Here is Bloomberg on next week’s election:
If separatist parties secure a majority and Madrid refuses to negotiate, Mas says he’ll declare independence unilaterally within 18 months.
The gap between Spanish 10-year bond yields and Italian yields has widened to a two-year high as political uncertainty escalates ahead of an election in Catalonia this month and a general election in December.
Spanish 10-year bonds now yield 0.27 percentage points more than Italian bonds. In October 2014 they yielded 0.4 percentage points less. The spread has widened by 0.15 percentage points in the last week alone, indicating a rising risk premium, with the timing of the sell-off coinciding with a major demonstration by Catalonian separatists on Friday.
The EU warns that independence would mean automatic expulsion from the EU. Various leading banks have warned they would leave an independent Catalonia. The odds are still against this actually happening, but it’s climbed on the radar screen again.
My position remains that this would be a big mistake. It would bring significant economic harms. Furthermore the current notion of “what it means to be Catalan” seems to be as much defined by the union with Spain as it would be realized without such a union. Voting to leave is like voting to become a very new people, although it is rarely framed that way and more commonly framed as a kind of self-preservation or cultural preservation. There’s nothing wrong with deciding to become a new people, but that can be done within larger political units as well.
What about the evidence on the economics?:
First, no historical evidence supports this claim [that an independent Catalonia would grow more rapidly]. Andres Rodriguez-Pose from the London School of Economics has studied the economic record of independence, mostly in Eastern Europe and the former Yugoslavia, and finds that countries at best maintain their previous growth paths.
Second, no evidence suggests that institutions in Catalonia perform better than the Spanish average. Anecdotal evidence suggests that corruption is as pervasive in Catalonia as in the rest of Spain. On a more scientific basis, the 2012 European Commission report [pdf] measuring the quality of government in European countries and regions shows Spain ranked 13 out of 27 EU countries, while Catalonia ranked 130 out of 199 EU regions, thus in the bottom third of EU regions. Catalonia also ranked last among Spanish regions.
Third, Catalonia’s potential growth benefited massively from the 1992 Olympic Games, which were financed mostly by the Spanish State and the City of Barcelona, with a minor contribution by the Catalan government, and which opened up new parts of the city with civil infrastructure investments. Research conducted by the University of Barcelona and the City of Barcelona shows that this spending not only boosted the economy before the games but also provided long-lasting benefits. For example, Barcelona moved higher in the “best city to conduct business” ranking.
That all said, Spain and the eurozone are now outside their immediate and dire fiscal and financial crisis, at least compared to say 2011. So I now think that if a clear majority in Catalonia wants to leave Spain, Spain should let them go. I wrote a few years ago that would be my stance once the most pressing parts of the financial crisis are past, and it seems to me that is now the case. Catalonian separatism, while I still think it is imprudent, is no longer morally irresponsible from a broader European point of view.
Good luck, I’ll be watching either way.