Spain: The Threat from Barcelona

Published on September 16, 2015

Voters in Cataluña will head to the polls on September 27 to elect the National Assembly and government of the Generalitat de Cataluña in an historic event, with four major pro-independence parties running for the first time on a unified platform of self-determination.


*** While Spanish markets are starting to wobble – just a tiny bit – on fears of an uptick in political risk after the elections, we believe they may still be overly complacent on the real risk of an escalation in the conflict between Cataluña and the central government of Mariano Rajoy in Madrid. That is especially the case in light of a political election cycle that will likely lead to a strengthened secessionist movement in Barcelona, and an almost certainly weakened new government in Madrid.  ***


*** It is almost certain current President of the Generalitat and leader of the pro-independence movement Artur Mas i Gavarro will be able to form a government after the September 27 Catalan elections. He will not unilaterally declare independence after that, but he will start drafting a new constitution almost immediately upon re-election. ***


*** Finalizing that process could take as long as two years, but the pushback and clash with Madrid will be immediate, and the Catalan government will use that conflict and period to build even greater support for a final, confirmatory referendum to take place in 2017. Furthermore, the emboldened separatist movement will begin to agitate for civil disobedience against Madrid, including calls for measures as extreme as the setting up of independent institutions for the collection of tax revenues.  ***


*** Prime Minister Mariano Rajoy, despite some minor dissenting views within his cabinet, will continue to take a hard line, and for his part remain adamant that any effort to build independent institutions through regional legislation be immediately declared illegal by the “Tribunal Supremo.” Indeed a tough stance on the independence issue may serve him well with his center-right Partido Popular conservative base in the lead up to what are currently polling to be highly uncertain national elections coming in December. ***


Hopes are after that Rajoy – if re-elected – will come back to the negotiating table before the Catalan secessionist movement runs out of control, but there are no guarantees of that.


Indeed we believe the rapid sequencing of the two elections will all but ensure a major escalation in separatist tensions after the September 27 vote, tensions that will continue as an emboldened secessionist movement faces a weakened government in Madrid that will most likely struggle to form a ruling coalition after the national elections in December, pushing the confrontation between Barcelona and Madrid into uncharted territory.


A Carefully Planned Election


As polls currently stand, the independence front, “Junts pel Si’, is likely to fall just short of an absolute majority of the Catalan National Assembly, between them winning 62 to 65 seats (an absolute majority is 68).


But there is a strong chance after the elections the JpS will enter into coalition with the leftist Candidatura d’Unitat Popular (CUP, or Communist Party of Cataluña), which is also supporting independence, and which, with an additional currently forecast 8 or so seats, would put them over the hump for a majority.


The pro-independence Catalan leadership, from we understand, had originally planned the so-called September 27 “plebiscitarian” elections as a fallback option in the event of a failure of the “9N” (November 9, 2014) referendum. The vote was supposed to have been called earlier this year, but was delayed when it took the independence front (Esquerra Republicana de Cataluña, Convergencia de Cataluña, Demòcrates de Cataluña, and Moviment d’Esquerres) as long as it did to resolve leadership issues between Mas and ERC leader Oriol Junqueras (see SGH 10/13/14, “Spain: Catalans Likely to Postpone Independence Vote”).


Pro-independence politicians, in any case, have been relentlessly working in preparation for this vote for more than a year, and have achieved a level of grassroots organization that is far superior to the fragmented and litigious “loyalist” parties. And the pro-independence campaign’s slogan – “the vote of your life” – we have been told is resonating very well with voters.


To make matters worse, because this is not a referendum, in which case, perhaps, the NO front could have organized an effective counter-campaign (as happened in the Scottish referendum), loyalist parties, despite last minute efforts to mobilize their electorates, have not seen fit to join forces.


For example even the traditionally solidly pro-Spain PSC party – the Catalan Socialist Party – in order to distinguish itself from the Popular Party, has gone as far to support a hybrid proposal for more autonomy and the recognition of Cataluña as a “nation” in the Spanish constitution, a measure that is anathema to the ruling Partido Popular (PP) in Madrid.


Along those lines, we are told it is even hard to envision how an alternative majority could be formed in the unlikely event the pro-independence front does not win, as that would require cooperation between parties with radically disparate positions on basically every political issue apart from independence.


All signs nevertheless seem to be pointing in the direction of a victory for the independence front, albeit with the caveat of a possibly uncomfortable alliance with a leftist party (the CUP), with little or no experience in government.


The Start of a Negotiation in January?


Should Mas get his majority one way or another, he will outline a road-map for independence that will not be an outright declaration, which would clearly be illegal, but a pledge to build up the structures of an independent state and to write a new constitution.


That will still be more than enough to set Cataluña immediately and directly on a collision course with Madrid.


Pro-independence supporters have in the meantime been floating radical (or better, borderline illegal) statements, and even drafting official documents suggesting citizens take control of vital communication and transportation hubs (phone and internet lines, ports, airports, border posts), and even suggesting setting up a local army.


But without underestimating any of these alarming signals, we believe these threats are part of a more comprehensive strategy to mobilize the Catalan nation around the independence cause, and send a message to Madrid as well as international observers the secession process is here to stay, rather than a realistic declaration of specific post-referendum policy intent.


They are, however, revealing of the resolve and determination of the independence movement to push the envelope, and this – we understand – should put pressure on Madrid to go back to the negotiating table. But first, in the event of a victory of the pro-independence front on September 27, and with national elections looming, a muted if not openly hostile reaction from Madrid is all but guaranteed.


And so at a minimum until December 13 or (most likely) 20, the date set for the Spanish national elections, Rajoy will maintain a tough stance on Cataluña. Political observers however hope he will soften his line once the campaign is over, assuming of course he wins re-election.


And Madrid is indeed aware that time is running against the central government, with the Catalan leadership determined and capable of methodically building on support for the independence cause once the movement reaches critical mass. The Catalan pro-independence leadership is well aware that a unilateral and ill-timed declaration of independence could have catastrophic consequences for Catalan businesses, and eventually prove very damaging to its own credibility and success.


Ultimately, if there is to be a negotiation beyond cosmetic changes to the constitution such as for example a simple formalization of the “Catalan Nation” into a “Catalan Nationality,” the front and foremost issue will be control of regional revenues (or a percentage of those).


As things stand, Cataluña can only decide how to spend the money it receives from the national Treasury, not how much it actually receives from the taxes collected from the region. Incidentally, the Spanish government also pays for the police and other public officials, which makes any immediate switch of loyalty hard to imagine in the event of a confrontation.


Madrid will also play up the non-trivial card of EU membership, which the Catalan government has repeatedly indicated it would take for granted from day one after independence.


But Brussels, while not publicly stating it, is overwhelmingly against any unilateral move by the Catalan government (or “Caxit”), both because it could open a political Pandora’s box of separatist movements (Cataluña is not the only region in Europe that seeks independence), but also because it would generate instability in Spain’s richest region just when the country is finally increasing the pace of its economic recovery.


All in all, Spain will be heading into uncharted territory after the September 27 vote, with the issue of Catalan independence left hanging over Madrid and national elections for at least the next three months. Even after that there is as of yet no sign of a fiscal compromise in sight, and the Catalan question may well turn into the biggest challenge facing the next Prime Minister of Spain.


That will be even more so given all signals pointing to the likely inability of any of the major parties winning a clearly defined parliamentary majority in the December 13 or 20 national vote.

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