Edward Hugh on the current Eurozone crisis potential implications for Catalonia

Edward Hugh is a good friend of Col·lectiu Emma.  We strongly recommend an interview that the Barcelona International Network has made him about the causes of the current Eurozone crisis and its potential implications for Catalonia.

You can find the interview by clicking here, here, here and here.

We are reproducing here his opinions about Catalonia:

4.What specific effects are future developments likely to have on Catalonia? Given the substantial PP majority in the Spanish Parliament, do you see increasing political tension between a centralist nationalist government and a Catalan administration under increasing citizen pressure to exercise the right of self determination, or do you believe sufficient common ground will be found to make agreement and cooperation achievable to address the current economic issues?

Well, as you probably know the situation here in Catalonia is very difficult. The cutbacks in public spending here have been very severe, more or less 10% across the board including in key areas like health and education. Yet despite this the underfunding of the region is so severe that the government is not going to be able to comply with the 1.3% of GDP deficit target laid down for 2011 by the central government. This year's deficit is likely to be around 2.6% of Catalan GDP but the government in Barcelona has made no secret of this, since it always considered the proposed reduction too drastic to carry out in one year.

It is important to understand here that Catalonia has a large fiscal SURPLUS with the rest of Spain, maybe 8% of Catalan GDP. Catalonia is one of Spain's richest regions, and effectively subsidises spending in other parts of Spain. Most Catalans accept this, and accept that their region should make some contribution to balancing disequilibriums across the Spanish territory. What Catalan citizens cannot understand is the extent of their contribution, and why it is that their regions should be receiving swingeing health cuts while other areas seem to be able to avoid them whether by hook or by crook.

So this is a very unstable situation. Catalans are also pretty fed up with the lamentable efforts of the previous Zapatero administration to find solutions to the economic crisis and to find ways of improving their financing problems - it is important to remember that Catalonia is one of the richest and most productive regions in Southern Europe, yet Catalan debt is treated scarcely better than Greek debt by the financial markets. We do not deserve this.
My feeling is that the new Rajoy adminstration will go to some considerable lengths to try to avoid confrontation with the Catalan administration, and many Catalans will be ready and willing to respond to such overtures. I well remember close Mariano Rajoy adviser Baudilio Tomé saying to me, "Edward, you are one of those Catalans who recognises when Spain goes well, Catalonia goes well, and for Spain to go well, Catalonia has to go well." And yes I, like many others, take this view. The thing is, Spain isn't going well, and in the near future it is unlikely so to do.

In addition the new government's room for manoeuvre may be very constrained. The Catalan Parliament is preparing a new financing proposal, but in the short term anything which improves Catalonia's situation is inevitably going to make the position in some other parts of Spain worse, so this is going to be an aspiration which it will be hard for a Spanish nationalist party to fulfil.

So while in the short term there will be conciliation, in the longer run confrontation would seem to be far more likely, given the diametrically opposed aspirations of the various parties. Naturally, any kind of disorderly Euro disintegration would add to these strains enormously. I recently attended an experts' meeting on the legal background to state creation. It was really fascinating stuff, but what I was most surprised to learn was that in the event of a Catalan declaration of independence, and absent an amicable agreement between Spain and the new state, the liability for servicing existing debt issued by the Spanish state would fall on Spain and Spain alone. This would mean that the country without the Catalan financial contribution would be virtually immediately bankrupt. This is a daunting thought, and should serve to concentrate everyone's minds in the months and years to come. Catalonia could easily finance itself and live up to its responsibilities outside Spain. The same cannot be said of the parent country absent Catalan financing. I think it's high time for a change of mindset in Spain about this reality, and time that Catalonia's problems were treated with the respect and importance which they deserve.