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After looking like it was suing for peace with Spain, Catalonia’s government, buoyed by a pro-secession protest called “the stoppage of the country,” resumed its defiant stance.
In an interview with BBC, President of the Generalitat of Catalonia, Carles Puigdemont, said that Catalonia would declare independence within days. This bold pronunciation took place shortly before the King of Spain denounced the separatist leaders. A key section of his remarks, as translated by the Financial Times:
For some time, certain authorities in Catalonia, repeatedly, consciously and deliberately, have been failing to comply with the constitution and the statute on autonomy, which is the law that recognises and protects its historic institutions and its self-government.
“With these decisions they have systematically infringed the approved legal framework, showing an unacceptable disloyalty to the powers of the state. A state that those authorities represent in Catalonia.
“They have broken the democratic principles of the rule of law and have undermined the harmony and coexistence of Catalan society, to the point — unhappily — of dividing it. Today Catalan society is fractured and conflicted. Those authorities have ignored the feelings and sentiments of solidarity that have united and will unite all Spanish; and with their irresponsible conduct are even putting at risk the economic and social stability of Catalonia and all of Spain.
Catalonia’s separatists don’t appear to have a realistic end-game, particularly in the time frame they have set up. Punching the Catalans is seen as sport in much of the rest of the country, so even if Rajoy made less than optimal use of the political opportunity presented by cracking down on the referendum in an unnecessarily brutal manner, it’s not clear that he has come out a net loser. Reader St. Jacques argued that it had weakened Rajoy’s party, the Popular Party, to the benefit of PSOE, but the King’s denunciation may have limited the damage. If nothing else, the conflict over Catalonia’s future has diverted attention from a corruption scandal.
If Catalonia delivers, or looks like it is going to deliver on its threat, one course of action by Madrid may be to arrest or otherwise isolate the separatist leaders. As Jesus Martinez pointed out in comments yesterday:
The king’s speech sounds to me like (expectable) hard-line (the Sacred Unity of Spain) but with limits: he distinguishes between Catalan leadership and Catalan institutions. To me that sounds like they are going to arrest the Catalan government, possibly pro-independence MPs, stop the Catalan Parliament activities and give it months (6? A year?) for things to calm down and then hold elections. Making the pro-independence parties illegal would be an option.
Anonimo 2 made similar observations:
Now about the referendum itself: the strategy has been disastrous and at least in my opinion the outcome will be that independence or federalism will be further than ever as a result. That’s because this referendum has polarized the Spanish society and has strengthened the ruling Popular Party, the centralist wing of the Socialist party and the pseudo-liberals economic nazis of Ciudadanos. Podemos was the only big party willing to dialogate and listen to the Generalitat… A victory of Podemos would have been the only real way to change the things, yet ironically the identitary disputes have made sure that this won’t happen.
Catalans have not played the long-term game, they (we) have put ourselves between a rock and a hard place, and we have lost leverage and we have given wings to the worst of part of Spain. The defeat will be really painful… but mind you, we are used to lose and we do love lost causes (just check our history).
Some readers, particularly Jesus, were nevertheless enthusiastic about the ability of Catalonia to go its own way. I hate to be a nay-sayer, but the central government has the upper hand via its ability to shut down the banking system, if not in full, to a very substantial degree.
As reader RabidGhandi had caught, the Spanish government has already put itself in the position of using its power over the banking system to control the payments now being made by Catalonia’s government. As I read this article (and I welcome corrections and additions, since trying to understanding legal/regulatory interventions via an article translated by Google is a fraught business), Spain has used the secession threat to take control of Catalonia’s spending, taking the view that the violation of the Constitution gives it unlimited authority to intervene. From the rough English version of the El Mundo story:
The government begins to hit and where it hurts most. The Generalitat will not have free from its budget. Cristóbal Montoro has confiscated the keys of the box. From next week all the expenses destined to cover the essential public services of Catalonia will have to have the approval of Finance that will be who directly pay them. It is a question of preventing the money from being diverted to the referendum of 1-O .
This decision of exhaustive control of the Catalan accounts affects the salaries of the civil servants, the cost of the health, the education, the civil protection, the dependency and the diverse transfers in aid and subsidies to the families. In total, the approximately 1.4 billion euros per month of community funding is left to the central government, which is prepared to ensure that not a single public euro is diverted to pay for the 1-O referendum and the secessionist process…
What the Government decided this Friday is practically the application of Article 155 of the Constitution for economic purposes. It is true that the Government does not seize political competition from the Generalitat but, in fact, it binds its hands to decide on what it spends the money, since who will open the portfolio and make the appropriate payments, after strict justification by the Intervention General of the Generalitat , will be the Ministry of Finance.
And notice the mechanism for seizing control:
The central government will supervise even the approximately 250 million euros per month of own collection in Catalonia – a relatively small item, in the words of the minister – since when the Government orders financial institutions to make payments from these funds, thereof.
In this sense, Hacienda will send to the banks the text of the agreements adopted so that they are vigilant and do not allow any payment that is not justified by a certificate of the Catalan Intervention. If they detect that any of the operations may be related to the celebration of the independence consultation, they must immediately notify the Attorney General’s Office. It is a very similar method to that used to avoid criminal operations of money laundering.
In other words, Spain has mechanisms already in place by which it can require banks to step in and seize control of collections and expenditures made by parties engaging in criminal activity….and Spain’s courts have deemed the secession to be illegal. Reader Sue confirmed our reading of Spain’s ability to strangle Catalonia’s finances:
Banks cannot issue payments to Catalan public servants and Catalan institutions which depend on the Catalan Government, “Generalitat”, without previous paperwork submission and rubber stamp approval from the Spanish State bureaucracy. This has caused some anger among some Catalan public sector enterprises and contractors doing work for them when quick timely payments are of the essence. Nevertheless, right now public servants and organizations directly or indirectly linked to the Generalitat are being paid because Catalonia as of today is not a State and, (although micromanaged and surveilled and controlled by “Spain’s Ministry of Plenty”), payments reach their destination.
So what would happen if Catalonia actually secedes? Rajoy does not need to send in troops when he has banks, although he could use the belt and suspenders approach.
Spanish banks, like Santander and the cajas like Caixa/Caixabank, are licensed by the Spanish government. Spain can revoke the licenses of any Catalan banks and could also make it illegal to transfer funds in and out of Catalonia, similar to the sanctions imposed on Iran. Any bank licensed by Spain would fall into line immediately out of the threat of losing its license. It would take the cooperation of the bank regulators in other European countries for them to put similar restrictions on their banks, but given the unified EU position against separatist movements, similar rules would almost certainly be issued on an emergency basis.
As least as important, the case study of Greece 2015 shows that the ECB is perfectly happy to be the heavy as long as it has elected officials giving it political cover.
How this would play out in detail is way over my pay grade, but here are some of the things I imagine would happen:
1. No more stocking of cash in Catalonia’s ATMs
2. Cutting off merchants from electronic point of sale systems
3. Bank closures, as in at least a bank holiday and possible shuttering of banks/bank branches, with what happens to frozen Euro-denominated deposits an open question.
Notice that the measures imposed on Catalonia could be even more brutal than what was done to Greece, which merely behaved very badly in negotiations while having its banking system dependent on ECB life support. A declaration of independence is a much greater act of intransigence.
The Greek negotiations had been going pear-shaped for months, so the ECB had time to think through its moves. Greece was cut off from EPOS and payment systems, banks were closed, and withdrawals from ATMs were limited to small daily amounts. The already-weak Greek economy was prostrated. Importing became virtually impossible; businesses that had managed to hoard enough cash (and hoarding had been going on for months) were either trucking money across the boarder to deposit it in foreign banks or flying to other countries to make payments. Even so, Greece is not self sufficient in food, pharmaceuticals, or petroleum. Fish hauls were rotting on docks because there was not enough gas to truck them inland. The EU made provisions only for the import of critical drugs like insulin. Food shortages were already starting when the Greeks reached a deal, less than three weeks after the ECB lowered the boom.
This is what we said about the preliminary terms:
This deal is simply vicious. This is far and away the most one-sided agreement I’ve ever seen, by an insanely large margin. Even the language is shamelessly punitive. For instance, the document repeatedly mentions that all the previous terms under consideration will need to be made vastly more stringent in light of the deterioration of the economy and how the Greek government needs to prostrate itself to gain the trust of the creditors.
Let us also not forget that in the wrangling before the final breakdown of negotiations with Greece, Spain regularly took the most hardline position of all the creditors, outdoing the Germans.
Again, let us remember that an actual exit by Catalonia would have catastrophic knock-on consequences to Spain and the Eurozone. So a likely strategy would be to impose the most painful economic punishment possible on Catalonia, quickly, so as to delegitimate the separatists, have them turfed out of office (assuming they haven’t been rounded up and hauled off to prison already) and get Catalan back in the hand of a more tractable set of politicians.
The mechanism, as we indicated above, is the control of Spain and other national governments over banking licenses. Not only do they have revocation of bank licenses as the ultimate but virtually never-used threat, but they also have the weapon of refusing to recognize any banking licenses issued by a breakaway Catalonia. As Clive explains:
A newly-independent Catalonia would, as a state, licence such banks as it could (any Catalonia-based operationally segregated entities).
But if that state wasn’t internationally recognised, that would presumably make those Catalonia-issued banking licences useless.
So how quickly would a newly-independent Catalonia get international recognition? The ball then gets kicked back to “politics” from “finance”.
And don’t get your hopes up that other separatist regions like Quebec and Scotland would recognize Catalonia. Neither one of them regulates their banks. Canada licenses all banks in Canada, and the Bank of England, all Scottish banks.
As Clive confirms:
No banking licenses means any cards issued by banks which declared themselves to be “Catalan” based, any merchant services provided by such banks (EPoS terminals) and card network acceptance at ATMs they operated risked being cut off in very short order. The card networks have absolutely *no* apatites for getting embroiled in – or trying to resolve or mediate in – protracted legal squabbles which potentially invalidated card payment processing.
How Spain gets Spanish banks to crack down on their operations in Catalonia could be thornier. Clive again:
Catalan branches of a Spanish national coverage bank (Santander springs to mind) would be entirely different. They would almost certainly have a consolidated national IT Infrastructure with a single central datacentre (or multiple regional datacentres which are unified and synchronisation to act as a virtual central host). The head offices could then, in theory, pull the plug on the Catalan-locality operations.
But – and it’s a big but – they could only do this if, within their consolidated central back-end host they had created localised Organisational Units which allowed them to differentiate, say, a branch or ATM or an account for an individual in Catalonia from one in Torremolinos. They might well have done this to allow for, say, profitability analysis, specific regional legal requirements, sub-branding/logos, language localisation — any number of reasons. I’d say it’s more likely than not that a national bank in Spain would have features in its IT to allow some sort of segregation of Catalan-specific operations. I am referring here to IT and business operations — the balance sheet implications if they were to do this are, of course, another matter entirely.
So Catalonia’s banking capacity could be said to be at high risk of being reduced to any Catalonia-based regional players.
Which in this scenario means they could be cordoned off much as Greece’s banks were and told to restrict or suspend operations.
Now you might say, this view makes banking all too central! Well, if you run a business, access to funds, which in the modern world means access to banking facilities, is essential to survival.
How long Catalonia could hold out if its banking system were put on holiday depends on how much of an autarky it is (as in how self-sufficient it is) as well as how much its citizens are willing to pull together. I suspect Catalonia is even less self sufficient in food, fuel and pharmaceuticals than Greece was. Even though readers report that Catalonians have been withdrawing cash from local banks, as a community, they probably have not been hoarding cash to the degree that Greeks had.
Moreover, Rajoy could intensify the pain by restricting access to Barcelona’s ports (as in blockading some or all imports) and cordoning major roads to speed the arrival of shortages of critical supplies.
In other words, Spain has the ability to break Catalonia quickly if it secedes. And Rajoy is just the sort to impose a vindictive settlement. However, even with the Spanish government being able to inflict considerable pain quickly, political time moves more slowly than financial time. Even if the odds of Spain, being able to install a puppet government in Catalonia, and/or further strip it of its autonomy are high, that is likely to be a longer, more tortured process than forcing Syriza to capitulate to the Trokia in 2015.
And Mr. Market has finally woken up to the risk. From the Financial Times:
After a relatively calm open, the yield on the 10-year Spanish bond jumped to its highest level since March, the country’s benchmark equity index fell 2 per cent and Catalonian bonds were sold.
An escalation in Spain’s constitutional crisis, which last night saw the country’s king, Felipe VI, offer a public rebuke to the Catalonian government’s push for independence, is forcing traders and money managers to pay closer attention.
In a sign that investors are worried, Spanish 10-year bonds were the second-most traded in Europe’s sovereign debt market early on Wednesday, accounting for more than 10 per cent of the total volume, according to data from MarketAxess.
“The ratcheting-up of tensions has negative credit implications for the Spanish sovereign because it complicates the process of legislating policy,” analysts at rating agency Moody’s noted.
The yield on Spanish government bonds is still below the peak it hit earlier this year, although spreads versus Bunds has widened. Perhaps more interesting is that investors don’t fully trust the recent Spanish government guarantee of Catalonia’s debt. Again from the Financial Times:
While Spanish government bonds were in investors’ crosshairs on Wednesday, the pressure on debt sold by the Catalonian government was more intense. The yield on the regional government’s bonds maturing in 2018 — which was as low as 0.9 per cent at the start of the summer — rose to 2.578 per cent on Wednesday, their highest level since September 2016.
As much as I understand and sympathize with the desire for independence, the separatists have done so little in the way of preparation that they might as well be taking on a tank with swords and slings. This is unlikely to end well.
We’ll know more about Puigdemont’s plans soon:
⚠️Catalan President Carles Puigdemont to make official statement on TV at 9pm CET
— Catalan News (@catalannews) October 4, 2017
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Also, the few major banks with headquarters in Barcelona have plans in place to move out of Catalonia in case there is any material steps towards independance. They don’t want to be stuck in a legal limbo and will remain under Spanish juridiction. I assume all major firms have similar plans…
The exile has actually already started…
https://www.bloomberg.com/news/articles/2017-10-04/catalan-companies-weigh-an-exit-as-investors-laud-their-plan-b
Things are moving quickly. Thanks for the updates (and to readers who provided them in yesterday’s post).
Hello Frenchguy. The news you referred really shocked me. I have personally met and talk with the CEO of Oryzon, formerly Oryzon Genetics, that was originally a Plant Biotech company focused on rice genomics (Oryza sativa) but then diversified to other biotech services to survive. When I talked with Oryzon founders, around 2002 in a Biotech congress in Barcelona I was trying to develop my own start-up that finally didn’t make it. They succeeded, and that demonstrates me they are better managers than I was. I remember I had a good conversation on how they managed to survive.
They are catalans and it must be tough for them to take such a decision. I hope the best for them!
Can anyone tell us if Catalonia is a net fiscal contributor or recipient in fiscal terms? Thinking of the consequences for their economy if they continued to pursue independence and succeeded
Is clearly a net fiscal contributor
Can you link me to something so I can see e.g. what percentage of Catalonia’s GDP it would keep if independent?
As far as I can tell the official documents from the Catalunya Department of Economy, which until recently was headed by Mr. Mas Colell, (2016) the fiscal contribution from Catalunya is around € 78 Billion to the Central Government and the transfer from the Central Government to all Administrations is around € 75 Billion. So it is a net fiscal contributor.
Thank you!
Catalonia is net fiscal contributor but not the only one. The richest Comunidades Autónomas are all net contributors. Madrid is, by far, the largest net contributor followed by Catalonia, Comunidad Valenciana and Baleares Islands. Link in spanish.
Claiming independence for fiscal reasons would be, to say the least, mean. Tipically neoliberal-nationalistic.
Thank you.
Whether it would pursue neoliberal policies is another matter since there are both right- and left-wing nationalists. As in Scotland (except it’s a net fiscal recipient like Northern Ireland even if some deny it).
It would be a selfish reason yes, but a non-neoliberal argument could be made of course. Namely that since Catalonia is a net fiscal contributor, and dislikes decisions A, B and C by the Spanish state, Catalonia is being exploited and would be better off independent. I was interested in whether independence was economically feasible long-term.
I think it is neoliberal because I believe that if Cataluña becomes independent, their current fiscal déficit wouldn’t be used, by any chance, to help those that need it. After al Artur Mas, Puigdemont et al are that kind of neoliberals, catalans, but neoliberals.
There is a lot of misinformation. First of all, neoliberal is not a good fit for Puigdemont. Yesterday , one of the many “pandereta-propaganda-Spanish-TV-networks” called him bourgeois. Bourgeois ? What does that mean? Let me look at today’s date: 10-05-1873! Now we are getting somewhere!…Is an Uber driver in the USA a petite bourgeoise? Puigdemont has been called by the same far reaching media, “son of the privileged class”. I guess that is correct for the son of a little bakery owner…?????
What do you mean when you say et al? Do you mean the guys from ERC? Very neoliberal the ERC! And how about the CUP? The CUP, the anti system and anti capitalist political party. Here, an interview to a neoliberal CUPero: https://www.jacobinmag.com/2017/10/catalonia-referendum-spain-catalan-independence
Ugh. As Tom Lehrer sang:
“Remeber the war against Franco,
That’s the kind where each of us belongs;
Though they may have won all the battles,
We had all the good songs!”
Yves Smith: Thanks for this summary of events. Bracing. I recall how you had to tamp us all down during the Greek negotiations: Hey, the Greeks are plucky! They invented Western Civilization! They have a way with phyllo! But when your banking system is not your own, which means that your money is not your own, there is no path to independence. Also, Clive’s comments above about electronic systems indicate that the Hive Mind of the WWW is repressive, not freeing as advertised. Not only do Greece and Catalonia lack their own currency, but digitization now means that we don’t control our individual banking accounts anymore.
So a larger question here is What is autonomy? Is there personal autonomy in an era of digitization? And has digitization had the effect of reinforcing the powerful? Look at the Arab Spring, which supposedly was an effect of Twitter. Ashes instead.
And I worry that Puigdemont will come up with some romantic / melodramatic gesture. As Anonimo 2 writes above, Catalans love lost causes. La Diada, 11 September, which is part of the runup to this vote, celebrates a defeat of the Catalans. You can only rely on romantic nationalism so many times before it ends up in catastrophe: Look at Hungary.
I thought that the king might be able to demand compromises: After all, Juan Carlos, in spite of everything, succeeded in getting himself on the throne, promoting the democratic transition, and foiling a putsch. Instead, Felipe sounds like the usual Spanish king: All Castilian nationalism, all upper-class economic interests. So the monarchy in Spain goes back into crisis, where it likely belongs.
The UK is going through a (comparatively… but it is early days yet so I am not saying this is the final analysis) mild version of what Catalonia is experiencing in the form of the UK’s Brexit.
Unpicking and separating tightly-coupled, highly-intergrated complex systems which have political, legal and technological components is never, ever, going to be a quick or easy task.
With a lot of planning, shared aims and a bit of goodwill, such things are possible without too much pain or dislocations (but they aren’t necessarily cheap or risk-free). Neither Catalonia in respect of its independence nor the UK in respect of Brexit have any of these commodities in abundance.
And non-state but deeply hard-wired into modern commerce and systemically important actors like the card networks are only answerable to themselves and what they perceive as their own best interests. Even if a political settlement is forthcoming (and there seems little chance of that), they won’t cut Spain or Catalonia any slack at all. Preservation of the payments systems (which, never forget are their systems and not the systems of the regions they operate in) is the only thing that matters to them.
I’m reminded of the old adage that you can have sovereignty, democracy or unrestricted markets (no meaningful controls on what businesses get up to and the decisions they make) — but you can’t have all three. Catalonia certainly doesn’t.
Yes. Especially your last reminder. So-called unrestricted markets don’t care about sovereignty (as we see with large U.S. corporations and tax avoidance) or democracy (China / Erdogan’s dream for Turkey). So we are allowing markets and, of all things, accounting systems to swallow up everything.
On some threads, people brought up Portugal, which is like Catalunya, having its own cuisine, its own former empire, a lost monarchy, its own distinctive language, and geographic compactness. Yet Portugal has had roughly the same borders since 1200 and was involuntary “united” with the Castilian crown around 1600, only to throw out the Castilians. That is 350 or years ago. At this point, if Portugal were a Spanish region, it would be in the same situation as Catalunya.
This is the kind of reasoning urgently needed in Spain. Puigdemont has abandoned it definitely. His head and Rajoy’s should be delivered to… a museum of ignominy?
‘Rajoy does not need to send in troops when he has banks. Spanish banks, like Santander and the cajas like Caixa/Caixabank, are licensed by the Spanish government.’
As in Spain, so in the Estados Unidos. We have small state banks, but the money-center behemoths are federally regulated.
Uncle Sam’s fiscal lifeblood consists of payroll taxes directly extracted from corporate payors, with harsh lateness penalties.
The federal revenue system looks impregnable. But creative Silicon Valley tech minds bent on disruption may yet find a way to end-run it.
California libre!
> the Arab Spring, which supposedly was an effect of Twitter
Twitter was froth.
I cannot say that I know who the players are in this conflict are or what their secret agendas are but my reading of the situation is that Madrid has been taking back the autonomy that Catalonia had achieved over the decades. Maybe Madrid figured that as the Basques had quieten down it was time to reign in the other regions and concentrate financial power in Madrid again.
The Spanish king may have played a role in negotiating between the two sides as people probably remember that a Spanish King had undercut an attempted coup by the Civil Guard not that long ago. You can kiss that idea goodbye. He has firmly planted himself on the side of Madrid so I would expect that whatever the outcome, the Spanish royalty has now become irrelevant as far as Catalonia is concerned.
All I can say is that it was good that Portugal achieved its independence long ago as the Franco inspired constitution would mean that the Spanish would have never let it go if they were still a part of Spain now.
Yeah, I imagine that that letter written by him will feel as a definite slap in the face of anyone living in Catalunya.
Regarding roads and port blockades, geography matters, so just check a road map, Spain would be isolated from Europe.
Barcelona port is the main entrance port for Orient goods, so things would be different from Greece, a poor country on the Europe periphery.
It is unlikely a civilian movement could put up sufficient resistance to a military response to dismantle any attempt at a blockade. Even if the optics of using tanks made that politically unacceptable, armoured personnel carriers and army 4×4’s (with armed soldiers) would deter most have-a-go-heroes. Remember how brutal the put-down of the Occupy protests got.
Notions of popular uprisings against tyranny are all very romantic, but hard to sustain once things get really ugly.
The largest port by far for container traffic in the mediterranean region in Spain (and Europe) is Valencia, not Barcelona. I am not including passengers, as these tend to be more local.
Valencia is 32nd in the world*. And Algeciras Bay (not in Catalonia) is next.
* Antwerp, Hamburg, and Rotterdam are all larger (in Europe). Which makes sense, considering the markets they support.
You forgot Bremen.
My opinion is that you live in a dream JOSE.
I think someone needs to explain to me what the Catalans get out of independence, other than the warm fuzzy feeling of having a country named after their ethnic group. If the cost of said warm fuzzies is being cut off financially and economically from a much larger country, and risking the potential for severe violence, I’m going to say it’s probably not worth it and shouldn’t be encouraged.
(And aren’t we in a world that is moving past ethnicity, and haven’t we decided that nationalism can be deeply problematic?)
None of that is to justify harsh measures by the Spanish government, but I haven’t seen the case for Catalan independence. (Haven’t seen the case for Scottish independence either, and if your case for independence is based even in part on a movie with Mel Gibson wearing a kilt, you’re not in a good place.)
There are a couple of things that they get out of secession, though I think that it is not worth it.
From a financial perspective, they stop subsidizing the rest of Spain.
From a cultural perspective, they end the consequences of politicians in Madrid (Rajoy most prominently) n***** baiting them as an electoral strategy.
The Insider
You are most probably correct that it isn’t worth it, but as can be increasingly seen when groups or populations are being constantly screwed by an economic system that benefits the few largely at their expense, a glance at history should tell us that they always tend to grasp at straws in desperation.
There is no flexibility here, TINA rules & eventually the system that wont bend will break, but if they do continue to keep a lid on things & continue the process, what will be the eventual cost in life ? It will not be something that will make dramatic TV footage but as in Russia in the 90’s it will kill many.
People I think are starting to realise that the ‘ Boom ‘ bit no longer exists & has been replaced by a continuous crushing ‘ Bust ‘ due to economic policies that only serve the few. TPTB have shown no signs of wanting to change this & their mealy mouthed promises are increasingly being seen for what they truly are.
How desperate does someone or a population need to get in order to feel that they have nothing to lose ? The tragedy for me is that if things continue to slide downwards, unless they can jam the lid down extremely tight, we shall probably find out.
An excerpt I picked up from Jesse a few years back, Lenin, Trump, Hitler, Brexit, just I think different levels of the same symptoms – who bent in this instance ?:
Tsar Nicholas II: I know what will make them happy. They’re children, and they need a Tsar! They need tradition. Not this! They’re the victims of agitators. A Duma would make them bewildered and discontented. And don’t tell me about London and Berlin. God save us from the mess they’re in!
Count Witte: I see. So they talk, pray, march, plead, petition and what do they get? Cossacks, prison, flogging, police, spies, and now, after today, they will be shot. Is this God’s will? Are these His methods? Make war on your own people? How long do you think they’re going to stand there and let you shoot them? YOU ask ME who’s responsible? YOU ask?
Tsar Nicholas II: The English have a parliament. Our British cousins gave their rights away. The Hapsburgs, and the Hoehenzollerns too. The Romanovs will not. What I was given, I will give my son.
It seems to me their is a weird symmetry here with Venezuela where a local elite is rebelling against incompetent central authorities, though in Caracas they share the same city. There appears to be in Catalonia, as in Venezuela, an economic elite pursuing a similar though less violent revolutionary strategy against a national government they see as illegitimate due to both past history and current incompetence.
The main difference is that in Venezuela the incompetent government is actually trying to help the majority of Venezuelans while in Madrid the incompetent government is trying to re-institute serfdom at the behest of its EU creditors. Naturally, the Venezuelan insurgents can count on outside support while the Catalan ones can’t.
“If one strikes at kings, one must kill them.”
It’s wrong to consider Catalans an “ethnic group”. There is no conceivable “ethnic” distinction which differentiates between people living in Catalunya and people living in Castilla, and there are all manner of ethnicities among the Catalans. They do speak a different language, and that means there is a different culture, and those are far more significant differences than ethnic ones.
Like race, ethic identity is a social construct. The following have all been used as ethnic markers: skin colour, religion (see “Muslim” in Europe and the Anglosphere), language, accent or dialect, mode of dress, hairstyle, geographic location (Appalachian hillbillies, highland vs lowland Scots), method of food production (grain cultivation vs slash-and-burn agriculture or hunting/gathering), diet, and probably some others I’m forgetting. Maybe genetically the Catalan are essentially the same as Castilians but they are definitely not the same ethnicity.
> what the Catalans get out of independence
Perhaps the better question is “Which Catalans”? I would bet Catalan elites are better off. The left allying with the neoliberals can only mean that they think they can force redistribution. Personally, I wouldn’t bet on it, since nationalism provides no ideological justification for that. What if all the money that used to go to Spain now goes go building up a military, for example?
Thanks to NC for this very interesting article. My educated guess is that none of this will matter though. Simply because art. 155 CE (section 155 of Spanish Constitution ) will be applied shortly after the Catalan DUI (UDI, unilateral declaration of independence). This will be done through the Spanish Senate, where ruling party has the necessary majority required(btw. Hernando PP’s Speaker & Congressman confirmed it yesterday).Moreover, PP will gather support from political party Ciudadanos and possibly PSOE . If the procedure on the Senate floor is deemed too lengthy, it will be somehow shortened or circumvented and the takeover will take place anyway. IMO the sequence of events will go like this: takeover (i.e application of 155), arrests of top indep. politicians, the independent political parties will be made ilegal,elections in Catalunya orchestrated by the Rajoy government will be held and ,simultaneous to all this, police truncheons will strike the protestors’ heads. A short term win for the Rajoy administration which will be very painful to the indep. side. However , the situation will be unsustainable in the long run & will lead to social and political gains, more democratic and less corrupt political models. The short-term outlook in my opinion AIN’T pretty
> situation will be unsustainable in the long run & will lead to social and political gains, more democratic and less corrupt political models
I’m very dubious about “worse is better” theories. The variety of “worse-ness” counts for a lot.
Catalonia has quite a bit more leverage than Greece, given that their port as well as the fact that they represent significant production for Volkswagen and Nissan. It is not trivial to move a heavy industry concern like an auto factory.
They also appear to be a net food exporter:
link
In Greece, the non-implemented Plan B was to cut off Greek banks from the Eurozone clearing network and convert the euro deposits to drachma, while stamping notes held by the Greek central bank with a delta, making them drachma notes. Unclear whether Catalonia could muster such a thing, though their ability to pull off the referendum even under intense repression by the Spanish state augurs well for their operational thinking; someone clearly had a plan and executed it pretty well.
Whether any of this is “worth it” depends on one’s views regarding colonialism. Some regard anti-colonial feelings as irrelevant to a true discussion of material well-being. To those folks I’d recommend a reading of Mao/Guevara/Fanon, and an examination of the scope of anti-colonial movements in the Third World in the second half of the 20th century. There is something distinctly neoclassical about the idea that people are or can ”rationally” price the value of self-determination.
Historically, many people have demonstrated that they are willing to endure intense suffering in order to exercise self determination — Vietnam and China among them. I’d note that by any standard those nations have operated remarkably successful industrialization efforts over the last 20 years.
Communist success in your examples took many years, decades for Vietnam, plus countless deaths. Population was very poor, maybe felt they had little to lose.
Barcelonans have first world living standards, because and in spite of all the tourists… how many will risk death and want for independence?
If the population is that committed, and can protect the leaders from arrest, and is self sufficient in food, they will win, but at cost. They will need their own currency, for starters…
a cost and benefit is no tourists…
I think that there is a possible difference here in that unlike Greece there is a possibility of a game of chicken. I read earlier somewhere that Spanish bonds are in some disarray & I imagine that as Catalonia is part of the body that is Spain, Madrid might have to be very careful about stomping on what would in effect be it’s own foot which is in turn connected to the EU. The Greeks at the later stage were I believe only in a position to hurt themselves.
I do not have the nous to understand the bond situation, but the markets must be at least nervous. Perhaps the ECB will come to the rescue or they can avoid this in some other way, I really do not know, but butterflys & Archdukes can apparently cause storms of different sorts.
That’s what is interesting to me about Catalonia — they are a wealthy region where significant numbers still want to fight for independence from what they see as a colonial outsider. It may not be so odd after all though; when you look at the early leadership of the CPC, not a small number of them were from well off or intellectual families (Mao Zedong, Zhou Enlai, Li Lisan among others). I’m not as sure about the leadership of the CPV. Ho Chi Minh was certainly from an intellectual and well off family, as were his close associates Vo Nguyen Giap and Pham Van Dong; Le Duan came from a far humbler background.
Being a net agricultural exporter is a plus, but you also have to worry about the mix of foods. I don’t see that grains, which are a staple of most diets, among the list of things produced (at least in scale) nor dairy.
Good point. There are some indicators though that Catalonia is a major rice producer, though perhaps not for export:
http://www.spain.info/en_US/que-quieres/gastronomia/productos/arroz_del_delta_del_ebro.html
And they are overall a net cereals importer
http://agricultura.gencat.cat/web/.content/de_departament/de02_estadistiques_observatoris/13_publicacions_estadistica_del_dar/04_dades_basiques_arp/quadriptic_anual_de_dades_basiques/arxius_estatics/dadesagroalim2016en.pdf
According to the second PDF they mostly export meat.
That’s helpful, thanks.
Is anybody on the ground in Catalonia framing independence as an anti-colonial movement? Surely the neoliberal faction in favor of independence is not. Is the left? (There’s also the fact that colonies tend not to be richer than the metropolis; consider flyover states like Maine. But in this case, Catalonia is richer than the rest of Spain. So is a colonial relationship really the right frame? For example, are Catalonia’s resources being plundered?
As far as I can tell, ‘Flemish’/’dutch (16th-century)’-style (bad) arguments for independence (“we’re paying too much taxes [without getting anything back]”) are at least part of the reason why Catalonians want out, as people do tend to understand that as resource extraction. Not sure a colonial frame really fits the Spanish/Catalonian case, but maybe someone else does.
By resources, I mean stuff like pipelines, or fracking, or Nestle sucking millions of gallons of Maine Water out of our state. I don’t mean financial transfers, a consequence of any Federal system.
To Tim’s comment:
1. The Greek Plan B was never viable because it would take years to implement the payment systems, as Clive showed extensively at the time. You’re not going to get this done without help from the international banking system.
2. The Port of Barcelona = 2 million TEU pa vs. the Port of Piraeus = 3.3 million TEU pa.
3. Yes Mao/Guevara/Fanon all wrote eloquently about colonialism and capitalism, but the current Catalonia conflict cannot in any way be classified either as a colonial or a capitalist conflict. To claim so ignores first the way Catalonia was part of the formation of Spain in the first place, and secondly that Catalonia independence has ever and always been led by capitalists within Catalonia itself. The most powerful leftist tendency, the CNT union that spearheaded the anarcho-syndicalist community in the 1930’s, never took a side in the Madrid/Barcelona autonomy conflicts.
The far-reaching propaganda from the mainstream Spanish media has it that most Catalans frame independentism as a consequence of colonialism. An obsolete term (as obsolete is the all-famous expression ” La burguesia catalana”, “the Catalan bourgeoise”), if the term is meant to describe the relation between the current Spanish State power and the current Catalan region. It is instead a modern relation of domination (not synonymous with colonization), between dominant and dominated. By bringing the correct vocabulary to the conversation, anyone can easily understand the words from PP, “Catalanes, sean buenos chicos como los del PNV” (Catalans, behave like the good boys from the PNV party”). Likewise, “La operation Catalunya, las cloacas del Estado”… ” And so too, ” la ley mordaza”, introduced as well by PP, law which did not work on October 1st. This law bans anyone from recording the police. How can police officers say to CNN or BBC reporters, “do not video record us or we will have to file criminal charges against you”?
Interesting you mention the Port of Piraeus. The ECB has been purchasing corporate bonds since the Great Financial Crisis. I hope you are aware from which corporations the purchases have been made and what types of investments and where the corporate debt funds have gone to. By the meantime the EU has excelled at choking Greece and China has started to allocate productive investments in Greece (Port of Piraeus in this example).
https://www.nytimes.com/2017/08/26/world/europe/greece-china-piraeus-alexis-tsipras.html
An independent Catalunya wanting to remain in the EU does not need to become a centrifugal force for the latter. Internationalization and the rise of newly formed nation states do not need to exclude each other. New historic processes and realities must make the laws to accommodate to them; the other way around does not work. EU must embrace pragmatism and flexibility or let others dominate the international exchanges and win the geopolitical game. As a matter of fact ,if the EU does not do this sooner rather than later it will break into tiny pieces.
Given the heavy handed banking isolation methods used, that would be an excuse for the Catalans to introduce a new currency and default on all debt, since they will be excluded from credit markets anyway.
Could they bank through UK, since the UK also has an independence streak, or through Switzerland?
Naked Capitalism covered this topic extensively during the Greek crisis. Short version: introducing a new currency is a long-term programme. Printing, distribution, physical and technical adjustments (ATMs, vending machines, self-scan checkouts, note and coin counters in banks and cash handling centres — a lengthy list); oh, and in case of “can’t we just do it, how hard can it be?” notions, consider that here in the UK we’ve just cut over from an old £1 coin design to a new version and even though we’ve had the luxury of a six-month period of dual-running, conversion has been a time-consuming and not unproblematic undertaking.
(Confession — the Clive household had a mini-panic this weekend having discovered numerous “old” £1 coins which we had to get rid of, I didn’t know they’d be taken out of circulation soon and I work in finance).
And do please read Jerri-Lynn Scofield’s comprehensive coverage of India’s hard-stop attempts at demonetisation. This can be found in the Naked Capitalism archives. A case study in what not to do. But that is precisely what you’re suggesting Cataluña does (and others similarly would have had Greece do).
In my best Donald Trump voice: “Disaster. Absolute. Disaster.”
“A case study in what not to do. But that is precisely what you’re suggesting Cataluña does ”
I appreciate the explanation of the practical aspects of switching currencies, but I do think you are misinterpreting my brief comment.
My argument goes the following way: If the Catalans already are treated like pariahs, excluded from banking, which is a very heavy handed tactic, why not optimize the long term fiscal health, by not paying back creditors that were not standing up for you?
That argument is like saying that you’ve lost your house in an arson attack, so why not set fire to your car, too?
Trying to escape from being put on the financial rack by Spain would be hard enough for Cataluña without making things a whole lot worse by trying to implement a new currency.
Oh, and if you think the Bank of England or the Swiss Central Bank will fall over themselves to help out an independent Cataluña by extending banking licenses or banking services, I’ll have some of what you’ve been smoking. There is absolutely nothing in it for them. These agencies do not operate on a model of extending kindness to strangers.
Finally, defaulting on your sovereign debt locks you out of the bond markets for a good long while. That means running primary surpluses (known to its friends as “austerity”) as the ECB would never do any asset purchases with your name on it. Or a new currency. Two rather gruesome choices.
The banking licenses would not be very useful in isolation without a central bank backstopping the banks, another big reason for them not to touch this tar baby. Catalonia cannot suddenly adopt the pound or the Swissie even if the UK or Switzerland were for some perverse reason inclined to do Catalonia a monster favor. That would entail a massive systems changeover too, as well as changing all of the currency-handling parts of ATMs (which in the Greece posts Clive also explained was a non-trivial task).
So it’s a game of chicken. Will Catalonia blink like Greece?
A Catalan coalition representing a minority of voters, who forced through legislation through a half empty Catalan parliament on the 6th and 7th September for independence, who conducted a dodgy, anti-constitutional referendum, that has support from less than half of all Catalans as shown over and over by polls, and is being stonewalled by an EU that sees the potential for a very dangerous destabilizing precedent being set……
hmmmm…..they’ll push the nuclear button and after some big strikes and lots of marches and protests and flag waving, reality will quickly sink in and the majority of Catalans who do not support independence will tire very soon of Puigdemont’s antics. Talk about being backed into a corner. It’s all bluff now.
Hi all
We all learnt heaps about the Greece crisis thanks to this site, and particularly on the role of banks and IT systems as constraints to democratic will and tools of control.
That said, I think that you are framing this as a Greece – The Return scenario, and I think it is not right.
Independence here means quitting Spain but keeping EU/EES and the Euro. You are discussing something different. Of course, that leaves us in the hands of what EU Member states (all, by consensus) decide, but we are not even close to that yet, if we ever get there at all.
A few comments on what has been written up here:
1-The company that started the run to move out from Catalonia: Spanish fantasy. The trend does exist, but is not new, not even recent, and most probably hasn’t been triggered by current events (although it may have been rushed by them so that they could get the extra publicity from the Madrid press). Spanish and foreign investment in Catalonia was big and growing until last reports. There is a trend in the Spanish press to over-play the significance of these moves.
2-The Spanish government intervention of Catalan government spending. It has been happening for months, and announced formally probably half a dozen times since 2015. In spite of it, the referendum happened. That Montoro seems to be particular keen to boast stupidly. Don’t mistake me, the control is real, but to me, no detailed information about it, it sounds more like relatively high-level auditing procedures. And then the headlines about it.
3-The control of Catalan government bank accounts, though, is probably effective now and that means that we are in borrowed time.
3-There has been no talk of bank closures or financial warfare. IMHO, this is not their call. The Spanish government needs approval from higher powers. What would the consequences be for the wider Spanish financial system, or the European one? I don’t think that High-Up are too keen on that.
4- Quickly: I still think that our chance of success depends on the unspoken limits that the EU may set to the use of violence by the Spanish government.
5-I was cautiously optimistic about what could be going on quietly in Brussels, Paris and Berlin because the Catalan issue is well known out there. My fear is that the perception of this may be mutating from a Catalonia vs Spain conflict towards a the people vs the State issue. Framed like this… uuuuuufffff!
There is a so far not discussed scenario: Puigdemont doesn’t declare independence and calls for immediate elections.
I have to go to work.
DJG
What makes the issue more interesting and difficult, Jesus, is that it is not “Catalonia vs Spain” either, but instead “0.5 Catalonia vs. Spain + 0.5 Catalonia”. One cannot ignore that “small” detail…
Jesús:
vs. Jean Claude Juncker:
and in case Juncker wasn’t clear enough, Reuters hammers home the point
EU, EFTA, EEA
http://presidencia.gencat.cat/web/.content/ambits_actuacio/consells_assessors/catn/informes/inf_6_angles.pdf
In my quick skim of the 72 page report you linked– a report by the Government of Catalunia itself– the sections that address the issue that Spain might block the EU accession of an independent Catalunia (§ 5.4. “Scenario of exclusion as a member state” + § 8. “Summary and Conclusions”) basically say (paraphrasing) “well in that case let’s pray that the ‘flexible and pragmatic’ EC determine that Article 50 applies to give us a two-year transition period”.
Since I assume you have read it in greater detail, is there anything else in there that refutes what was noted in the Reuters article?
I read it awhile ago. I did not post the link as a refutation to the Reuters article. What Reuters reports -an independent Catalunya would automatically be removed from EU, would need to reapply to become a new member, all EU members must agree to take new member,.etc..-is definitely not new talk. All that said, do not discard so fast the term pragmatic. Legalism in the long run is unable to cope with change and historically has been a recipe for the demise of organizations.
All those things you say require unanimous EU vote. Spain will say no.
I think this is a crucial point in showing why independence for Catalonia is almost impossible.
Historically (in Europe anyway) countries have managed to become independent from a larger state either when the larger State either doesn’t object strongly (e.g. when the Soviet Union and Yugoslavia collapsed, or when Czechoslovakia divided), or then the new nation had a big friend who was able to ease the transition and prevent hostile acts from the ‘parent’ State – for example Ireland, which almost certainly could only have gained independence due to the powerful Irish lobby in the US which prevented London from taking the sort of ruthless approach that could have crushed its emergence.
Due to the constitutional make-up of the EU, which is strongly predicated on the absolute right of the member nation States to veto acts they disapprove of, it is almost impossible for a region within the EU to declare independence without the co-operation of the parent State. This is not of course impossible – it could have happened if Scotland had voted for independence.
But in current circumstances Spain has an effective veto on Catalonian independence, unless the Catalonian people are willing to withstand a complete collapse of their economy. The only possibility is if Spain agrees to independence, or if Spain is forced by external forces to not interfere with a newly emerging Catalonian State. Neither seems very likely.
While I have no time for Rajoy or the Madrid establishment in general, it must also be said that the Catalonian government has simply not done the groundwork to allow for independence. I think Slovenia is a good example of how a new nation can form – in their case by slowly building external friends and internal administrative structures, and taking their opportunity when it arose.
I keep reading about how unprepared, unproductive, and unprofitable it was, is, and will be for anyone right now for any uprisings, secessions, and revolts are.
So?
If you think we all use sweet reason, may I give some counter examples?
Neoliberalism and Austerity;
The United States would not still be in Iraq and Afghanistan or would have invaded Saudi Arabia instead;
Units of South Vietnamese Army wouldn’t have had to pay bribes for artillery support from local district commanders;
The Great Leap Forward would not have happened;
The Weimar Republic might still exist, which is one of the reasons the German war debts, including everything it stole from Greece was mostly forgiven, which the Germans have conveniently forgotten;
The highest level of international trade in the 20th century wouldn’t have been in 1914;
Haiti would not have finished paying France back for its stolen property (the freed Haitian slaves) in 1947 in part by deforesting itself;
The American Revolution would not have happened.
People don’t always do what is in their best interest or what others might think is their best interests. People are also fools or just moronic sometimes.
It is true that based on reason, the always huge pile of facts & historical precedents aplenty that show that resistance is futile should deter anyone in their right mind from such a course. I can only speak as one who has experience of at one stage during a period of around six months, trying to live through a winter while living on around £70.00 per week. This was the low point around three years after losing my house, savings, & means of income.
Bill Mitchell wrote an excellent piece called ‘ When Austrian’s Ate Dogs ‘, which paints a picture of apathy & despair that rudderless communities & individuals can sink into. I experienced a small flake of that, but fortunately for me I have been able to gradually, with a few setbacks climb out of that depression, which was both outer & inner. I am not out of the woods yet, but I have I believe a fighting chance to be able to sustain myself & my partner until I drop dead, which as I love my work & it is not too physically demanding is fine with me – I have hope in other words.
Fortunately the above occurred in my fifties after raising a family who had flown the nest. My children were not forced to live in poverty, or despite having good qualifications had to leave to a foreign country to find work. Even with my short stay in extremis, I cannot imagine what it would be like to sink into a long term version of it without any hope of an improvement, but it was enough to realise that if someone had come along & gave me the chance to hit out or to belong to a movement I could believe in, I would have in a kind of ‘ What the Hell ‘ sort of way joined up. I still recall my teenage years when as a football supporter I found a sense of belonging & unity in a cause among a much greater number, no matter how mindless it was.
The one thing that stuck in my mind from the film ‘ The Hunger Games ‘ was Donald Sutherland’s line which went something like ” Give them a little hope, but not too much “. It is I think hard for people to understand what a little bit of hope means to those who no longer have any as it can be a lifeline, no matter the reality of it’s fragility. The present system is I think increasingly offering decreasing levels of this precious benefit & for increasing numbers none whatsoever. In the case of Greece any lights of hope have been stamped out & I imagine that at least some of that population will if they are not already, eating dogs.
Looking at it with the knowledge of knowing how this increasingly nasty world works, especially in it’s financial machinations, which now mean that send in the tanks has been replaced by send in the banks, any resistance of the Catalonian does look futile & will most certainly end in tears, but isn’t that the case in any or either case ?
https://www.irishtimes.com/news/politics/irish-cabinet-clashes-over-catalonia-at-heated-meeting-1.3243312 — Ministers agree police force was ‘excessive’ but strongly disagree on legitimacy of vote
Darn,
More Irish. This one is a close friend of mine:
https://twitter.com/mattcarthy/status/915600381924790277
I scraped this from the comments section at WaPo regarding 30 Billion Euros squirreled away by a Catalan finance minister for funding independence. Legit or garbage propaganda?
The link does not say Salvadó has 30€ billion “squirrelled away”. It says Salvadó claims to have 30€ billion in commitments.
Hi
Squirreled away sounds like sent abroad sneakily. The article is about credits secured abroad to finance the first months of an independent Catalonia.
There was talk of that sort of arrangement some time ago. But when a big mouth like Pilar Rahola, who is a hard-line pro-Israel lobbyist in the Catalan/Spanish press, started saying that Israel was behind that money and stuff, it all sounded like a fantasy to me.
I don’t think that private investors are going to put their money behind a State that does not exist yet (although that search for yield might work miracles, who knows :-) ).
That said, a lot of people in the Catalan government have been giving a lot of thought to all these issues. I think that a certain perception that the Catalan government actions these days are acts of desperate improvisation is wrong. They may miscalculate, but I don’t think that there is any improvisation going.
But as to the money, I have no clue.
30 Billion?? Thats insane. 40 billion was Spains giveaway to rescue banks. Huge numbers. Catalonia depends on madrids FLA since the crisis. FLA provides liquidity: Madrid lends Catalonia its own money at a (supposedly “low”) interest. Catalonia has no spare millions, let alone billions, to play around with.
I’m very much reminded of comments plutoniumkun has made – someone who is very well informed and consistently shows great insights into how “small countries with perceived corrupt elites” feel with regard to the EU and Euro.
They have cognitive dissonance – love the Euro (as a way to get “Germanic discipline”) but don’t realise the euro and associated institutions are the problem. Of course within the eurozone it’s a zero sum game that Germany won’t lose but as long as people support the euro, not recognising its straitjacket, they won’t fight for the right thing.
This of course doesn’t negate the problems people like Clive have pointed out…. but perhaps give insights into why the independence push is automatically on the back foot.
https://www.elconfidencial.com/espana/cataluna/2017-10-05/independencia-cataluna-clima-insurreccional-suma-comunes-colau_1455580/
Breaking News!!!
Partido Popular is a factory for the endless production of independence supporters in Catalonia. Political Party Si Que Es Pot joins the independence ranks/cause. See my link above.
Huge mistake by PP Spanish Government! By getting ready to pass/issue a decreto ministerial (law without Congressional approval) to allow CaixaBank to bypass a Shareholders Meeting and have directly the Board of Directors to decide on relocating Caixabank’s headquarters from Catalunya to somewhere else in Spain. Catalans are furious: is the PP Government promoting the relocation of corporate headquarters, all staff, all these good jobs( including high management positions ) while very soon will be taking over the Catalan Government (applying sect. 155)? If so, are they governing for the Catalans and impoverishing the 50% of law abiding Catalans who allegedly do not want independence? See link:
http://www.lavanguardia.com/economia/20171005/431811368226/gobierno-decreto-cambio-sede-empresas-catalunya.html
PP: lack of brains, plenty of guns!
Violation of the deontological journalistic code of ethics. In English:
https://twitter.com/AaronBastani/status/915262873223548929
I am from Vancouver,Canada and I wanted to say that this is indeed naked capitalism.When ever the working class goes against the wishes of the Capitalists then Capitalism shows its true face.People are killed and maimed and what little freedom they did have is taken away.There are many examples of this throughout history.Capitalism was started dripping in blood and continues so today.
It is the working class that will get rid of Capitalism. It is only then that people will get out of the animal kingdom.