An October plebiscite on Catalan independence?

Date: 12.08.2017

Author:  Robert Ledger

Source: Global Risk Insights (Excerpt)

The final – and potentially most serious – component of this trio of risks is an independence referendum in Catalonia. The Catalan regional parliament, led by Carles Puigdemont, of the pro-independence Catalan European Democratic Party (PDeCAT), has called a referendum on 1 October this year. The central government in Madrid has so far refused to recognise the legitimacy of any plebiscite, stating that it would contravene the 1978 constitution. Both sides seem set on a collision course, driven by brinkmanship. Despite the chaos caused by the Brexit referendum last year, the probability that Madrid would not recognise the result, and that even if independence was declared a fledgling Catalan state would be blocked from joining the EU, opinion polls are currently very close.

Catalonia exceeds the rest of Spain’s economic performance by every measure: higher growth, lower unemployment, higher GDP per capita. Catalan nationalists have eyed an almost perfect opponent in the PP government. Posters have started to appear around Barcelona making the link between a no vote in October and the Franco dictatorship. The current situation in Catalonia is the very essence of political risk. However Madrid choses to approach the referendum, a ‘Yes’ vote – even without recognition – would cause the dominos to fall in a most unpredictable manner.

Spain has registered steady economic growth since the depths of the financial and Eurozone crises. The country has implemented a number of reforms, demonstrating a flexibility less obvious in its other neighbours in South Europe. Nevertheless, Madrid will have to weather a number of other storms if this outward stability is to be maintained.

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