lunes, 24 de septiembre de 2012

FT:Viva España? Spain’s other crisis

Viva España? Spain’s other crisis

There’s nothing like a financial crisis to bring out a surge of nationalism. In Spain’s case the situation is especially serious and seemingly getting worse. So much so that some argue that the growing constitutional crisis could soon eclipse the country’s fiscal problems. The two, you see, are very closely entwined.
In short, more than half of all Catalan want independence for their region, according to the latest polls. The separatist movement has been around for decades but the levels of support have surged since the start of the financial crisis. Earlier this month between 600,000 and one and a half million people (estimates vary) marched the streets of Barcelona demanding autonomy, starting with control over their tax base (which the Basque region already has). The 7.5m Catalans have an economy roughly the size of Austria’s.
There is a lot of painful history in Catalonia’s relations with the Spanish monarchy and central government — but we’ll try not to go into those here, sticking as much as possible to the economic points.
The reason the stakes are so high is that Catalonia is one of Spain’s economic powerhouses, and a significant net contributor to the state coffers. Nevertheless, itwas forced to ask for a €5bn state handout last month. Many in the region argued that if they had more control over their own finances, getting bailed out (with what they regard as their own money) could have been avoided.
Mario Rajoy’s promises to Brussels to enforce a stronger hold over the regions’ finances, made around the same time, did not help Catalan relations with Madrid. His government argues that it would be unconstitutional to give Catalonia more tax autonomy, never mind independence.
But the situation poses real headaches for Rajoy, even if Catalonia ends up with neither tax autonomy nor independence any time soon. He knows that the more the central government clamps down and pushes for greater austerity in the regions, the more it boosts the secessionists. This is reason why Willem Buiter expects Rajoy to wait until after the October 21 regional elections in Galicia and the Basque country before requesting help from the EFSF/ESM programme.
As Artur Mas, the Catalan leader, acknowledges. Speaking earlier this month:

Even though there are many obstacles and difficulties, even though there are few precedents of situations like ours, and even though the Spanish government will respond to the process with hostility and resistance,everything is possible if there is a will, a large majority and the capacity to resist.

Remarks by Colonel Francisco Alaman, a serving officer, indicate the strength of feeling on the other side:
Independence for Catalunya? Over my dead body. Spain is not Yugoslavia or Belgium. Even if the lion is sleeping, don’t provoke the lion, because he will show the ferocity proven over centuries.
The next few weeks are going to be crucial. Last Thursday Rajoy told Mas that there were “no margins” for negotiations over Catalonia’s demands for greater tax autonomy, thus making it more likely that early elections in the region would be called, to be held possibly as early as November 25 . The polls suggested that these would give Convergència i Unió (CiU), Mas’ party and the ruling party in Catalonia, an overwhelming majority and a clear mandate to push on for independence. There’s also talk of a referendum on the issue.
Todaymeanwhile, El País reports that CiU are in negotiations with the other regional Catalan parties over a non-binding agreement defending the “right to self-determination” of the Catalan people. It is due to be voted in the Catalan parliament on Thursday, according to the article.
Yet, independence poses as many problems as it solves. The country would most probably have to apply to join the EU and the single currency, for starters.
From a friendly trader in London:
This is a sensitive topic, but that doesn’t mean we can, or should ignore it. Markets will not for much longer I fear.
At the VERY LEAST, the pressures for fiscal autonomy comes at a dreadful time for Madrid, when the EU demands seem to lead a drive in the opposite direction, and Spanish finances are under pressure and under a microscope.