Catalonia independence: Spain in ‘full crisis mode’

Catalan separatists in Spain are determined to vote in Sunday’s independence referendum, despite Madrid sending in police to arrest a dozen of their leaders, raid government offices, seal off warehouses holding ballots and threaten to take over any voting booths.

While polls indicate that the majority of Catalans favor remaining part of Spain, there is worry that Madrid’s heavy-handed tactics could help swing the pendulum in favour of the “leave” campaign.

“There is anger at the Spanish government for not allowing an official vote on the matter and for the perceived suppression of a democratic process,” says CNBC.

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Pro-independence support has been growing since 2009, when Spain’s financial bubble burst and austerity measures kicked in, The Economist says. The Scottish independence referendum in 2014, which ultimately saw voters opt to remain in the UK, further “galvanized” Spanish activists, CNN adds.

Whether pro-separatists win on Sunday or not - and commentators are still debating whether Madrid will allow the vote to be held at all - Spain’s constitutional trouble shows no signs of abating.

Here’s what could happen if the vote goes ahead - and if Catalonia votes Yes.

‘Tanks on the streets of Barcelona’

“The Spanish government has entered full crisis mode,” Politico says.

National and regional security forces have been ordered to prevent any activity connected to setting up polling stations, seal off buildings, and confiscate computers and all material related to the ballot. Tension reached a “high point” last weekend when the Mossos d’Esquadra, Catalonia’s police corps, were ordered to accept coordination from a non-Catalan official - a colonel of Spain’s Civil Guard police force, Bloomberg says.

Spain's chief public prosecutor has refused to rule out the arrest of Catalonia’s president Carles Puigdemont on charges of civil disobedience, abuse of office and misuse of public funds for pressing ahead with preparations for the 1 October referendum, The Daily Telegraph says, citing an interview on Onda Cero radio.

In the event of a Yes vote, Madrid is likely to do everything in its power to declare the poll illegal and non-binding. If arrests and negotiation don’t stop the movement, Spain’s central government has the option of using Article 155 of the constitution and officially suspending self-government in Catalonia.

“This extreme measure, never used in modern Spain, would in theory make possible what Catalans often joke about: tanks from the Spanish army would drive down the avenues of Barcelona,” The New Statesman says.

The financial impact

Luis de Guindos, Spain’s economy minister, says a split would be “brutal”, leading to a 30% drop in Catalonia’s economy and causing unemployment to double, the Financial Times reports. Banks in Catalonia would relocate their headquarters to Spain, and the Catalan currency would be worth 30% to 50% less than the euro, he predicted.

Europe would also feel the pain, economists warn.

“If the Catalonia referendum goes ahead we expect this to be a disruptive event for the euro, with the potential for a sharp decline of up to five per cent initially in the single currency if the separatists win,” Kathleen Brooks, research director at City Index, told the Daily Express.

Spain’s economy minister told the FT that a Catalan exit would also mean an automatic exit from the EU and eurozone, subjecting 75% of the region’s production to export tariffs - but not everyone agrees.

Carles Puigdemont, the Catalan president, says that a Yes vote would form the basis for discussions with the EU, and Catalonia would not necessarily be expelled from the EU and the eurozone.

Jean-Claude Juncker, president of the European Commission, has said that an independent Catalonia would have to apply to join the political bloc, with Spain likely to try to block that application.

‘Catal-exit’ negotiations

If pro-separatists succeed on Sunday, Catalonia’s 7.5m people would probably declare independence from Spain within days but, as the UK has learned, a Yes vote would be just the start of an agonisingly difficult separation.

Setting aside the problem of Madrid’s opposition and membership in the EU, Catalans would be forced to make a number of difficult decisions in quick succession.

Would a separatist Catalonia form its own military? Which currency would it use? Does Catalonia have a plan to negotiate trade deals with other nations? And, of course, how would Catalonia - an autonomous community located on the northeastern extremity of the Iberian Peninsula - man its borders with Spain and France?

What rights would it offer EU citizens? And would it be willing to pay a ‘divorce’ bill if Madrid ever did, grudgingly, accept a majority Yes vote?

Catalonia accounts for 19% of Spain’s gross domestic product and contributes €224bn (£196bn) a year to the Spanish economy, according to regional government statistics, so Madrid isn’t likely to let the region go without a price.

Catalonia also accounts for 16% of Spain's debt, which in 2016 was priced at about $1.18tn (£878bn), according to central bank statistics.

“Much would depend on the financial and political terms under which Catalonia left, including how Spain’s debt burden would be split and whether Madrid would impose economic sanctions on Catalonia for withdrawing unilaterally,” The New York Times says.