progressive and power devolving measures that were taken during the time of

Second Republic. Not only did the Franco regime abolish all previously established

regional institutions, laws and powers, but it also went as far as prohibiting all regional

languages and identity-establishing symbols, in a clear cut attempt to finally solve the

perceived problem of Spain's diversity through forceful homogenization (Guibernau,

2002, p.11/49). One of the main victims of these policies was Catalonia. During the time

of the Franco dictatorship, from 1939 to 1975, the use of the Catalan language was

forbidden among all parts of society, was banned from the sphere of education, and

forcefully replaced by Castilian (Vila, 2013, p. 35). The Francoist notion of a united

Spain, driven forward by conservative Catholicism and deeply reactionary in its nature,

forbid any diversity, and therefore especially targeted regions with a strong local identity.

Every harmful cultural influence was to be annihilated, and the superiority of the Spanish

nation, defined by the values of Franco's regime, to be reasserted (Grugel & Rees, 1997,


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p. 133). When Franco died in 1975 however, Spain decided to use this possibility to

change. One of the most important issues the new government had to tackle, and which

was actively pushed forward by the respective interest groups, was the question of how a

democratic Spain should deal with the different regional, cultural and linguistic identities

it had inherited. Whereas the representatives of the minorities were doing their best to

make sure that their rights would be safeguarded in the new constitution, Spanish

conservatives and Unitarians were uncompromisingly emphasizing the unity of the

Spanish nation (Guibernau, 2002, p. 14). However, the problematic situation after the fall

of the Franco regime, and the memories of the devastating civil war only forty years

earlier had made the Spanish population aware of the need to compromise. In order to

give the new constitution and therefore the new state the highest level of legitimization,

the political elite of Spain tried to bring as many political parties behind it as possible.

Yet, while this guaranteed a peaceful and democratic process of decision-making, it also

ensured that the final solution would be a middle way between all political groups

involved. Instead of defining a clear-cut separation between the different cultural groups

inhabiting Spain, the new constitution was drafted purposely ambiguous (ibid. p. 13).

While it set down the fact that there was one Spanish nation which was indissoluble, it

simultaneously acknowledged the existence of several nationalities inside this nation

leaving doubts about the exact differences between said nations and nationalities, and

thus their further relationship. This is still a problem today, as Madrid continues to deny

Catalans the acknowledgment as a distinct nation, which many see as the basis for a

Catalan right to self-determination. Therefore, in the Declaration of Barcelona in 1998,

nationalist parties from Catalonia, Galicia and the Basque Country demanded that Spain

would define itself as a multilingual, multicultural, and multinational state (ibid., p.

17). Furthermore, the use of the Catalan language is still a political issue these days. The

question in how far Catalan can or has to replace or complement Spanish in the spheres

of education and general public life is not yet finally solved, and continues to promote

discontent among Catalan nationalists, who perceive the current situation as

discrimination coming from Madrid (ibid., p. 19).

Whereas the first two reasons are directly related to Catalonia's history and its

distinct national identity, the third one is due to monetary struggles only. The Spanish


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constitutional system, which is based on seventeen autonomous communities, uses a

model of fiscal redistribution among its regions, in order to equalize differences in their

economic strength. Except for the Basque Country and Navarre, which have their own

fiscal agreements with Madrid and enjoy full fiscal autonomy, all other regions are

obliged to participate in the Spanish redistribution system (Paluzi, 2013). While

redistributive mechanisms are neither unusual nor unmoral per se, Catalans complain

about having to bear a burden way heavier than those of other regions. They claim that

while they contribute disproportionally much to the Spanish budget, the federal

investments into their region are too low, leading to a lack of infrastructure investments

and an insufficient funding for public institutions such as school and hospitals. Over the

period of 2002 until 2009, Catalonia received merely 52% of its contributions to the

Spanish central government and social security back via public investments (Paluzi,

2013, p. 26). While these imbalances did not carry too much weight in times of good

economic climate, they developed into a major point of concern for Catalans over the last

years, and as such became one of the most important political issues in the Spanish-

Catalan relation (Bosch, 2013, p. 117).

The existence and perseverance of these reasons, together with the unwillingness

of Spain's conservative parties to solve them, has led to increasing tensions between

Catalonia and the rest of Spain. Whereas for most of their common history the Catalan

strive for self-determination was merely focused on the demand for increased autonomy

within Spain, the recent years have seen a strong rise in demands for complete

independence among Catalan citizens (Guntermann, 2013, p. 2). The reasons for this are

twofold. Firstly, the economic difficulties caused by the financial crisis of 2008 have

increased the distribution battles among Spain's mostly rather economically weak

regions, and have strengthened Catalonia's focus on their overwhelmingly large fiscal

deficit. Since Catalonia is now in a situation where it even had to request own loans from

the Spanish rescue funds, its regional government is even more focused on abolishing its

current fiscal deficit, and on finding a way to leave the redistributive Spanish tax system.

Furthermore, empirical research has shown that although Catalan secessionism is

partially caused by the feeling of distinct nationhood and feelings of cultural oppression,

the recent surge in support for it is mainly due to the increasing economic crisis that hit


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Spain (Guntermann, 2013). Secondly, Catalans are frustrated by the intransigent position

Madrid is taking with regards to most negotiations about Catalan autonomy and

independence. Barcelona's last attempt to renegotiate their terms of autonomy with

Madrid was struck down by the constitutional court, after having been ratified by the

Catalan as well as the Spanish parliament before (Delledonne, 2011). With the

perspective of a fair negotiation on equal terms missing, more and more Catalans are

publically expressing their discontent with the current situation, and are finding

themselves supportive of more extreme solutions, with even the possibility of a

unilaterally declared independence becoming a topic of discussion.

3. Revisiting the Statute of Autonomy

An effective and politically little fraught way to solve current problems between Madrid

and Barcelona would be to rethink and implement the new Statute of Autonomy

(Estatuto) which was proposed by the Catalan regional government in 2006. The new

statute was brought forward by the governing Partit dels Socialistes de Catalunya, and

supported by other leftist parties as well as the moderate nationalists in Catalonia's

regional parliament (Autonomy plan, 2006). While the proposal was aimed on increasing

Catalonia's autonomous rights in many different fields, such as immigration, judiciary

and education, its thematic priority lay with the acknowledgement of Catalonia as a

distinct nation within Spain, and the right for the affluent region to establish an own fiscal

system (Parlament de Catalunya, 2006). After being drafted and published by the Catalan

regional parliament, the new statute was also agreed on by the Spanish parliament, and

finally legitimized by a domestic referendum in Catalonia, in which a majority of 73%

voted in favour of the new statute of autonomy (Pericay, 2010). Yet, even though the

statute had passed all democratic obstacles, the conservative Spanish Partido Popular,

the only party in the Spanish parliament which had publically opposed the statute,

invoked the Spanish constitutional court on this matter, claiming that out of the statute's

221 articles, 113 were unconstitutional. After four years of legal proceedings, the court

struck down several provisions on Catalan autonomy. Most importantly, it declared

Catalonia's definition as a nation non-binding, denied the region a reorganization of its


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fiscal agreements with Madrid, and curtailed provisions which were put forward to

promote the Catalan language (Delledonne, 2011). In the wake of this verdict, resentment

grew in Catalonia, leading to an even further split between Catalanists demanding

independence on the one hand, and the Spanish government on the other hand (Juberias,

2013, p. 210). A Spanish agreement to this statute, which only failed due to the

intervention of the constitutional court, would have alleviated the current Spanish-

Catalan problems strongly. Yet, whereas Catalan nationalists will not easily give in on

their demands, it is equally difficult to bring around a change in the Spanish constitution,

in order to allow a passing of the Catalan demands. However, it would be possible to find

certain agreements which would on the one hand satisfy at least parts of the Catalan

demands on their main points, while on the other hand also be in accordance with the

Spanish constitution. While a full assessment of all articles refuted in the verdict would

exceed the scope of this paper, and instead deserves an independent assessment on its

own, it will focus on the two parts of the proposed statute of autonomy which have

caused the biggest concerns, and for which a solution would be most crucial.

Already in the preamble of the original statute, Catalan law-makers had

incorporated the declaration of Catalonia as a distinct nation, in reflection of the feelings

and the wishes of the citizens of Catalonia (Delledonne, 2011, p. 8). While the Spanish

constitution grants to Catalonia and other cultural minority groups, such as the Basques

and Galicians, the deliberately ambivalent status of nationalities, it only officially

recognizes the 'indissoluble' Spanish nation as such (Guibernau, 2002, p. 13). In

accordance with this excerpt of the constitution, the court ruled that while the Catalans

have the right to call themselves a nation for the purposes of political and cultural

debate, there are no legal rights established by this. On the contrary, the only nation

officially existing in Spain continues to be the Spanish one. The importance of this legal

distinction stems from the fact that the legitimacy of the Spanish legal system is derived

from popular sovereignty, which is exerted by the Spanish people (Delledonne, 2011, p.

8). For the case of an acknowledgment of Catalans as a nation, Spanish conservatives and

nationalists feared the emergence of further claims towards Catalan self-determination

(Govan, 2010). Yet, it is questionable in how far these fears are justified. In 2006, the

regional parliament of Quebec sent a motion to the federal Canadian government, and


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proposed an acknowledgment of Quebeckers as an own nation. In contrast to the Spanish,

the Canadian federal government managed to find a solution which on the one hand

satisfied the Quebecois demands for national acknowledgment, while on the other hand

still preventing an undermining of Canadian national unity. Firstly, the Canadian Prime

Minister at that time, Stephen Harper, added the words within a united Canada behind the

acknowledgment of the Quebecers as a nation, and therewith constituted that their status

as a nation would not be related to any new rights of separatism or independence.

Secondly, he replaced the English expression Quebecer with the French Qubcois, based

on the self-identification emanating from the Quebecers (McIlroy, 2006). Spain could use

a similar manner in order to alleviate its current tensions with Catalonia, while still

honouring its constitution. As the Spanish constitution's part on nationhood is phrased

ambiguously, it would be possible for the constitutional court to interpret it in such a way

to allow Catalonia the status as a nation. The use of the word nationalities in the

constitution could be interpreted as also carrying the meaning of nation, while in return

demanding that every proclamation of Catalan nationhood would depend on the condition

that the acknowledgment of such a nation is only possible within a united Spain. In the

Canadian case, the secessionist Parti Qubcois did not only not receive any particular

gains in support after the acknowledgment of Catalonia as a nation, but has recently even

experienced its worst general election results since 1970 in 2014 (Hamilton, 2014).

Therefore, if Spain should take similar steps and acknowledge Catalan nationhood, it is

unlikely that separatist tendencies in Catalonia will increase simply because Catalans win

the right to be a legally acknowledged nation. Already now the Catalan CiU manages to

define Catalonia as a distinct nation on the one hand, while nevertheless adhering to

Spanish unity (Guibernau, 2002, p. 16). While Spain would thus lose little by making

concessions on this point, it could regain a lot of lost trust with Catalan citizens.

The second crucial point of the Estatuto concerned a change in the current fiscal

agreement between Barcelona and Madrid, an issue which regularly causes discontent

among Catalan citizens. Catalonia has the highest differences in Spain between the

amount of money it contributes to the redistribution system, and the amount of money it

receives back from it. In 2010 for example, Catalonia transferred 62bn Euros in taxes to

the Spanish central government, but only received 45bn Euros back in public expenses


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for the region (Departamento de Economa y Conocimiento, 2014). In its new statute of

autonomy, Catalonia therefore demanded a complete fiscal autonomy, according to which

the region would have full powers in the levying and spending of its taxes. The current

system, in which Catalan taxes are first transferred to Madrid and then flow partially back

to Catalonia, would thereby be circumvented (Parlament de Catalunya, 2006, p. 113ff.).

Instead, the Catalan regional government would negotiate with the Spanish central

government each year the amount Catalonia has to pay for shared federal services, as

well as a certain amount to be paid for redistribution among the regions, and keep all

further tax revenues directly in the region. With these powers, Catalonia could prevent its

annual fiscal deficit either completely, or at least decrease it decisively. Yet, whereas this

would benefit Catalonia strongly, as the region would have up to eightteen billion Euros

per year extra to spend on public investments, tax reductions and social benefits, it would

at the same time be difficult for the Spanish state and weaker regions dependent on the

fiscal redistribution mechanism (Cala, 2012). It would render many of Madrid's reform

packages and investment plans unfeasible, and especially the ability to support weaker

regions through structural funds would be decisively curtailed. However, once again

Catalonia will not give up its claim for further fiscal independence. Quite on the opposite,

the current fiscal situation is one of the most critical issues between Madrid and

Barcelona, and a main cause for the intensification of the Spanish-Catalan tensions

during the last years (Guntermann, 2013). Furthermore, the situation is aggravated due to

the fact that both, the Basque Country and Navarre, already have a special fiscal

agreement with Madrid, which is enshrined in the constitution. Yet, even if Madrid is not

willing to grant similar rights to Barcelona, it could still move towards Catalan demands

in such a way that it would quell further dispute about the fiscal system. Firstly, it would

be possible to introduce a strict ceiling to the fiscal deficit a region is allowed to suffer

due to the redistribution of taxes. This could mean that the current Catalan deficit could

be permanently limited to an amount which would be acceptable to both Madrid and

Barcelona. This would solve the fiscal question at least partially, while still leaving a

certain amount of fiscal leeway to Madrid. Secondly, it would be possible to increase the

amount of taxes which Catalonia can not only levy, but also directly spend itself. This

would mean that the amount of money which has to be send to Madrid would be reduced


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in the first place, irrespective of how much money will afterwards be reinvested into

Catalonia. So far, as negotiated in 1997, Barcelona can keep and directly spend up to

thirty percent of its levied taxes (Guibernau, 2002, p. 16). An increase of this percentage

could mean several billion Euros more for Catalonia, and could consequently help to

fulfil the Catalan demands at least partially.

In the long run, a revisiting of Catalonia's statute of autonomy, this time including

the amended parts about nationality and fiscal structures, will not solve the problem of

Catalan and Spanish cohabitation completely and forever. Nevertheless, while

secessionist tendencies will most likely prevail among small parts of the Catalan

population, it is certain that Spanish concessions on these points will at least take away

the current majority for such separatist policies in Catalonia. For many Catalans

supporting independence at the moment, the question is less about identity, and rather

about the economic situation and their standard of living. Therefore, in the case of a new

fiscal agreement for Catalonia, which would consequently alleviate economic problems

in the region and lessen the fiscal pressure on Catalan tax payers, a huge part of current

supporters of Catalan independence might rethink their choice (Guntermann, 2013, p.

25). It will furthermore raise the awareness that a third choice between the status quo and

secession, namely a renegotiation of Catalonia's terms of autonomy, does indeed exist.

4. Catalan Independence

From a modest point of view, a Catalan independence during the next couple of years

seems rather unrealistic. Not only does the Spanish legal framework clearly prohibit any

political act which would harm the unity of the Spanish state, but Madrid's political elite

has also made clear at several occasions that they would not accept a unilateral

declaration of independence by Catalonia (Buck, 2014). Yet, the question arises in how

far such legal and normative arguments can hold back a sub-territorial entity which has a

decisive will to split away from its current parent state. Assuming a successful Catalan

secession from the Spanish state however, either through unilateral action or through a

mutually agreed on separation, several issues concerning the viability and status of an

independent Catalan state would become apparent. This part of the paper will therefore


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focus on examining the issues and problems an independent Catalonia would have to face

after reaching independence, and assess in how far these obstacles could be overcome. In

order to do so, this paper will consider Catalonia's relationship with the European Union

as well as with other international organizations and institutions, and the ways in which

an independent Catalan state could interact with these stakeholders. Furthermore, the

issue of territorial claims between Catalonia and Spain will be explored, as opposing

historical and administrative definitions of Catalonia could lead to further problems in the

process of a Catalan secession. In the end, the economic reality of a independent

Catalonia is examined closely, and claims as to how far a Catalan state would overcome

economic obstacles and risks will be assessed.

The European Union

When Spain joined the European Union in 1986, Catalonia, in its role as a sub-territorial

entity of Spain, became member of the European Union, too. Consequently, Catalan

citizens enjoy the full benefits of the European Union; free movement of persons and

goods, democratic participation, European structural funds, and of course the right to

European citizenship, to just name a few. While these and many more benefits are

guaranteed to all Catalan citizens so long as Catalonia remains part of Spain, things will

drastically change once Catalonia chooses to secede. Whereas Catalan politicians try to

frame the future of Catalonia as part of the European Union, taking their continuing

membership for granted even in the case of a secession from Spain, the current tone

coming from Brussels seems to oppose their view (Sinkkonen, 2012). In late 2012,

speaking on the issue of a possible Scottish secession from the United Kingdom, the

Commission President Jos Manuel Barroso stated that indeed a country seceding from a

current member state of the European Union would lose its membership in the latter,

including rights and duties stemming from it. Due to the nature of the country's newly

found independence, Barosso argued, it would not be regarded as a part of the European

Union anymore, but would be treated as a third country. As a consequence of this,

Scotland as well as Catalonia would, equal to all other third countries, need to apply for

EU membership again through the normal procedure (Fassbender, 2013, p. 3). In


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addition, Herman Van Rompuy declared that should a part of a current EU member state

secede as an independent state, the treaties of the European Union will no longer apply to

said territory (Van Rompuy, 2013).

Yet, there has neither been a precedent in the past, nor any clear provision in the

treaties, which would give absolute certainty to Barroso's claim (Crawford & Boyle,

2012, p.103). Regularly new proposals and ideas are brought forward, some appealing to

the European Court of Justice to protect Scottish citizens' rights by granting them

continuing EU membership, others demanding a change in the EU treaty system in order

to establish privileges for seceding territories (Fassbender, 2013, p. 3). Nevertheless, the

realization of none of these proposals can be taken for granted. Indeed, the most likely

outcome predicted by officials of the European Union is the automatic exit of an

independent Catalonia from the European Union, as there is no legal statute which would

guarantee them a right to remain as a member, and neither can there be expected a quick

agreement of the current twenty-eight member states to change European law in favour of

Catalonia (Crawford & Boyle, 2012, p. 103).

If one therefore follows the logically consistent conclusion that Catalonia would

have to apply for EU membership under Art. 49 TEU, or associate membership under

Art. 217 TFEU, the focus shifts to the issue of how such negotiations would be dealt

with, and what the possible outcomes could be. Dalle Mulle proposed a set of three

different scenarios for the case of Catalonia's application for EU membership. A first

scenario would see Catalonia keep some sort of passive EU membership for a certain

transition period, most likely consisting of access to the European market, the Schengen

Area, and membership of the common currency, giving all stakeholders enough time to

negotiate a possible accession of Catalonia to the European Union as a full member

(Dalle Mulle, 2013, p. 36). Under this model however, Catalonia would have no voting

rights or seats in the European institutions, and would be merely a passive member. Yet,

this timeframe of passive membership could constitute a useful transition period for

Catalonia, during which it can sort out details of its independence and new status not only

vis--vis Madrid, but also with Brussels. A similar transition period of around eighteen

month is planned for Scotland, in the case of a successful independence vote in

September 2014 (Campbell, 2013). While this seems a viable option with reference to the


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EU's practice for finding pragmatic solutions, its likelihood will depend on the terms

under which Catalonia seceds from Spain, and whether all EU member states would

directly grant recognition to an independent Catalan state. Such a model is mostly

realistic in case of a mutually agreed on split of Spain and Catalonia, in which Madrid

gave its consent to Catalan independence. Yet, should Catalonia decide to declare

independence unilaterallypresenting Madrid with a fait accompliit is to assume that

Spain would punish such a move by preventing any further affiliation of Catalonia with

the EU, at least in the short run. A second option would be a clear break between

Catalonia and the European Union directly after Catalonia's secession, resulting in

Catalonia fully leaving the EU, and having to negotiate over its accession as a third

country (Dalle Mulle, 2013, p. 36). In this scenario, Catalonia would lose its EU

membership completely, but would be able to apply under normal conditions. However,

while Catalonia would probably have little difficulties to fulfil most formal criteria for

EU accession, an application could still take a long time. The fastest accession of member

state so far has been Sweden's, and even in this case it took four years. Catalonia would

therefore need to deal with a not neglect able time outside of the EU framework. While

the first two scenarios both assume a Catalan accession to the EU soon after

independence, a third and rather critical approach also exists. Due to the unanimity

required for the accession of a new member state to the European Union, and to Spain's

strict prohibition of a Catalan secession, critics warn that Spain might unilaterally block a

possible Catalan EU accession. The Spanish Partido Popular, one of the country's two

major political parties, is heavily opposed to any form of Catalan independence. The

majority of its conservative base, as well as many of its leading politicians, are firm

believers in the unity and indissolubility of the Spanish nation, and might feel the need to

punish an attempt to destroy said unity (Red light from Madrid, 2014). Furthermore, this

view is also borne by a perceived Spanish fear of even further division, should Catalonia

establish a successful model for independence. Even though Basque secessionism has,

latest since the end of ETA, been less active and extreme than in earlier times, Madrid

still fears a resurgence in Basque separatism in the case of a successful Catalan secession.

Furthermore, other autonomy-seeking regions in Spain, such as Navarre, Galicia or

Valencia, could also use the pretext of Catalonia to demand further rights from the


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Spanish central government. In the eyes of Spanish politicians the only way to prevent

this development is to make sure that a Catalan state, should it come into existence, will

face severe difficulties. In 2008, this perceived fear seemed to be confirmed by the

Spanish denial to recognize the independence of the Kosovo, which unilaterally declared

its independence from Serbia (De Quetteville, 2008). While the original refusal to

recognize Kosovo was officially based on the fact that the unilateral declaration of

independence ran contradictory to international law, Rajoy later stated that a recognition

of Kosovar independence would also run contrary to Spanish interests (Rajoy se opone a

reconcer Kosovo, 2012). Yet, recent developments show that indeed the Spanish

opposition to Kosovo might not be directed against separatist movements in general, but

might rather be caused by the unilateral declaration of independence in Kosovo, which

left Serbia no say in this affair. Concerning the case of Scotland, Spanish foreign minister

Garcia-Margallo announced in February 2014 that his country would neither interfere in

the Scottish run for independence, nor would it necessarily block a Scottish EU

candidacy (Buck & Dickie, 2014). Whether or not Spain, or any other EU country, might

block a Catalan accession to the European Union, will therefore most likely depend on

the way in which Catalonia and Spain separate. As long as both states split apart in

mutual agreement and in an orderly way, little opposition to the Catalan project can be

expected on EU level. Should Catalonia however decide to declare its independence

unilaterally, it might have to face severe consequences. Other EU member states, such as

Italy, which still faces difficulties with the traditionally German-speaking region of

Southern Tyrol, could in this case oppose Catalan independence and henceforth their

accession to the European Union, in an attempt to prevent the creation of a successful

precedent for other separatist movements.

Schengen and Citizenship

Another problem which is relevant with regards to the topic of Catalan independence, is

the question of how this would affect the right of Catalan citizens to freely move around

Europe. As citizens of the European Union, Catalans can currently freely work, travel and

live in all EU member states, without having the need for any further formalities.


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Furthermore, they are guaranteed political rights, such as the important right to vote in

European elections, to rely on the European Ombudsman, and the right to consular

protection in third countries (Art. 16, 21, 22, 24 TFEU). In addition, with Spain being a

Schengen state, its citizens can also cross the borders of all other Schengen states,

without being subject to border controls (Schengen Area, 2014). However, if Catalonia

was to secede from Spain, it would be unclear whether or not Catalan citizens could

continue to rely on these rights.

The right to European Citizenship, would most likely be lost if Catalonia was to

exit the the European Union. As some rights, such as the participation in the European

democratic process, can hardly be granted to the citizens of non-EU members, it is

inconceivable that Catalan citizens would be able keep their full citizenship rights. This is

also mentioned in the TFEU, which clearly binds the European Citizenship to the

citizenship of a member state (Art. 20 (1) TFEU). Yet, one decisive factor in this question

has so far not been put on the tablethe question of how Spain and Catalonia are going

to solve the issue of citizenship among them. According to current Spanish law each

Spaniard by origin, which would include all native Catalans, has the right to keep the

Spanish nationality when adopting another one next to it. If this law would remain in

force, a majority of the citizens of a future independent Catalonia would have a right to

Spanish citizenship next to their Catalan oneand therewith consequently to a European

citizenship. For Spanish citizens who are not of Spanish descent, a multiple citizenship is

in most cases not possible (Tener la doble nacionalidad, 2014). Theoretically, it would

therefore be possible for a majority of Catalan citizens to keep their EU citizenship,

simply by keeping their Spanish citizenship next to their new Catalan one. Yet, it is

unclear how this will play out in practice. Spain could change its laws on citizenship, and

force inhabitants of Catalonia to decide for either one of them. An important case related

to this topic is the situation of the Faroe Islands. While they belong to Denmark, and

citizens of the islands have Danish citizenship, they do not have European Citizenship

(Folketinget, 2012). A similar approach could be taken with regards to Catalonia, where

Spanish citizens residing in Catalonia could be excluded from European Citizenship.

How the situation is going to turn out is therefore hard to predict. While it is clear that in

the case of leaving the EU Catalan citizenship will not guarantee European Citizenship, it


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is still open whether or not Catalans will be able to access the rights of European

Citizenship via the Spanish one. On a related note however, a citizenship light, at least

for a transition period, might constitute a viable solution. With the rights to democratic

participation and usage of EU institutions being off the table, the EU could still decide to

grant Catalan citizens the right to freely reside, work and travel in other EU states, at least

until a new and durable solution can be established.

The question of an accession of Catalonia to the Schengen Convention is less

complicated than the issue about citizenship, but so far also unclear. While membership

in the Schengen Area is not directly related to membership in the European Union, it has

by now become a fixed part of the EU legal system. According to the guidelines of the

Schengen Convention, membership for non-EU members is possible, and has already

been put into practice by the accession of Norway, Switzerland, Iceland and Liechtenstein

(Schengen Area, 2014). Yet, a politically possible accession of Catalonia to the

convention could, at least in the time shortly after the independence, be constrained by

the high demands towards new member states. First of all, Catalonia would have to prove

that it is able to sufficiently control its borders, inclusive air and sea, and to establish a

functioning and effective agency for law enforcement. Only after these conditions are

met, an accession to the Schengen Area could be realistically approached, and Catalonia

could be subjected to several rounds of Schengen Evaluations, in order to examine their

readiness to join.

International organizations

Whereas the relation between an independent Catalonia and the European Union has

already been subject to various discussions, the topic of Catalonia's membership in other

international organizations has received only little attention so far. Yet, even though the

EU membership might be the most crucial aspect concerning the international standing of

an independent Catalonia, the issue of membership in organizations such as the United

Nations (UN), the World Trade Organization (WTO), the World Bank (WB), or the

International Monetary Fund (IMF) are not to be neglected. While certain rules exist

which guide the debate about the role of successor states in international organizations


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and treaties, these are neither universally acknowledged, nor ultimately binding

(Crawford & Boyle, 2012, p. 93).

Concerning a membership of Catalonia in the United Nations, the legal

framework as well as several precedents have set out that Catalonia, if it would want to

become a member of the UN, would have to apply again. The possibility for a breakaway

region to inherit UN membership through its former state has been ruled out by the UN's

Sixth Committee, with reference to the unclear willingness of new states to subject

themselves to UN guidelines and cooperate peacefully. A membership in the UN is

always bound to the acceptance of and compliance with specific principles and rules, and

it can not be relied upon that a newly created state will automatically take over all

commitments of its predecessor in this regard (Scharf, 1995, p. 42). If Catalonia therefore

was to become independent, it would have to formally submit an application to the UN,

which would then be subject to a first voting round in the Security Council, and a second

voting round in the General Assembly. Whereas in the first round Catalonia would merely

need 9 out of 15 affirmative votes, a two-thirds majority is necessary in the General

Assembly. The only way Catalonia could be blocked, would be through a veto by one of

the five permanent members of the UN Security Council (UN Membership, 2014).

Whether or not such a veto might take place is up for the debate, and can not be finally

answered at this point. However, similar situations in the past have delivered concrete

precedents for such situations, and can therefore help us to assess the probability of

certain reactions on the side of the permanent members. Since Kosovo's declaration of

independence in 2008, China and Russia deny the country official recognition, and

therewith have so far prevented the country from joining the United Nations. However,

both countries referred their reactions to the unilateral nature of the Kosovar declaration

of independence, brand marking it as unlawful separatism (The Ministry of Foreign

Affairs of the Russian Federation, 2008; Ministry of Foreign Affairs of the PRC, 2008).

In the cases of Southern Sudanese secession from Sudan, Montenegrin secession from

Serbia, and East Timorese secession from Indonesia however, neither Russia nor China

opposed the UN membership of said countries. The difference lies with the fact that the

latter secessions were all agreed on under international law, and did therefore not violate

the constitution of the predecessor state. It can therefore be expected that, as long as a


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Catalan independence from Spain takes place according to international law, and is not

declared unilaterally, a veto against a Catalan membership in the United Nations is

unlikely.

Regarding the Council of Europe and the European Convention Of Human Rights

(ECHR), precedents created by the cases of Serbia-Montenegro and Czechoslovakia

established that while Spain would keep its membership in both institutions, Catalonia

would have to reapply. While the Council of Europe and the ECHR are legally separate,

their close connection makes an accession to one without acceding to the other

impossible. Catalonia would have to formally reapply to the Council of Europe, and go

through the normal accession procedure. However, the ECHR would most likely still

apply to Catalonia, as the European Court of Human Rights stated that the rights are

belonging to the people, and can therefore not be taken away by a change in state

formation (Crawford & Boyle, 2012, pp. 95-98).

Another important organization Catalonia would have to join, for reasons of

practical concern as well as in order to gain further international recognition, is the

International Monetary Fund (Andrews & Davis, 2009). As the precedent of Kosovo and

Serbia has shown, in the case of a Catalan secession, Spain would rest a full member of

the IMF, and would keep all of its voting rights and quotas, as well as assets and

liabilities. Catalonia on the other hand would have to reapply as a new member. It would

first be subject to an investigation by the IMF's Executive Board, and later on by the

Board of Governors (International Monetary Fund, 2008). However, the weighted-

majority voting rules of the IMF would make it comparatively hard for Catalonia to be

blocked from accession, as long as it gets a sufficient number of influential countries

behind its cause. The Kosovo managed to join the IMF against strong opposition by

Russia, Serbia and other countries, even though at the time of its application less than a

third of all UN members had acknowledged Kosovo as an independent state (Andrews &

Davis, 2009). Chances are therefore high that Catalonia could join the IMF even against

the opposition of Spain and its allies.


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Territorial Claims

Whereas the main engine behind the Catalan thrive for self-determination is to be found

in the Autonomous Community of Catalonia, the Catalan culture and feeling of

nationhood radiates further. First brought up in the late nineteenth century, the term of the

Paisos Catalans has taken hold in the debate about Catalan nationalism and

independence today. The Paisos Catalans or Catalan Countries, are a concept which

refers to both, the concept of a linguistic and cultural unity of the region, and the idea of a

possible political unity between its current actors. It encompasses the Spanish areas of

Catalonia, Aragon, Valencia, and the Balearic Islands, the sovereign state of Andorra,

Northern Catalonia in France, and the Italian city of Alghero in Sardinia (Vilalta, 2006).

While the concept was regularly brought up by Catalan intellectuals in the past, it has so

far not been part of the current Catalan campaign for independence. This might also be

caused by the fact that the concept of the Catalan Countries proves little popular outside

of Catalonia proper, and that most parts of it are de facto indifferent to it. Some, such as

the Balearic Islands, have even outright denied the existence of the Paisos Catalans, as

well as their membership in it (Els Pasos Catalans no existeixen, 2013). On the same

note, it can not be expected that either France, Andorra or Italy are willing to grant any

independence. Furthermore, it is thinkable that the neighbouring countries of Catalonia

will link their recognition for a new Catalan state to the relinquishment of any territorial

demands by Catalonia. The concept of a unity of the Paisos Catalans seems therefore

rather a nationalist elite project than an a possible scenario for the future. While it might

be brought up again in the future, it will most likely not lead to any substantial disputes

over the possible borders of an independent Catalonia.


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Economic Challenges

With the issue of economics being one of the core points in the Spanish-Catalanrelationship, and serving as a major argument in public debates, it is crucial to examine

whether an independent Catalonia would truly be in a better financial shape than a

Catalonia which is part of Spain. Whereas the fiscal deficit of Catalonia is undeniable, as

well as its leading economic role in Spain, it is so far unclear in how far an independent

Catalonia would be economically viable (Credit Suisse, 2012). Naturally, this will depend

on many different factors, which can not all be fully assessed at this point. It will,

amongst others, depend on the future relationship between an independent Catalonia and

the European Union, the Spanish reaction to Catalan independence, and how Catalonia is

going to deal with the delicate question of its post-independence currency. Still, certain

factors can already now be assessed, or at least preliminarily evaluated. These concern

not only possible losses in international trade and investment, but also questions about a


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partial transfer of Spanish national debt to a new Catalan state, and the necessity for

Catalonia to build up an own state apparatus.

Whereas Catalonia is often described as the powerhouse of Spain, generating

around one-fifth of the total Spanish GDP, its growth rates have been declining of the last

decade, especially in comparison with structurally similar regions of the European Union.

The blame for this downturn is often given to the Spanish state, and its system of fiscal

solidarity among the autonomous communities (Griffiths, Guillen & Martinez i Coma,

2013, p. 12). In 2011, Catalonia's fiscal deficit, the difference between the sums of taxes

raised and spent in Catalonia, amounted to 18,5 billion Euro, or around 8,8% of the

Catalan GDP. Over a broader time frame, between 1986 and 2010, Catalonia contributed

19,7% to the revenues of the Spanish state, while on average merely receiving 11,2%

back in government expenditures (Departamento de Economa y Conocimiento, 2014). In

the case of a Catalan secession from Spain, this fiscal deficit would vanish, and allow the

Catalan government to use these funds for local investments in infrastructure, social

policies, and economic incentives. Yet, even though Catalonia is among Spain's most

prosperous regions, it is still dependent on funding coming from the central state. Due to

the financial crisis, Catalonia requested another nine billion Euros bailout from the

Spanish state in 2013, in order to be able to repay its debts. Prior to this, Catalonia

already applied for five billion Euros as bailout assistance in 2012, which was paid for by

a Spanish public fund (Catalonia asks Spain for Bailout, 2013). However, while Catalonia

needs Spanish assistance in this case, it is important to note that the requested bailout for

2013 is merely half of the regions annual fiscal deficit. It is therefore questionable

whether Catalonia would have needed such a bailout in the first place, if the fiscal

pressure put on it by the Spanish state would have been lower. Overall, it is undeniable

that Catalonia is running a net loss concerning monetary flows with the Spanish central

state. Yet, a secession which would end the fiscal deficit for Catalonia would

simultaneously end benefits the region is currently drawing from its union with Spain,

such as in the areas of trade and labour migration.

Traditionally, the Catalan economy has been among the most modern ones in

Spain, as it industrialized early and on a large scale (Greer, 2007, p. 21). While today

there has been a shift away from tradition heavy industry in the region, moving more


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towards the service sector and new knowledge-based industries, the industrial sector

still is a crucial part of the Catalan economy (Toms & Munos, 2009). The industrial

sector itself is diversified, and ranges from chemical industry and car production to

textiles and machinery production. All of these industries would be put to the test during

a secession, as most of them are dependent on the import of intermediary goods, and on

exports of the final goods in order to have a big enough market. In the case of an

exclusion of Catalonia from the European common market, these industries are likely to

suffer (Credit Suisse, 2012). While bilateral trading agreements or an accession to the

EEA are in the realm of the possible, this can not be taken for granted. Furthermore, it is

not clear in how far Catalan industries will be successful at developing new markets for

their products, and whether this will be a sufficient offset for their losses of European

trade volume. The agricultural sector of Catalonia is very small, and accounts for merely

three percent of the Catalan economy. While also this sector might be harmed through an

exclusion from the European Union and consequently the CAP, this alone will not put the

Catalan economy under serious pressure. On the contrary, a part of the Catalan economy

which is likely to be harmed is tourism. So far, Catalonia is the most successful Spanish

region concerning tourism, with revenues of nearly thirteen billion Euros each year

(Consell General de Cambres de Catalunya, 2012) Whereas extreme drops in tourist

numbers seem unlikely, especially in the long run, the inconveniences of visa regulations

and a foreign currency necessary for travels to Catalonia could discourage at least some

tourist from visiting the country.

While Catalonia accounts for around one-third of overall Spanish exports, the

region is still heavily dependent on Spain for trading. Currently more than 60% of goods

leaving Catalonia are staying in Spain, and are merely exported to other provinces.

Andaluca, Aragon and Valencia together account for around 30% of Catalan exports, and

therefore import more Catalan goods than Germany, Italy, Portugal and the United

Kingdom together. Catalonia's main foreign trading partner is France, to which 14% of

Catalan exports go (Credit Suisse, 2012). If Catalonia secedes, a continuation of these

strong trade patterns with other Spanish provinces seems highly unlikely. First of all, a

secession of Catalonia would most likely see the country leaving the European Union,

and therewith the Single Market. As a third state without any special agreement, Catalan


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products exported to EU countries would be subject to the Common External Tariff of the

European Union, and therewith become more expensive (The Combined Nomenclature,

2014). This would hit Catalonia especially hard, as the EU's external tariffs are high on

food and clothes, areas in which the Catalan economy is strong (Credit Suisse, 2012).

Yet, Catalonia might be able to avoid the creation, or at least longevity, of this trade

barrier. As mentioned earlier in this paper, even if Catalonia might not be able to join the

EU quickly as a full member, it could still apply for associate membership with the

European Union or join a free trade agreement. While the content of a possible associated

membership is not clear yet, a free trade agreement would most likely see all tariff

obstacles to trade between the two entities removed. Yet, precedents have shown that

even without major tariff barriers being erected, the division of states can lead to a sharp

decrease in trade among its successor states. After the split of Czechoslovakia in 1993,

trade between the newly founded Czech Republic and Slovakia fell by 25% compared to

their trading volume when they were unitedeven though both states kept a free-trade

agreement after their separation (Lopatka, 2011). A Catalan secession from Spain could

therefore hurt trade between both entities extensively, even in the case of an independent

Catalonia reaching a free trade agreement with the European Union. Whether Catalonia

would be able to fully make up for these losses by increasing exports into other countries

is not clear yet, but will at least in the short-run be unrealistic. Another problem which

could hinder Catalan exports to Spain, are possible boycotts on the side of the Spanish

population. Already in 2006, when political difficulties between Madrid and Barcelona

reached a so far unknown level, a boycott against sparkling wine from Catalonia was

taking place in Spain, noticeably diminishing Catalan exports to the rest of Spain

(Tagliabue, 2006). Should Catalonia secede from Spain, especially if under a unilateral

declaration of independence, a new boycott by Spanish citizens against Catalan goods is

thinkable.

If Catalonia is going to secede, the economic conditions of a new Catalan state

will to a huge extent rely on whether the split will be under amicable circumstances. Not

merely because this will predetermine how a future relationship between both countries

might look, but also because it will set straight the financial framework with which an

independent Catalan state will have to start. If a country splits apart, no matter whether


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partially through a seceding province, or completely, the question of who takes over

which debts and assets is essential. However, so far there is no official and universally

valid guideline on how to deal with such cases, leaving the decisions up to the state(s)

concerned (Rowlands, 1997). In the run up to the Scottish referendum on independence

several possible solutions have been proposed, each of which calculates a Scottish share

of British debt on a different basis. A first proposal envisages a split of the national debt

according to population figures, in which the total debt is divided through the number of

citizens, and afterwards allocated to the dividing entities according to population (Wills,

2014). In this case, if a similar model was used, Catalonia would be faced with 16% of

Spanish debt, leaving the newly independent country with a starting debt of already 154

billion Euro, next to Catalonia's current debt of already of around fifty billion Euro

(Duarte, 2013). This however could be a beneficial solution for Catalonia, as the region's

GDP per capita is among the highest in Spain. Would the division of debt follow the

second proposal instead, which calculates the shares on the basis of economic output,

Catalonia would have to accept around 192 billion Euros instead, 20% of public Spanish

debt. Yet, the adoption of other models, calculating public debt on the basis of historic

contributions, imports and exports, or other means, are also possible. In the case of a

mutually agreed separation however, Catalonia can be expected to take over parts of the

Spanish public debt. Yet, the situation might look different in the case of a Catalan

secession without Spanish agreement. In such a scenario, which would probably cause

Spain to not recognize Catalan independence, Catalonia could use the public debt as a

trump. It could then link its adoption of a fair share of the public debt to the recognition

of its independence by Spain, forcing the country to either come up for all the debts itself,

or acknowledge Catalan independence in a legally binding way. However, this might be a

dangerous game for Catalonia to play, as it would lead to great distrust towards the

country from international investors and banks, who might doubt Catalonia's financial

credibility (Rowlands, 1997). This topic is further related to the general questions about

how Catalonia and Spain would divide up different public assets, social security

guarantees, federal property and so on. Yet, this exceeds the scope of this paper, and is to

be researched by other scholars in the case of a dawning Catalan secession.

In the end, many of the questions about the economic performance and viability of


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an independent Catalonia depend on the question of which currency such a Catalan state

will use. Not only would this have important impacts on the trust of foreign investors into

the country, but it would also affect trade and tourism to a considerable extent. In light of

Catalonia's exit from the European Union, it is often assumed that in the same step,

Catalonia would also have to abandon the Euro, which currently serves as the official

currency of eighteen out of the twenty-eight EU member-states. What would happen in

the case of Catalonia having to abandon the Euro, has so far not been settled, or even

been subject to detailed and open discussion (Sills & Duarte, 2013). When assuming that

a direct membership of Catalonia in the Eurozone is unrealistic, there are three broader

options left for the country.

First of all, Catalonia could decide to unilaterally keep the Euro as its de facto

currency, while formally exiting the institutional framework of the Eurozone. While this

model has so far not seen major support on the political level, its viability has already

been proven successfully in related cases. In January 2002, Kosovo and Montenegro both

unilaterally adopted the Euro as legal tender in their countries, without concluding any

formal agreement with the European Union (The euro outside the euro area, 2014).

Already leading up to the introduction of the Euro, both countries started using the

Deutsche Mark in the 1990's, in order to be independent from the troublesome and

politically controlled Yugoslavian Dinar. During this period, the two countries profited

heavily from the benefits of using a major currency as their legal tender not only did it

prevent them from the inflation which struck the rest of Yugoslavia during the 1990's, but

it also facilitates foreign trade and gives a certain amount of economic stability to the

respective countries (Hanke, 2007; Mnch, 2010). While the unilateral adoption of the

Euro would leave Catalonia without any independent monetary or exchange rate policies,

its benefits and its quick availability make it a worthwhile option. So far, there has also

been no opposition on the side of the European Union to this. On the same note, Jean-

Claude Trichet announced in 2006 that the European Union would not either encourage

nor deter third countries from using the euro, therewith de facto granting every willing

country to use the Euro as legal tender (Lekic, 2006). Should Catalonia therefore leave

the Eurozone officially, it could still decide to keep the Euro as its legal tender

nevertheless. Even though this might not be a solution in the long run, it could give


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sufficient stability to the Catalan economy until the country either joins the European

Union again, and therefore can adopt the Euro officially, or until it is stable enough to

issue an own strong currency.

As a second option, Catalonia could decide to introduce an own currency, which it

could peg either to the Euro or the Dollar. This model has been chosen by many European

and even African states, both EU-members and non-members, and can be established

unilaterally. In the European Union this model is used by Bulgaria, Hungary, Romania

and the Czech Republic for example, while outside of it also Morocco, Tunisia and Serbia

pegged their currencies to the Euro (Links to other currencies, 2014). As opposed to a

completely independent currency, a pegged exchange rate would give Catalonia the

benefit of facilitating trade with and investment from other countries, as it would make

the Catalan currency and economy more stable. Due to the consequently resulting

increase in price predictabilities for trade, and also the decreasing risk of inflation,

Catalonia could mitigate at least parts of the trade losses it would risk by leaving the

European Common Market. However, at the same moment, pegging the Catalan currency

to the Euro would diminish the Catalan ability to appreciate or devalue its own currency,

and to use monetary policies in order to influence the domestic economy and

international trade.

The third option would see a completely independent Catalan currency, which

would not be pegged to any other major currency. While in this case Catalonia would

have full control over its currency and could theoretically appreciate, devalue and issue it

according to its own needs, several risks would be apparent. First of all, the prospect of a

denomination of Catalan savings from Euro into a new and most likely weaker currency,

could lead to anxiety among the Catalan population, and consequently to a huge bank run

in the country. The only chance the Catalan state would have to counter this, would be the

implementation of capital controls. Catalonia would, at least for a transition period, have

to restrict the amounts of money which could be withdrawn from banks and brought out

of the country, in order to guarantee the stability of its new currency. However, at the

same moment these actions would cause distrust among international investors and

foreign holders of capital in Catalonia, who could be inclined to protect their money from

further restrictions by Catalonia (Lavelle, 2013). Should Catalonia however manage to


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keep its currency stable during the first years, which would mainly depend on the trust

placed in it by investors and citizens alike, it might be able to develop a strong and

independent currency on its own. Switzerland and Norway both showed that small and

wealthy countries are able to coexist next to the European Union with strong and

independent currencies of their own. Yet, this would depend on the ability of Catalonia to

publish a concrete and well-thought proposal for launching its own currency and

monetary policy.

Even though the topic of currency is one of vital importance for every

independent state (or state claiming independence), so far there has been no specific plan

presented by Catalonia's regional government, on how to solve the issue of an

independent Catalonia's currency (Ortiz, 2014). While it can be argued however that Mas'

insistence on a European Catalonia, keeping all benefits of membership, is an act of

naivety, it can also be understood as a conscious trick to keep the electorate on his side.

Rec

Documents

Catalonia and Spain - Separation or Divorce. TraugottL-libre