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A business approach to the secession of catalonia

A business approach to the secession of Catalonia 
Article by Jordi Capelleras

In past times, Spanish professionals working internationally, used to be asked about legal and tax questions around the hypothetical secession of Catalonia from Spain. Obviously, what we can say about it is not a legal opinion, because a secession would occur through a regulation that would be approved in the future, so we can only express a prediction of what we think is going to happen.
But we still have to answer questions such as: Should Companies mention something about future facts around secession in the contracts they sign? Do we think the situation will become so volatile that it would be better waiting for executing investments in Catalonia or in Spain? Even more, would it be a good idea running away from Barcelona as soon as possible if we have investments there?
When asked about this question, the most common answer from the Spanish interlocutors is saying that there is nothing to be worried about, explaining that the proi-ndependence movement is attributable to irresponsible local politicians telling lies to the Catalonia population, and that situation will be easily solved when the economic crisis has passed and there is money available to better finance the regional government.

Probably foreign investors are starting to think that these kind of explanations are becoming less and less credible. The pro-independence movement seems to be increasingly stronger, and politicians of both sides do not show a real intention for dialogue. Is it really an impossible event, the independence of Catalonia? Those stating that independence will not happen are saying that just 48% of Catalans support independence. But is it really a negligible percentage? Furthermore, if we go to specific figures, we realise that 48% is the percentage of voters of parties openly secessionist, but only 25% are clearly against independence. Other parties propose solving the question through a referendum, or by a deep constitutional reform. The regional government is in the hands of independence parties, 90% of municipalities also belong to them, and the remaining local governments are not controlled by unionists: Barcelona is governed by a local version of Podemos (the Spanish Syriza), which supports a referendum.

To analyse the question, we should describe the possible scenarios and, then, assign probabilities to each one:

First Scenario: the pro-independence movement collapses and things will remain in the same positions.

Second Scenario: political negotiation between the Spanish and the Catalan governments, to give more autonomy and more money to Catalonia.

Third Scenario: Agreement between Spanish and Catalan Governments to make a referendum of secession, stating clearly what would happen if the answer was yes, similar to Scotland.

Forth Scenario: Unilateral declaration of independence of the Catalan Government followed by an undetermined conflict, difficult to predict.

Probably, businessmen would prefer the Second Scenario (political agreement not meaning secession), but scenarios One and Three do not seem especially dangerous, and mostly irrelevant for their business. The only unpredictable scenario is number Four (unilateral declaration of independence).

Have we to assign a realistic possibility of performing to Scenario Four?

Theoretically, a unilateral declaration of independence by Catalan Government followed by effective actions to take the control of the power resources would imply the Central Government would take measures of force, such as arresting the members of the Regional government, threatening the civil servants (including polices) not following their instructions or taking out the Army and the tanks. The pro-independence parties would then organise big demonstrations and protests, and the Central Government could not easily execute its decisions without being the centre of the news broadcasting is half of the planet, and giving an image incompatible with the peaceful and civilized European ideals.

Do we think this is really going to happen?

Probably, most of the businessmen of Europe would agree that politicians are perfectly capable of taking in each moment the worst decision, and being Spanish increases the risk.

Nevertheless, we have to keep in mind that in this game there are not only two players (Catalonia’s Government and the Spanish Government), there is a third actor: the Spanish creditors.

At the present moment, the Spanish debt is over 100% of the GNP, and even though the deficit limits of the European Union will be reached in the coming years, it is no certainty debt is going to be reduced. Furthermore, as Angela Merkel said at the very beginning of the debt crisis, Spain is not Greece... really, the Spanish problem is five or six times Greece’s. The GNP of Spain is 10% of the total European Union GNP, and it is the fourth largest economy of the eurozone.

Catalonia represents over 20% of the Spanish economy, and it is the most dynamic and entrepreneurial zone. In practice, if Catalonia left Spain without a previous agreement, the debt will not be attributable to the new estate, so Spain will have, one day for another, a debt of 125% of the GNP, having lost its most industrialized zone. Even more, if Spain and the European Union try to penalise Catalonia economically (to prevent further independence processes, such as Corsica or Flanders), ruining its capacity to generate wealth, the possibilities of creditors being paid will evaporate very quickly. The point is: would the eurozone survive such a situation? Who is going to pay the price of the Catalonia punishment?

What is clear from our point of view is that Scenario Four is really unlikely. Of course, it is just an opinion, but we should agree that if it finally happens, businessmen would probably be better not only leaving Catalonia. They should also leave Spain and, why not, the eurozone, because instability will be guaranteed, and the debt crisis will start again.

And, to conclude, we should also agree that most entrepreneurs also share the theory that nothing really bad is going to happen, because 2015 has shown very positive figures of growth and prosperity in Catalonia. Just as an example, the Barcelona Harbour has registered its best year, and the Catalonia growth is almost 4% per year. This tendency does not seem easy to be broken.
Jordi Capelleras
Diagonal 550, 3º 1ª
08021 Barcelona
+34 93 2720180