Policy Research in Macroeconomics

Pain in Spain and the Catalan Crisis

By Jeremy Smith

In recent days, our media have been full of stories about the impact of Scotland and Catalonia seeking independence.  One key issue for both is whether they would automatically become member states of the European Union, or would need to apply (my view has always been that they would be obliged to apply, and it won’t be easy). The following article (slightly shortened here) was written by me a month ago, on my last visit to Spain, but has become even more relevant.

I was prompted to write it because of my long-standing interest in national Constitutions as a “window into the national soul”, and by a fascinating visit to the Museum in Cadiz where the first Spanish Constitution was launched. But I was also  pushed to write by the fact that in the same week, the Catalan government announced new “regional” elections with a focus on independence, whilst the Spanish government announced its latest mega-austerity package.

What I did not realise – it emerged from the Spanish statistics authority’s figures on unemployment issued last week – was that over the last year, Catalonia’s unemployment has grown by more than any other Spanish region, with an increase of 192,000 out of the total of 800,000.

A fascinating but lethal combination – with far wider implications for all Europeans, as we are starting to realise.


1st October 2012

Last week I was in the beautiful ancient Spanish city of Cadiz for the General Assembly of my old association, the Council of European Municipalities and Regions.  Among the speakers was Luxembourg’s European Commissioner, Viviane Reding, who tried valiantly to enthuse the audience with visions of a long bright future for the Euro.  As to longevity, we shall see over the coming years.  As to the brightness, well, the rain poured down for most of my three days in Cadiz, and the worsening economic situation of Spain was underlined by yet another savage austerity budget.

This year, Spain has celebrated the bicentenary of the promulgation in 1812 in Cadiz of its first written Constitution, following the overthrow of the Napoleonic ‘monarchy’.   It is a remarkable, even radical, document for its time, as can be seen from its first four articles:

Article 1. The Spanish Nation is the meeting-point of all Spaniards from both hemispheres.

 Article 2. The Spanish Nation is free and independent, and it neither is nor can be the property of any family or person.

 Article 3.  Sovereignty resides essentially in the Nation, to which exclusively belongs, therefore, the right to establish its fundamental laws.

Article 4. The Nation is obliged to conserve and to protect, by wise and just laws, civil liberty, property and the other legitimate rights of all individuals that compose it.

And it is the word “nation” that lies at the heart of a very modern constitutional fissure between the Spanish state and the people (or “nation”) of Catalonia, a fissure that has deepened and widened as a consequence of economic crisis. We are at the start of a power struggle whose outcome is hard to predict – but which may have an impact not just on people in Spain, but on all Europeans.

The 1978 Spanish Constitution

For note that the Nation features prominently in the current – 1978 – Spanish Constitution, whose first two Articles proclaim:

 Article 1 

(1) Spain is hereby established as a social and democratic State, subject to the rule of law, which advocates freedom, justice, equality and political pluralism as highest values of its legal system.

(2) National sovereignty belongs to the Spanish people, from whom all state powers emanate.

(3) The political form of the Spanish State is the Parliamentary Monarchy.

Article 2

The Constitution is based on the indissoluble unity of the Spanish Nation, the common and indivisible homeland of all Spaniards; it recognizes and guarantees the right to self-government of the nationalities and regions of which it is composed and the solidarity among them all.

Hmm – “indissoluble unity of the Spanish Nation”, and “the common and indivisible homeland”, all in one place… but note also the reference to “the nationalities… of which it is composed”.

Apart from our General Assembly is Cadiz, several other important events took place last week in Spain.

Sinking economy, bailing banks

On the economic front, the government announced its latest austerity budget, which takes a further €40 billion out of the economy and thereby ensures that GDP next year will continue to fall significantly.  Next day, and directly related, the banks’ stress tests led to the conclusion that over €53 billion will be required to recapitalize 14 banks – all of which will fall upon the Spanish government as further indebtedness, since Germany and other northern European states have now made it clear that they are ratting on the agreement made as recently as June to “Europeanize” the banks’ bail-out, via the forthcoming European Stability Mechanism (€500 billion fund).  We may be sure that the latest stress tests will have under- rather than over-estimated the sums required, since the Spanish government will hold the banks’ debt-baby in its arms.

Moving towards Catalan self-determination

And at the very same time, the Parliament of Catalonia, the richest of Spain’s ‘regions’ (autonomous communities), voted by a large majority (84 out of 135) to hold a referendum on self-determination:

“The Catalan parliament affirms the necessity of the Catalan people to decide freely and democratically their collective future and calls on the [regional] government to hold a consultation first and foremost within the next legislature.”

Maragall bros

The El Pais article of 27th September tells us that – like the right-wing Popular Party and its allies – the Socialists voted against, save for lone rebel Ernesto Maragall, who voted for.  The Maragall brothers are a great Barcelona political duo; Ernesto is an old friend and colleague in international urban politics.

His brother Pasqual Maragall is best known for his role as Mayor of Barcelona, including during the Olympic Games there…  Pasqual moved on from city to regional politics, becoming President of the Generalitat (government) of Catalonia; in this capacity he was responsible for the 2006 Catalonia Statute, of which more below.  He has in more recent times taken the brave and noble step of publicly announcing that he is suffering from Alzheimer’s disease.

I see, too, that another old colleague, historian Alfred Bosch, now part of the left-independentist Esquerra Republicana de Catalunya party, demanded “the restitution of Catalonia’s sovereignty” by means of the repeal of the Nueva Planta decrees signed in 1715 by Felipe V after the Spanish War of Succession.  Zounds, another long shadow of history! …

The 2006 Catalan Statute

Back to the constitutional politics. Recall again the first two Articles of the current Spanish Constitution, with the indissoluble, indivisible Nation…  And look now at the carefully sculpted language of this part of the Preamble to 2006 Catalan Statute which Pasqual Maragall negotiated through, at Catalan and Spanish levels (when the Socialist Zapatero was Prime Minister):

“In reflection of the feelings and the wishes of the citizens of Catalonia, the Parliament of Catalonia has defined Catalonia as a nation by an ample majority. The Spanish Constitution, in its second Article, recognises the national reality of Catalonia as a nationality.

Catalonia, as a nationality, exercises its self-government constituted as an autonomous community in accordance with the Constitution and with this Statute, which is its basic institutional law.”

And Article 1 states:

“Catalonia, as a nationality, exercises its self-government constituted as an autonomous community in accordance with the Constitution and with this Statute, which is its basic institutional law.”

Kicked back by the Court?

Although this text was carefully negotiated and gained political majorities in the Catalan and Spanish Parliaments, the Popular Party (conservatives) decided to take it to the Constitutional Court, which four years later, in 2010, in a highly controversial judgment upheld most of the Statute, found some Articles (including on language issues) to be unconstitutional, and held that the references in the Preamble to Catalonia as a nation to be devoid of any legal effect.  Catalan nationalists were infuriated by these judicial incursions, which they saw as a breach of trust on the part of the Spanish state.

Moreover, since the crisis broke, and especially since the Rajoy government was elected, central government has sought to claw back control over the financial autonomy of the autonomous communities; and since Catalonia as richest ‘region’ pays most into the central government’s purse, whilst it has had to face a major deficit, the sense of injustice has grown wider and deeper amongst the Catalonian people.

Spanish government – powers to block referendum

The Deputy Prime Minister has already threatened action in the event that a referendum on (in effect) independence is called, presumably on the ground that under Article 149, the central government has exclusive competence in relation to the “authorization of popular consultations through the holding of referendums”.  Moreover, Article 155 provides the legal tools which could be used to try to block the Catalan government from holding its referendum:

(1) If a Self-governing Community does not fulfil the obligations imposed upon it by the Constitution or other laws, or acts in a way that is seriously prejudicial to the general interest of Spain, the Government, after having lodged a complaint with the President of the Self-governing Community and failed to receive satisfaction therefore, may, following approval granted by the overall majority of the Senate, take all measures necessary to compel the Community to meet said obligations, or to protect the above-mentioned general interest.

(2) With a view to implementing the measures provided for in the foregoing paragraph, the Government may issue instructions to all the authorities of the Self-governing Communities.

All measures necessary” (my emphasis)… I think we heard similar words relied upon for the invasion of Iraq.

Painted into corners

Will it come to a full-blown constitutional crisis?  We must first await the results of the early Catalan elections called by Catalan President Mas for November.  We may also imagine that the form of “consultation” of the Catalan people may avoid being a full-blown “referendum”, but rather the offering of an opportunity to the people to express a point of view – thus forcing the central government to argue either that it is in reality a referendum, even if not in form, or that it consists of some other action akin to a referendum, which is prejudicial to the general interests of Spain, in tending towards dissolution of the indissoluble.

But all sides have painted themselves into their respective corners, so it seems hard to see how a diplomatic way through will be found, given the bad blood between the Popular Party and many of the pro-independence supporters in Catalonia.  It may be that in reality the Catalans would settle for the Basque solution, in which in effect the Basque region is financially quasi-independent of the central government, apart from modest contributions to a few designated central government functions like defence.

That way, the richest region would no longer subsidise the poorer regions… which itself would seem to some to be a strange contradiction or betrayal of principle, given the emphasis on solidarity in the Catalonia Statute.  And for the Spanish government and state itself, the economic and political cost of offering the Basque solution to the Catalans would appear to be too high to willingly cede or bear.

What if…there’s a Declaration of Independence?

But think the unthinkable (for most of us non-Spaniards) of a Declaration of Independence by the nation of Catalonia… followed immediately (as would happen) by a request to join the European Union, for the Catalans are among the strongest supporters of the EU, and would see memberships as a bulwark against the Spanish state seeking revenge and territorial re-integration.

But the EU could not conceivably just accede to such a request for membership… not just because of opposition from the government of Spain, but because it would open the way for other ‘regions’ or wannabe ‘nations’.  Flanders would be next, assuming Scotland had not got there first.  And would Lombardy be far behind?  It is simply too dangerous; the fragmentation of the traditional European states (I avoid calling them nation states) risks ending in civil wars across the continent, and the cumbersome machinery of the European institutions would surely not be able to cope with the constant territorial crises (and leading to very difficult arguments over votes in the EU).

The Euro as is – a force for European divergence

But behind all this is the disintegrative force of the Euro in its present form and structure.   While the European Treaties speak of cohesion and convergence, the reality is that the current austerity policies are breeding fragmentation and divergence.  Divergence between Member States, and now potential fragmentation within Member States.

I am more and more convinced that here are only two ways of resolving Europe’s current crisis. Either the Euro breaks, and we return to myriad currencies (even if some smaller groupings of States hold together), or we need to build a federal state of Europe rapidly.  Starting now, and strictly for those peoples who by exercise of their free democratic will choose to join.

To leave things unresolved as now, will lead to disastrous results for individuals, communities and nations.  What appeared solid and indissoluble will not melt into air, but will break down, painfully and sometimes violently.

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