Don Quijones: Catalonia Exit Threat Moves Spain Toward Political Breakdown

By Don Quijones, of Spain and Mexico, and an editor at Wolf Street. Originally published at Wolf Street

The dust is not even close to settling after Catalonia’s latest experimental flirtation with nation building. The pro-independence coalition fell tantalizingly short of gaining a majority of seats (62 out of 135). Now it needs the support of the anti-capitalist separatist party Popular Unity Candidacy (CUP) to secure a pro-independence majority in the regional parliament.

The problem is that CUP, which advocates a Catalonian exit (Cat-exit) from the EU, the Eurozone, and NATO, as well as unilateral default on the region’s debt, seems determined to play hard ball. After picking up 10 seats in the election – a seven-point increase on 2011’s total — its lead candidate Antonio Baños has refused to endorse the reappointment of the region’s pro-business president Artur Mas, who Baños described as “tainted” by corruption and the long shadow of austerity.

Kingmaker or Kingslayer?

In his role as Catalonia’s new kingmaker-turned-kingslayer, Baños also dismissed the possibility of CUP supporting a unilateral declaration of independence from Spain. Before the elections CUP had pledged that it would only support a unilateral declaration of independence if the pro-independence parties received a majority of the vote. It won 47%.

As for Mas, his post-electoral hangover has only just begun. Back in 2012, The Economist’s Giles Tremlett presciently warned that by nailing his colors to Catalonia’s independence movement in a last-ditch effort to salvage his own political career, Mas had jumped on a tiger he could not fully control. Now the tiger, it seems, is in the process of unseating its rider. And the rider could soon find himself barred from public office altogether.

As El País reports, the Catalan premier and two other political officials from his party are an official target in a probe (or in the vernacular of Catalonia’s pro-independence supporters, “political trial”) opened by prosecutors over last year’s symbolic referendum:

The Superior Court of Justice of Catalonia (TSJC) is investigating whether Mas, his former deputy Joana Ortega and education commissioner Irene Rigau committed any crimes by organizing a vote that Madrid considered illegal.

If tried and found guilty of disobedience, Mas could be barred from holding office anywhere between six months and two years. The other crimes also entail a prohibition to hold public positions for up to 10 years.

The day Mas is scheduled to testify in court, October 15, is also the 75th anniversary of the death of Lluis Companys, the last Catalan leader to declare national independence from Spain (in 1934) who had his life snuffed out by one of Franco’s firing squads after being deported from Nazi-occuped France. According to the Court of Justice of Catalonia, the provocative timing was mere coincidence, an explanation that’s unlikely to wash with Catalonia’s more fervent separatists, for whom Companys’ execution remains a deeply emotive event.

\The Price of Fragmentation

In sum, the bitter tensions and divisions, both within Catalonia and between Catalonia and Spain, seem set to deepen and widen further, especially with the separatist factions determined to continue with the secession process and Spain’s central government seemingly determined to create judicial martyrs out of Mas and his colleagues. As an editorial in Le Monde puts it, both sides are letting passion rule over reason.

Indeed, the only thing one can be certain about these days is that political uncertainty will continue to reign in Spain. And if there’s one thing financial markets loath, it is political uncertainty.

Catalonia has until the end of October to form a new government. If the pro-independence parties cannot find enough common ground to unite upon, Catalonia will be left with no government at all. Which will mean that new regional elections will have to be held in a region that is already sick to death of elections — and what’s more, just weeks before Spain’s do-or-die general elections.

It is the general elections that strike the most fear and dread into the calculating hearts of international investors. The biggest fear, as articulated by Bank of America-Merrill Lynch, is that after the elections it will be almost impossible for Madrid to form a strong government capable of carrying out “the necessary fiscal adjustments and structural reforms.”

This could be particularly bad news for the Troika, which has built a very effective working relationship with the Rajoy government. Here’s how that relationship works: the Troika says “jump”, and Rajoy says “how high,” while levering his government’s absolute majority in parliament to bulldoze through any new fiscal adjustment or structural reform.

However, the good times are coming to an end. After being implicated in all manner of political scandal [read: Spain’s Descent Into Banana Reublicanism] and having governed with virtual impunity, Rajoy’s People’s Party (PP) appears to be on the verge of an electoral bloodbath. It has already hemorrhaged votes in the European, regional, and municipal elections. In Sunday’s vote the PP mustered only 10 seats in Catalonia’s parliament, compared to 19 seats four years ago.

A New Age of Fragility

As I warned in “It’s Official: Spain is Unravelling,” if Spain’s new political forces (in particular the center-right, PP-lite party Cuitadans, which won an 25% of the votes in Catalonia’s elections) continue to capture the hearts and minds of the disaffected, which now represent a very large minority, if not the majority, of the population, they could hammer a deep nail into the country’s two-party system. While winning the general election is an almost mathematical impossibility, either party could become kingmaker — or like CUP, kingslayer!

The likely outcome is that Spain, which has no tradition of coalitions between parties of relatively similar size, will have to get used to a new age of fragile political alliances — alliances that could prove much harder to sustain. At the very least, it will spell the end of government by decree, which should be welcome news for most of the people of Spain, but perhaps less so for Troika. By Don Quijones, Raging Bull-Shit.

In the words of my mother-in-law, a born and bred Poblana, there is not a single family in Puebla, Mexico, that does not have some level of exposure to the VW plant. Read… Volkswagen Fallout Hits Mexican Economy