While Spanish yields remain OK, Spanish issues continue brewing. The northeastern region of Catalonia is holding elections on November 25th, and pro-independence parties are expected to win an overwhelming majority.
Support for independence rose in the past year, as Catalonia found itself making cuts, still losing market access, and having to ask the central government for aid. This comes after years of transfers from Catalonia to other regions.
* This article is part of the November monthly forex report. You can download the full report by joining the newsletter in the form below.
A rally held on September 11th, Catalonia’s national day, saw between half a million and 2 million people calling for independence. The Catalan president Artur Mas flew to Madrid and asked for a different economic model, once again: a model where Catalonia collects its own taxes and only pays the central government for the services it receives. This model exists in other northern regions: the Basque Country and Navarre.
After Rajoy gave a clear No, Mas declared general elections in order to increase the control of his party (CiU) in the Catalan parliament and also to get a mandate for moving towards independence.
The events in Catalonia have already angered some factions in the military, which talked about “defending the Spanish unity” with arms. A European member of parliament already talked about deploying the Guardia Civil in order to tackle Catalan aspirations. The Spanish civil war of 1936-39 and the Franco dictatorship that followed up to 1975 are still open wounds in Spanish society.
This new move towards independence is therefore very flammable and could become scarier if not handled with care by politicians. The worsening economic situation, 25% unemployment and no hope of recovery anytime soon, can push people to the extremes also in Spain, not only in Greece.
Aspirations for independence aren’t unique to Catalonia: also the Basque Country saw a victory for nationalistic parties in the recent regional elections. The region enjoys relative prosperity (thanks to the fiscal autonomy, among other reasons), but would also like to part ways.
The agreement on a referendum on the future of Scotland in 2014 has also fueled such aspirations. Interesting times are awaiting Europe.
Further reading: 5 Reasons Why Greece Could Leave the Euro-Zone After the US Elections
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