Notes From Underground: A Quick Look at Spain’s Catalonia Elections

The Greek debt issue will be resolved for the moment–as we have maintained for months. What is 31 BILLION EUROS among friends? Now that the Catalan independence parties have won a resounding victory in the Spanish region of Catalonia, the political waters of Europe have become murkier. It will be doubtful that Catalonia will actually secede from the Spanish polity but the mere threat will mean that Brussels will have to become more involved in pushing billions of more euros into the Spanish coffers. The Catalans are angry because they send far more euros to Madrid than they receive back in Barcelona. According to the most recent data from 2009, Catalonia had sent 16.4 billion euros more to the Spanish Treasury than flowed back to the region.

As the recession deepens and the need for local funds increases, the animosity of the Catalans toward the rest of Spain grows. Catalonia is presently cut off from borrowing in the debt markets because it has owes so much to creditors. So the issue is that the ability to keep the funds in Barcelona would mean that Catalonia would have a strong enough balance sheet to access the capital markets without any involvement from Madrid. While Catalonia’s debt rating is very weak, its economic power within the Spanish economy is very strong. The Catalan region represents 19% of the Spanish economy and much of its industrial might. As a region it also has close economic ties to France, Germany, Italy and the rest of Northern Europe. The issue for Spain will be how much money will be needed to make it a bad proposition for Catalonia to leave the Spanish Republic. The last thing Brussels and the ECB needs is for the issue of Spanish devolution to raise the cost of financing the bailouts of the peripheries. Two-hundred-fifty years ago it was the War of Spanish Succession. Today is the possible issue of some type of Spanish secession: History, first as tragedy, then as farce.


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7 Responses to “Notes From Underground: A Quick Look at Spain’s Catalonia Elections”

  1. arthur Says:

    Great post. Be aware: Spain is not currently a republic, but a constitutional monarchy.

  2. joe blogg Says:

    The histroical irony of all this is fantastic.It was the Catalans and Basques who opposed Franco during the Spanish Civil War. After winning the war he re-built most of the industry in those two regions in a clear effort to placate them. An interesting case where the spoils most certainly did not go to the winners. Even more ironic is the fact that many of the present day Catalans and Basques who are calling for independence have Castillian roots as their parents and grandparents immigrated to those regions in search for work. A beuatiful 60 year butterfly effect.

  3. kevinwaspi Says:

    The outcome in Catalonia is interesting, but even more so for the reason. Consider Delaware, Minnesota, New Jersey and yes, even Illinois! If transferring more to the federal government than receiving from it is the source of irritation, list those four states as starting a succession movement in the U.S.!
    (See: )

  4. yra Says:

    All of you–Kevin and Joe–great posts and thanks for generating new angles to the issue going forward –and this will certainly get bigger as will the Argentinian issue

  5. yra Says:

    Arthur–thanks for that correction.I assumed that the powers of the regions meant a republican form of government but upon further review you are correct

  6. Víctor Hernández Says:

    Dear Yra,

    I think your information sources about Catalonia are a little bit biased towards the “independence” side. The balance of euros sent to Madrid is another case of partisan Arithmetics. Catalonia is the perfect example of the consecuences of socialist waste of money (in Spain even the right wing is socialist), for example “embassies” all around the world, such investments enable to many relatives of catalans politicians to enjoy a nice wage. The consequence is S&P rating of catalans bonds is BB, Catalonia is bankrupt and had to ask the hated Goverment of Madrid for help. As Joe says, another irony, one squanderer asking a beggar for money.

  7. yra harris Says:

    Victor—thanks for the input.The analysis is based on much reading and synthesizing the data to draw out ways to trade —the “independence” side will utilize the referendum for pressure to achieve more money ,which was my main point.this will cost Europe as the main players are well aware of how far the powers in the core of Europe went and are going to keep Greece in the EURO–this saga will take a while to play out and especially now that Draghi has his hands on the OMT.

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