Catalonia Votes – Analysis
Madrid’s refusal to compromise, in the view of the Catalan nationalist movement, renders the push towards Catalan independence impossible to avert. There is no practical choice other than independence, save to succumb to ever more burdensome regional financial penury irrespective of the success of Catalonia’s economy.
By Matthew Parish*
On 21 December 2017, there will be a new snap election for members of the Catalan autonomous regional parliament. This election comes after extraordinary recent turmoil.
The independence referendum and its aftermath
On 1 October 2017 the Catalan regional government, known as the Generalitat, convened a referendum upon the secession of Catalonia from the rest of Spain. The outcome of the plebiscite was overwhelmingly in favour of Catalan independence, although doubts were raised in the media about whether putative “no” voters had declined to vote. The referendum had previously been declared illegal by Spain’s Constitutional Court.
The Generalitat then called for negotiations with the Spanish central government in Madrid. The Spanish Prime Minister, Mariano Rajoy, refused. The Spanish, King Felipe VI, had acceded to the throne after unusual circumstances surrounding the abdication of his father Juan Carlos I in 2014. The timing of this abdication was just before a prior Catalan independence referendum, and it was announced not by the abdicating monarch but by Mariano Rajoy. Felipe took the throne ahead of his two elder siblings. Felipe has unequivocally backed Rajoy in his refusal to negotiate with the Catalan independence movement.
Notwithstanding the outcome of the 2017 referendum, the Catalan President Carles Puigdemont declined to declare independence. Rajoy then imposed an ultimatum: either renounce the prospect of independence supported by ballot, or face imposition of so-called direct rule from Madrid under a hitherto never-used provision of the Spanish Constitution. In response, Puigdemont called for further talks and intervention by the European Union. Brussels was deaf.
Imposition by Madrid
Rajoy then made a declaration imposing direct government over Catalonia, effectively dismissing the region’s ministers and parliamentarians. Judges in Madrid, alleged to operate under the influence of Rajoy’s political party, ordered the arrest and imprisonment of the leaders of the Catalan independence movement including Catalan government officials. Some fled to Brussels, where they are contesting extradition proceedings for archaic crimes such as sedition and rebellion. Others submitted to the jurisdiction of Rajoy’s courts and were promptly incarcerated, where they remain.
Nevertheless Rajoy did not get everything his way. Although he had suggested a period of six to nine months of direct rule before new Catalan elections, European political pressure was brought to bear upon him. Rajoy was required to call new regional elections for Catalonia within a period of barely six weeks. The nationalist movement agreed.
There were a number of reasons why this truncated time scale was imposed upon Rajoy. A mounting sense of popular disgust was arising within Europe about the undemocratic and authoritarian methods being used to suppress peaceful politicians and activists aligned with the Catalan independence movement. The violence that had been used by the Police in an attempt to prevent the referendum exacerbated the situation. The crisis has been causing potentially irreversible economic harm.
Spanish public debt
Political uncertainty about the future of Catalonia is causing substantial damage to the economies of both Catalonia and Spain. Tourist numbers are down dramatically. Businesses are threatening to relocate from Catalonia. It is reported that some 2,000 have already done so. Catalonia is a principal tax base for the Madrid treasury. If the economy of Catalonia is threatened, tax revenues destined for Madrid may suffer. This could be critical. Spain is mired in public debt, approximating to 100% of GDP. Catalonia’s public debt, at some 35% of the region’s notional GDP, is trivial in comparison and moderate by European standards.
Spain’s debt is in significant part the consequence of a series of publicised corruption scandals involving misappropriation of government funds in the course of appointing state construction contracts. That misappropriation has been shown to have been executed by persons associated with Rajoy’s political party, Partido Popular. Spain’s economy is too big to fail. Berlin cannot afford to bail out the Eurozone’s fourth-largest economy, as it has done for Greece. Spain is teetering on the edge. The country’s finances have been supported by an ongoing European Central Bank quantitative easing programme since 2015, to avoid collapse of the Euro.
Catalan tax revenues are essential to service Madrid’s interest payments upon its international debt obligations. After imposition of direct rule by Madrid, nothing much changed in the government institutions of the Catalan capital Barcelona. Madrid has proven unable to run Catalonia at a distance. If uncertainty persists about the political future of Catalonia, then the economic and tax backbone of Spain may be undermined with potentially devastating results. The consequences for Spain and the Eurozone of a Spanish bond default would surely be devastating. Hence Europe has insisted that elections come early.
New elections for Catalonia
Rajoy decided upon December 21 as the date for the new Catalan regional elections. This is almost the last working day before Christmas. Presumably Rajoy’s goal was to reduce voter turnout. It is believed that a high voter turnout favours Catalan nationalist political parties. The Madrid-dominated media is engaged in a relentless campaign to discredit Catalan political parties that support autonomy.
The leader of one such party is now in exile. The leader of another party is in prison in Madrid. But the use of heavy-handed tactics by Madrid in suppressing the October 1 referendum and its aftermath may have backfired. There has been popular Catalan revulsion at the methods used by Madrid in seeking to prevent a democratic vote from taking place.
Particular disgust has been harboured towards Madrid-initiated police violence against voters, demonstrators and polling station officials. That has been compounded by the oppressive use of pretextual criminal law against democratically elected politicians. The net result is that support for the Catalan autonomy movement has now substantially increased amongst the voting population of Catalonia. Those who once were neutral are more inclined to support Catalan nationalist political parties, by virtue of repulsion by Madrid’s techniques.
The Catalan electoral system
Catalonia has a shifting assortment of political parties and electoral lists. The Catalan unicameral parliament is elected using the so-called D’Hondt closed party list system of proportional representation across four constituencies. This electoral model results in a political distribution of seats within the parliament reasonably proportionate to the number of votes for each party. The Catalan regional government is parliamentary as opposed to presidential. There are 135 deputies in the Catalan parliament.
The President of the Generalitat, the Catalan regional government, is appointed by a majority of voting deputies. The President in turn appoints the balance of the government. Once the elections are concluded and the votes have been counted, a coalition must be formed to elect the President and this will involve a negotiation as to which parties within the coalition are to occupy which positions in the government. Ordinarily a minimum of 68 votes out of 135 is needed to form a governing coalition.
Predicting the election results?
The opinion polls suggest that parties supporting Catalan autonomy are likely to obtain a clear majority of seats in the December 21 elections. There are seven party groups of significance contesting the election, plus a number of independent candidates.
Polling figures vary, and contrast with relatively consistent historical results. This in itself is a cause for some degree of uncertainty. Nevertheless current indications suggest that parties and independent candidates supporting the Catalan nationalist movement in one way or another will obtain around 58% of the popular vote. That translates into some 78 seats.
Such an outcome would not be substantially different from the prior 2015 snap elections, in which nationalist parties obtained some 83 seats on a 74.9% turnout. Nor would it be at significant variance with the outcome of the 2012 snap elections, in which Catalan nationalists obtained 81 seats on a 68% turnout.
Both 2012 and 2015 snap regional Catalan elections were called effectively as plebiscites upon issues of Catalan autonomy and independence in light of prior impasses between Barcelona and Madrid. The 2017 election will effectively be yet another plebiscite upon the same issues. The figure of 78 may be too low. Every indication is that notwithstanding Rajoy’s choice of an inconvenient date for the election, turnout may be even higher than it was in 2015. The Catalans are incensed. They propose to display their dissatisfaction at the ballot box.
Coalition negotiations
The Catalan nationalist parties are likely to support one-another in a subsequent coalition. They have grouped together in resistance to the legal attacks exercised against them, and in light of popular revulsion at Madrid’s treatment of what they perceive to be Catalonian democracy.
Although the nationalist parties vary from liberal / centre-right to left-wing, they give every indication of their intention to place ideological differences aside, at least temporarily, in favour of opposition to Madrid’s heavy-handedness. Madrid is discovering itself to be the architect of an imminent and impending catastrophe against its own interests.
Ciudadanos: Catalonia’s outlier political party
Another factor may be relevant in explaining the consistent fortitude of Catalan nationalist political parties at the ballot box. That is the recent rise of perhaps Spain’s most unusual political party, Ciudadanos.
Although ostensibly a Catalan political party representing liberal anti-nationalist views, the electoral origins of Ciudadanos might be searched for in the small town of Sanlúcar de Barrameda in southwestern Spain. One of the party’s first electoral successes was to achieve a king-making minority on the town council of Sanlúcar, under the name Ciudadanos Independientes de Sanlúcar, in 2007.
The party subsequently expanded throughout the autonomous community of Andalusia in southwestern Spain, and formed a king-making majority in the Andalusian regional parliament under the abbreviated name of Ciudadanos. At all times its leader in Andalusia has been a former member of the Alianza Popular, a predecessor to Rajoy’s Partido Popular headed by the notorious Francoist (Spanish fascist) politician Manuel Fraga. Ciudadanos is widely perceived as a Partido Popular proxy.
Ciudadanos is associated with a public sector management consultancy company of uncertain provenance that relies in substantial part for its funding from an obscure quasi-private foundation associated with the Pyrenees region in and around the reclusive tax haven of Andorra. Andorra is a mountainous micro-state not part of the European Union, wedged between French and Spanish territories. The Ciudadanos project might be generously described as involving suspected electoral engineering, using substantial funds from an unknown source. In the context of Madrid’s recurrent political corruption scandals, one might take the view that nothing should be surprising.
Ciudadanos has a number of curious qualities as a political party. One is its extraordinary leap in apparent electoral support within Catalonia between the two regional elections in 2012 and 2015. This was in the order of some 300%. This surge in popular support occurred during a truncated period between two snap elections. This was in the context of a political climate in which the principal issues for voters had not changed, and the party had little time to prepare for either election.
That in itself is unusual. Persons who study the development of electoral systems in divided societies might consider growth of this kind surprising. An equivalent, if not even more dramatic, surge in apparent popular support for Ciudadanos can be observed in Andalusian regional elections.
Another unusual feature of Ciudadanos is the extraordinary youthfulness of its elected representatives. Of the 25 deputies to the Catalan regional parliament currently on the Ciudadanos party list, the average age is 38. If one discounts the six deputies over the age of 50, the average age falls to approximately 34. Very few of these deputies have any prior political experience. A number appear to have attended the same law school.
The leader of the party, Albert Rivera, occupied the leadership post (his first position within Ciudadanos) at the age of 27. Before that he was a member of Partido Popular. Ciudadanos might be one of the youngest and least experienced political parties on record to have achieved such extraordinary electoral results.
The Spanish Minister of Economy
Albert Rivera is perhaps best-known for appearing in political advertisements nude. In June 2017 he attended the secretive Bilderberg elite financial meeting with Spain’s discredited Spanish Minister of Economy Luis de Guindos, who has been mired in a cronyism scandal. Nevertheless this has not caused Rajoy to dismiss De Guindos from office.
Rivera was an unusual choice to accompany De Guindos as a representative of the Spanish government. Rivera is the youthful leader of an obscure minority political party without representation within the government in Madrid. He has barely any experience relevant to participation in the meetings of the Bilderberg elite.
De Guindos is known to be a high-ranking member of the semi-monastical order of Opus Dei. This is a conservative organisation under the umbrella of the Spanish church, founded by Josemaría Escrivá. Escrivá was an overt sympathiser with the Spanish fascist dictator Francisco Franco, in office from 1939-1975. Escrivá used the secretive religious order as a covert channel to Franco’s fascist regime for American funds during the Cold War.
The rationale for this was to prevent Franco’s frail and autarchic fascist economy from succumbing to communism. Spanish Prime Minister Mariano Rajoy’s political party, the Partido Popular, is the party associated with De Guinos. The Partido Popular has its origins with a Francoist Minister of the Interior.
De Guindos is a close personal acquaintance of European Commission President Jean-Claude Juncker. De Guindos was Juncker’s preferred candidate to succeed Juncker as President of the influential Eurogroup meeting of Euro zone finance ministers. Other European countries blocked De Guindos decisively.
Crisis amidst the Spanish Socialists
The purpose for which Ciudadanos was created appears to be undermining popular support for the Socialist Workers Party (PSOE). This Madrid-based political party formerly occupied a broad Republican, anti-Francoist, swathe of the national political spectrum between firm left and moderate liberals. After Franco’s death in 1975, PSOE was the principal rival to the Partido Popular.
In recent years PSOE has seen its electoral base attacked from both sides. Its left-wing support has migrated in substantial part to Podemos, an unorthodox and anti-institutional parliamentary group with overtly socialist policies. PSOE’s liberal wing has lost support in a number of regions to Ciudadanos. The result of the growth of Ciudadanos in Andalusia has been to ensure that PSOE, historically the dominant party in that region, can no longer form governments without the support of Ciudadanos.
If Ciudadanos is a Partido Popular proxy, then Rajoy has managed to undermine his principal political opponents at the national level by ensuring that the PSOE is now constrained in a number of Spanish regions to govern only at the sufferance of a party that falls under the Partido Popular ambit. This may explain in substantial part explain why in the two most recent Madrid federal elections, PSOE abstained so as to permit Rajoy to form a minority government. Through Ciudadanos, the Partido Popular has hobbled its principal historical political opponent.
The Catalan anti-nationalist opposition
The two main anti-nationalist political groups standing in the 2017 Catalan regional elections are PSOE and Ciudadanos. While the Partido Popular itself enjoys scant political support in Catalonia, Rajoy’s ambitions are presumably to devise a PSOE-Ciudadanos coalition after December 21 that, possibly with the Partido Popular’s abstention, might traverse a reduced threshold for formation of a minority administration within Catalonia’s regional government the Generalitat. The President of PSOE in Barcelona, Miquel Iceta, has openly declared his ambitions to become the next President of the Generalitat notwithstanding PSOE’s poor recent political performance in the region.
It is doubtful that this will work. It seems arithmetically impossible that PSOE and Ciudadanos can achieve the necessary number of deputies to achieve such a result, no matter how much so-called electoral engineering the latter party, and its allied companies and foundations, might be prepared to engage in. Upon current predictions Ciudadanos seems likely to achieve no more than 25 seats, while PSOE would be lucky to better its 2015 tally of 16. It is unthinkable that these two parties, much derided by a substantial proportion of the Catalan population, could persuade the now defiant Catalan nationalist parties to break ranks and thereby relegate their common cause.
Catastrophe for Rajoy
Notwithstanding some inevitably fractious post-election coalition negotiations over the Christmas and New Year period, the new government of Catalonia is going to look much like the old one that Rajoy abolished and imprisoned. Even if Catalan President Carles Puigdemont is destined to pass several months or longer in exile in Brussels pending a potentially interminable judicial process, new faces will replace the old.
If this is the outcome, Rajoy’s strategy in undermining the Catalan independence movement through legal oppression will have failed. This will undermine Rajoy’s domestic and international credibility, and may come at a cost of fundamental structural damage to the economy of Catalonia and hence that of Spain. That is because Spain needs Catalonian tax revenues.
A fiscal origin to the Catalan crisis?
Why has the independence movement has been so recurrent in Catalonia since 2012? The fundamental challenge is one of control over tax income. Although Catalonia’s public debt is not excessive, it is impractical under the current Spanish constitutional arrangements for the Catalan regional government, the Generalitat, effectively to balance its books. That is because Catalan tax revenue is paid directly to Madrid’s treasury, that uses those funds to service its own debt and then has the effective liberty to repay to Barcelona such balance as it sees fit.
If a Barcelona government were inclined to try to pay down Catalonia’s public debt, it could not do so. Barcelona controls only one of two columns in the Catalan government’s accounts: public expenditures. It cannot control its tax revenues. In practice taxes paid by Catalans are not divided, as they are in the United States or Switzerland, into federal and regional components. Instead all sums are paid to Madrid who effectively can decide how much to return to Barcelona.
This is achieved through a discretionary power on the part of the Madrid government to use public revenues wherever in the country it considers most appropriate. This creates a permanent fiscal deficit on the part of Catalonia in favour of Madrid. No matter what the quantum of tax revenues raised by Barcelona, Madrid can (and historically has) ensured that Catalonia’s net tax revenues returned from Madrid to Barcelona are less than Barcelona’s public expenditures. This constitutional position is anomalous. Other Spanish regions, such as the Basque Country and Navarre, have substantially greater control over the destiny of tax revenues paid by their citizens and corporations.
Equal treatment between Spain’s regions
The Catalan government has sought in the past to negotiate equivalent treatment for Catalonia. The reason Madrid has refused to cede an increased level of control to Barcelona is because Catalonia is a disproportionately large tax payer. Catalonia pays more per person. Catalonia has a lot of people.
Madrid is using Catalonia’s tax revenues at least in significant part to finance its own precarious public debt obligations. Any relinquishment of control to Barcelona, or a rebalancing of the structure for Catalan tax contributions between Madrid and Barcelona (such as enshrining a fixed calculus for division of revenues between the two), would risk eliminating the discretion for Madrid to take more from the Catalans if its parlous circumstances so require.
One recurrent complaint by Catalan politicians is that the perennial increases in Barcelona’s public debt are attributable not to over-spending by the Generalitat but instead to Madrid unilateral amendment of tax distribution formulae to ensure that no matter how efficiently Barcelona might run its finances, it is consistently in deficit. The result is that Catalonia’s public debt is destined to increase year upon year, irrespective of how its regional government manages its economy.
Madrid’s refusal to compromise, in the view of the Catalan nationalist movement, renders the push towards Catalan independence impossible to avert. There is no practical choice other than independence, save to succumb to ever more burdensome regional financial penury irrespective of the success of Catalonia’s economy.
In search of a solution
Relations between the Spanish state and Catalonia have reached an impasse. The ongoing financial dispute between Madrid and Barcelona is sorely in need of resolution. That is because the consequences of perpetuating the dispute are damaging to all of Madrid, Barcelona and the European Union. Recent unrest in Barcelona is degrading the region’s economy. This will reduce Catalan tax revenues upon which Madrid relies. If Madrid has access only to ever-diminishing tax revenues from Barcelona’s tax base, it risks defaulting upon Spanish sovereign debt or being unable to meet subsidy obligations to some of Spain’s poorer regions.
Catalonia does not necessarily resent such subsidies. Nevertheless one of the drivers of the independence movement is the uncertainty and arbitrariness of a Spanish constitutional structure in which Catalonia, as an autonomous region, suffers from substantially more arbitrary distribution of its tax revenues than other regions within Spain. If ultimately Spain defaults upon its international debt servicing obligations as a result of this dispute, then the viability of the Euro zone is at stake. The EU cannot bail Spain out, as its economy and its debt are too large.
So-called “re-pesetafication” of Spain is one option. This is reversion to a devalued Spanish national currency in the face of unserviceable Spanish sovereign debt. Legally mandated conversion of Spanish sovereign Euro-denominated interest and repayment obligations, to debt denominated in a devalued replacement national currency, might avert formal sovereign default. But this would be an unmitigated European disaster, as bond market confidence in Euro-denominated debt collapsed.
This would surely increased the prospects for a more determined drive towards Catalan independence. Relatively prosperous Catalonia – that can service its own debt – would seek to accelerate disassociation with the Spanish central government. This would entail an increased potential for military conflict between Barcelona and Madrid. If Madrid needs the money, it is likely to send in the tanks to collect it. By reason of this mess, Europe is at risk of civil conflict. That is why the Catalan crisis is perpetually in the newspapers.
The Catalan independence movement is not all about economics and finance. The Catalans have national pride in their own language, culture and traditions. But financial travails are often a significant component within secessionist disputes. Tensions giving rise to independence movements can often be ameliorated through renegotiation of vexing financial and other legal issues dividing the parties. The European Union should facilitate this. Refusal by Brussels to intermediate in the Catalan crisis is exacerbating the problem, not alleviating it.
The importance for Europe
This is not purely a Spanish internal constitutional issue. The continued financial health of a major Eurozone economy rests upon constitutional renegotiation within Spain about the relationship between the Spanish federal government and its regions. The principal problem infecting the Spanish constitution is that a number of regions within Spain are treated differently from others.
That is because the current Spanish constitution was a compromise prepared during a chaotic transition to democracy after Franco’s death in 1975. It may be appropriate now, more than 40 years later, to be revisit some of the issues decided when Spain was a very different country. While some of the differences in constitutional treatment of Spain’s regions may be harmless, and might reflect greater or lesser senses of national identity between Spain’s regions, the issue of Catalan fiscal autonomy is not such an issue.
If there is some good that might arise from the unilateral Catalan push for independence in the second half of 2017, it is the creation of an impetus within Spain and amongst the broader European Union to initiate an enquiry into Spanish constitutional and fiscal reform. The current position is unsustainable. But there is an opportunity.
If nothing is done, then we may be looking at the prospect of repeated snap elections and referenda, with all the crises that follow, every two years. Whatever one thinks of the notion of Catalan independence a priori, recent conflicts between Madrid and Barcelona have the potential to cause significant damage to the economy of both Catalonia and of Spain as a whole. Current events are damaging Spain in the eyes of the world. Europe cannot afford this, and neither can Spain.
Promptly after the December 21 elections, at is imperative to focus upon a prompt solution. That must involve Spanish constitutional reform. The European Union must be engaged. The Spanish constitution was written in the aftermath of the quiet demise of Europe’s last fascist dictatorship. It has served its purpose tolerably well. But it is ripe for reform.
Should a project of this nature be undertaken in good faith by all parties, the Catalan independence project might be viewed through a new lens. The immediate crisis may be averted. That is surely now the priority. The stakes for Catalonia, Spain, and the European Union as a whole, are too high to countenance continued neglect of this most dangerous of problems for European stability.
*Matthew Parish is an international lawyer based in Geneva, Switzerland and a former UN peacekeeper. He is a scholar of ethnic conflict and civil war, and he has published two books and over two hundred articles. He is an Honorary Professor of Civil Law and Litigation at the University of Leicester and a Young Global Leader of the World Economic Forum. Bilan magazine named him as one of the three hundred most influential people in Switzerland. www.matthewparish.com
