As I have continued to talk about over this year, without a massive change in direction, the economic outcomes of Europe have already been decided. Attempts at supra-Eurozone fiscal consolidation all but guarantee a fall in economic output for the EZ, and the recession has really only just begun. In that regard it is the politics that will become increasingly important over the next 12 months as the economic fallout opens new fractures in the political systems of participating nations.
With over 23% unemployment and a continuously worsening economy, Spain, along with Greece and Italy, is certainly somewhere I have been watching, and I have commented more than once that I suspect Mariano Rajoy political career is going to be short lived. What has become apparent over last week is that the failing economy has once again stirred up the nationalist desires within the Spanish regions as resentment against the national government’s failure to fix the economy has risen.
Catalonia, the home of Barcelona and a traditionally prosperous region, has seen its wealth fall rapidly over the last few years while its annual deficit had grown 8% of GDP, in part, due to transfers to the Spanish state. The mediteranian coast has been hit excessively hard by the economic downturn with the latest Tinsa housing index report showing that the regions residential real estate prices have now fallen on average by nearly 40% from peak.
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With regards to the cumulative falls by segment since the top of the market, the “Mediterranean Coast” is once again the biggest faller, with a decline of 39.5%; followed by “Capitals and Major Cities” with 35.6%, “Metropolitan Areas” with 31.4%, the “Balearic and Canary Islands” with 30.2% and “Other Municipalities”, which refers to those not included in other categories, with 27.4%.
The tension between the Spanish state and Catalonia is not new, in fact the inaugural September 11th national day commemorates when King Philip V banned the use of the Catalan language after winning against the Catalan army in 1714. You can also read about the Statute of autonomy to get an idea of the recent history. And the economic fallout of the Eurozone crisis has again pushed the issue to the fore. This week an estimated 1.5 million joined the Sept 11th separatist march and took to the streets in Barcelona to demonstrate for independence, as RT News reports:
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And yesterday the Catalan regional leader, Artur Mas, warned both the Spanish state and the EU to prepare for Catalonia to become independent:
The European Union must prepare itself for the breakup of countries within its frontiers, the regional prime minister of Catalonia warned on Thursday, adding that Madrid could not simply ignore a huge independence demonstration held in Barcelona this week.
Artur Mas said: “Europe will at some time have to think about this. It wouldn’t make sense if, because of some rigid norms, it was unable to adapt to changing realities.”
His comments came after the European commission president, José Manuel Barroso, indicated this week that any new state would have to apply to join the EU.
Mas said there would be no looking back for Catalonia after the march, which police said was attended by 1.5 million people – a fifth of the population of the north-eastern region. He also warned the Spanish prime minister, Mariano Rajoy, and his conservative People’s party (PP) government that they would be foolish to try to ignore the apparent desire for greater autonomy.
Are we about to see the Eurozone crisis claim its first country?
