Banks Caution Catalonia Against Independence

Banks warn that an independent Catalonia would be cut off from the ECB and the euro.

Subway station in front of the Spanish central bank building in Madrid, May 21, 2014
Subway station in front of the Spanish central bank building in Madrid, May 21, 2014 (Werner Wittersheim)

Spanish banks have warned Catalans in recent days not to vote for independence in regional elections on Sunday.

The governor of the country’s central bank argued that an independent Catalonia would be “automatically be excluded from the eurozone because this would also imply an exit from the European Union.”

He added that Catalan banks would no longer be able to access European Central Bank financing if the region breaks away from Spain.

Spain’s banking association voiced similar concerns earlier this month. Two of the country’s largest banks, Caixabank and Banco Sabadell, are headquartered in Catalonia.

The region, Spain’s richest, votes this weekend in what pro-independence parties have declared a de facto referendum on secession.

Although Spain insists independence is out of the question, Catalonia’s largest left- and right-wing parties have said they will interpret an election victory as a mandate to draft a new constitution and build up state institutions, including a central bank, diplomatic service and tax authority.

Recent polls show the left-right Junts pel Sí (Together for Yes) alliance led by regional president Artur Mas winning around 40 percent support. The smaller pro-independence party Candidatura d’Unitat Popular would get around 6 percent. That could give the separatists the 68 seats needed for a majority in parliament, even if they fall short of a 50-percent majority of the votes.

Support for breaking away from Spain has surged in recent years. As recently as 2010, only one in five Catalans said they favored independence. The turning point came when Spain’s Constitutional Court threw out most of the region’s autonomy statute that year. It also said the definition of Catalonia as a “nation” had no legal standing.

The same court blocked an independence referendum last year while Spain’s central government has frustrated Catalan autonomy at every turn.

Separatist sentiment has also been fueled by the country’s recent economic downturn. Catalonia is more prosperous than the rest of Spain. The region has only 16 percent of its population but accounts for more than a fifth of Spanish gross domestic product, giving Catalonia an economy the size of Denmark’s. Catalan trade accounts for a third of Spain’s total. Around $21 billion in Catalan taxes, equivalent to 8 percent of the region’s economic output, is invested in other parts of Spain — to the mounting chagrin of the Catalans.

Independence is not without risks, however. Among the thorniest issues is European Union membership for which an independent Catalonia would have to reapply. That includes the use of the euro. Being forced out of the single currency could hurt the region’s tourism industry which brings in $12 billion per year.

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