To Keep Catalonia In, Spain Should Allow a Vote to Secede (BLOOMBERG POINT OF VUE, 13-10-2012

To Keep Catalonia In, Spain Should Allow a Vote to Secede

It is a truth believed by nations around the world that their borders are God-given and immutable. It’s also false.
Frontiers change. The important question -- as Standard & Poor’s downgrades Spanish debt to a grade above junk and Catalonia contemplates a referendum to secede -- is when breaking up is right.
That’s hard even for outsiders to judge dispassionately, but as Europe’s debt crisis washes away some of the redistributive glue that has held together the continent for the past half-century, it’s also important. Scotland and Catalonia plan referendums on secession from two of Europe’s largest economies as soon as 2014, and others may follow -- this weekend, a Flemish separatist won an election to become the mayor of Antwerp, Belgium.
In the case of Catalonia, there is a thicket of historical, legal and economic issues to cut through. Catalans speak a distinct language, were once separate from the rest of Spain, and contribute more in tax to Madrid than they receive back -- a net annual loss of 8 percent of the region’s gross domestic product, according to the government in Barcelona, although that’s probably an overstatement.

New Resentments

Catalonia also suffered severe repression during the dictatorship of General Francisco Franco. Things have been much better since, with Catalonia and Spain’s 16 other regions gaining substantial autonomy. But democratic Spain never reached a full settlement between the Castilian center and the regions, and in 2010, Spain’s Constitutional Court watered down a new Catalonia settlement that the Spanish parliament had approved four years earlier.
Now Spain’s economic crisis has led to renewed centralization and resentment, as Prime Minister Mariano Rajoy seeks to impose more budgetary control on the regions. Last month, more than 1 million Catalans turned out to demonstrate for independence on La Diada, Catalonia’s national day, which celebrates (or mourns) defeat and submission to Madrid in 1714.
The turnout surprised everyone. President Artur Mas called early elections for Nov. 25, and said that if he gets a mandate he’ll call a referendum on independence. Legally, Spain’s constitution doesn’t allow for one -- by contrast the U.K.’s laws do give Scotland the right to a vote. But would secession improve life for Catalans and Spaniards?
Probably not, and especially not now. Catalonia represents about 16 percent of Spain’s population, 20 percent of the economy and 30 percent of exports. A contested bid for independence and disruption of payments to the center would probably topple Spain’s fragile finances, with unpredictable consequences for Catalonia, Spain and the rest of the euro area.
Not all of the arguments for independence are straightforward. Catalonia is a long way from being all Catalan. Between 2000 and 2011, its population rose from 6.2 million to 7.5 million, with immigrants who came from outside Spain accounting for 1 million of the increase. A large if difficult- to-determine proportion of the remaining 6 million were born in other parts of Spain. One way to look at who comes from where is by examining language. Although schools in Catalonia are taught in Catalan, 44 percent of the population can’t write in the language, indicating that it may be their second tongue.
Moreover, Catalonia’s economy is intricately connected to the rest of Spain. Hong Kong’s Hutchison Port Holdings Ltd. is investing as much as 500 million euros ($647 million) to expand Barcelona’s port to service 110 million consumers in Spain and France, not just the 7.5 million in Catalonia. The central government is building the new rail link required.

Bailout, Please

A contested divorce would hurt Catalan economically. That 8 percent of GDP transfer to Madrid would be eaten up quickly by the increase in bureaucracy and services that Catalonia would have to replicate for itself. Catalonia has a debt problem of its own and is seeking a bailout from Madrid while calling for independence. An independent Catalonia wouldn’t automatically get to join the EU -- Spain, as an existing member, would probably have the right to veto that.
Given all those complications, the most likely outcome is a lengthy negotiation. The challenge for both sets of leaders is to avoid scorched earth tactics that spook markets and damage the economy.
Secession doesn’t need to happen to keep a majority of Catalans happy. Even now, opinion polls suggest a referendum for independence would be very tight, with 51 percent saying yes. As recently as 2007, support for independence was 15 percent. It wouldn’t take much to reverse the trend.
Things have come to this pass primarily due to the ineptitude of the ruling People’s Party in Madrid, which complains that Catalonia’s leaders are taking advantage of Spain’s economic weakness to push their own political agendas. There’s something to that, but Spain needs to settle on a constitutional arrangement and tax distribution that both sides can accept. It isn’t a question of no tax transfers, but a new agreement on the amounts. The Basques already get a better deal than the Catalans.
The People’s Party also needs to stop pushing centralization and Spanish nationalism. On Oct. 11, Education Minister Jose Ignacio Wert said he wants to “Hispanicise” pupils in Catalonia, following on his demands to centralize the school curriculum to reflect a more Spanish version of history. Such moves are needlessly provocative and he should reverse them.
The central government should also cede more regional control over infrastructure such as Barcelona’s airport. Above all, Spain should follow the U.K.’s example by granting Catalonians the right to hold a referendum on independence and conduct a legal, orderly secession if they want to. Last week, Spain’s parliament voted against doing so, and it was a mistake. Without the right to determine their statehood for themselves, Scots would be enraged. Instead, they’re agonizing over whether it’s really in their interests to leave the U.K. in 2014, no matter how much they love to hate the English.
By allowing Catalans a free choice in a legally sanctioned referendum, Spain’s government would go a long way toward winning the vote.