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Spain’s crisis in Catalonia Could Threaten European Investments
01 Nov 2017

Spain Crisis

This crisis covers more than just the obvious. Spain’s national net debt is over 1 trillion EUR’s (around 1.2 trillion USD), as indicated by the International Monetary Fund. That’s more than three times the sum owed by Greece when it started to collapse. Anything undermining the stability of Spain, the fourth-largest within the eurozone, would undoubtedly rock international markets. Catalonia is a major factor in the Spanish economy. It’s among the richest and most productive regions, accounting for around one-fifth of Spain’s GDP and is a significant net contributor to the Spanish budget.

There will be no major winners and a lot of losers if this crisis continues to escalate. So it is surprising to see Spanish Prime Minister Mariano Rajoy mishandle it.

Rajoy’s actions have been so clumsy to the point that a great number of people in Barcelona believed it was all part of an elaborate plan to provoke the situation for political gain. The believe Rajoy, wants to avert the Spanish voter’s attention away from a very public corruption scandal in which he was made to testify in court. They also fear he’s using the anti-Catalan card with voters across the rest of Spain.

The pro-Madrid Spainards say Rajoy isn’t being cynical, just inept. Meanwhile, lots are also very critical of the Catalan government, suggesting that the separatist politicians of manipulating the crisis to achieve their own goals.

The stakes are incredibly high. For instance, in the 1970s Montreal was the economic hub of Canada. But Quebec separatism drove the hub to Toronto and it never returned. Barcelona is a significant and flourishing economic hub and therefore the locals do not want this to transpire to them.

Meanwhile, Madrid appears to have little comprehension of how its actions are damaging its profile overseas. Pictures of baton-wielding riot police hitting voters don’t just make investors wary of Catalonia but of the whole of Spain. Does Madrid really believe this puts them in a good light in New York, London, or Tokyo?

Spain Crisis

A lot of Catalans also very disappointed by the apparent indifference of the European Commission to the situation. Brussels said it doesn’t meddle in the internal affairs of member countries. That would come as a surprise to the Greeks, presently enjoying their seventh year of EU-imposed austerity.

Widespread support for independence is new. The majority of people in Barcelona still appear open to a reasonable compromise. Madrid might possibly settle this crisis with significant symbolic gestures towards Catalonian national identity, more self-governance, and either a partial rebate on Catalan’s tax overpayments or some extra infrastructure investment.

Madrid and Barcelona can still avert a totally avoidable situation. However, the longer this continues, the harder it will become.