Col·lectiu Emma - Explaining Catalonia

Saturday, 5 october 2013 | ARA


Outside the euro? Impossible (ARA)



Joaquin Almunia’s statements to the effect that an independent Catalonia would have to negotiate accession to the European Union (EU) is a sensitive issue that needs to be clarified. In my opinion, many of the analyses published on the new state’s membership of the EU and its continuity with the euro are based on the erroneous premise that Catalonia would make decisions autonomously. Yesterday El País, on the basis of that erroneous premise, questioned the viability of Catalonia using the euro but outside the EU.

What Almunia said is obvious, even if difficult to take on board. After the split, Spain would still be Spain, and therefore a member of the EU, whereas Catalonia would be a new state which could only rejoin the EU after a formal process.

This does not necessarily mean that Catalonia would have to spend some time outside the EU. In the period elapsing between the decision to become independent and independence becoming effective, negotiations would get underway between Spain and representatives of the future state regarding thousands of practical issues: from the fate of state officials based in Catalonia to the portioning of the central state’s debt. For Scotland, this process is calculated to take 18 months. For both Scotland and Catalonia, accession to the EU would be negotiated in parallel to the negotiations with the respective states and, furthermore, would be resolved in the same period, both because this would be in the interests of the different sides (as we shall soon see) and because it would pose no particular difficulties (Scotland and Catalonia have been complying with EU legislation for decades). Consequently, provided Spain does not veto accession, Catalonia would be part of the EU from the moment of its existence as a state.

Would Spain veto Catalonia’s accession? For some, the answer is a definitive yes; for others, it is very unlikely. As this is strictly a political matter, I think it is impossible to make any grounded predictions.

Prudence would indicate, therefore, that we assume a scenario in which Spain (or another state) would, for internal political reasons, veto Catalonia’s accession to the EU. In this case Catalonia would remain outside for an indefinite period. However, this does not imply breaking ties with the EU, because three powerful agents would intervene to impose their will on a weak Spain (it relies on European funding) and an even weaker Catalonia (as a newborn state it would have little international influence).

The first group of agents consists of industrial and financial companies with interests in Catalonia: Volkswagen, Solvay, Repsol, Inditex, BBVA, Santander, etc. This formidable array of interests would insist on the EU maintaining free movement of goods, people and capital from the outset – becuase the alternative would be a nightmare. Catalonia, hovever, could become part of the Schengen area, so that lorries carrying parts for Nissan-Renault or packets of Ariel for European markets would not be stopped at the border amidst queues of tourists undergoing anti-terrorist checks. Fortune would smile on Catalonia, because maintaining the free movement of goods, people and capital is precisely what would ensure that independence did not have a negative impact on production, trade, employment and living standards. Thus, the relationship between the new state and the EU would be comparable to that of Switzerland with the EU, that is, governed by a treaty that Spain could not veto (assuming that it wanted to declare its opposition) because this relationship would require just a majority decision, not a unanimous one as required for accession.

The second group of agents would be Spain’s creditors, who would also mobilize states to try to avoid a split that might jeopardize the recovery of their loans. In this case, the impact on Catalonia would be adverse, because the creditors would impose a distribution of debt (over one billion euros) that would maximize the share belonging to Catalonia, given that this would be rated as the more solvent entity. Of the three criteria usually considered, economists would probably use GDP of almost 20% – and maybe even a higher percentage.

Finally, the third agent is the European Central Bank (ECB), with a vested interest in protecting the stability of the euro. With the support of the above groups, it would impose measures to neutralize the possibility of a financial crisis originating in Catalonia. It would veto two possible solutions, namely, a new currency or euroization (unilateral use of the euro), as too fragile, given that exchange rate fluctuations could cause havoc with commercial and financial relations and could lead to a solvency crisis. Therefore, Catalonia would be obliged to sign a treaty of monetary union, whereby it would be able to access ECB liquidity in exchange for ceding control over macroeconomic and financial variables. Like all other conditions, the euro would be imposed on Catlaonia.

In short, therefore, if Spain vetoes its accession, Catalonia would come into being as a state that would not be part of the EU, that would use the euro and that would be supervised (intervened in, if you prefer). The supervision would not, of course, be intended to protect the Catalans, but to protect the interests of investors in Catalonia and holders of Spanish debt. Nonetheless, protecting these interests ultimately promotes the viability of the new state. This particular scenario has two advantage: it satisfies the real interests of all stakeholders (including Catalan citizens and large Spanish companies) and, on the psychological level, it could enable Spanish public opinion to swallow the fact that its representatives signed a treaty of independence for Catalonia. This scenario needs, therefore, to be borne in mind as the most likely.

Translation by Ailish Maher

(Link here)

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Col·lectiu Emma - Explaining Catalonia

Col·lectiu Emma is a network of Catalans and non-Catalans living in different countries who have made it their job to track and review news reports about Catalonia in the international media. Our goal is to ensure that the world's public opinion gets a fair picture of the country's reality today and in history.

We aim to be recognized as a trustworthy source of information and ideas about Catalonia from a Catalan point of view.
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Col·lectiu Emma - Explaining Catalonia