By: Sheri Dickson
As Catalonia seeks independence from Spain it is inevitable that there will be ripple effects, not just in Catalonia and Spain, but also across Europe. While Catalonia has had some level of experience with self-governance as one of Spain’s seventeen autonomous communities, it is an entirely different matter to become an independent nation state. As one of the wealthiest regions in Spain, Catalonia has been “propping up” areas of the country more severely impacted by the economic crisis. However, Catalonia owes € 52 billion to the Spanish government, in addition to other outstanding debt, which is hardly a foundation of financial stability upon which to build a nation. While independence from Spain would give Catalonia the complete autonomy it seeks, consideration of the potential for dire economic disparity cannot be overlooked. What is being called by some as “Catelexit” could have “negative effects that . . . exceed those of Brexit” on the European Union.
Why Catalonia wants independence from Spain
For centuries, there has been a battle back and forth between Catalonia and Spain for Catalonia to gain more autonomy. Historically Catalonia has fought to maintain its language and cultural identity. However, more recently the biggest catalyst for independence for Catalonia has been carrying a heavier economic burden than many parts of Spain.
How independence is likely to impact Spain’s economy
Catalonia accounts for almost twenty percent of Spain’s GDP which means “[s]ecession . . . would cost Spain twenty percent of its economic output.” Catalonia has profited from “maritime power and trade in goods such as textiles, . . . [as well as in] finance . . . and hi-tech companies.” While there are indirect benefits of Spain having a region such as Catalonia with strong industrial resources, there are also direct benefits such as the € 17 billion in taxes Spain collects from the region annually. The loss of this tax revenue is likely to have an impact on the resources that Spain is able provide its citizens. Additionally, if Catalonia defaults on the repayment of the € 52 billion it currently owes Spain’s government or their current portion of the national debt, it could propel Spain into an even greater financial crisis. Defaulting on the debt is a very real possibility; Catalonia is likely to find it difficult to “gain  access to international debt markets, [if that happens it] will lose its ability to renew its debt which would force it to default” on the debt owed to Spain.
The impact independence could have on Europe and the European Union
The sky may not be falling but the euro has after it was announced that Catalonia had “won the right to independence.” The European Union (EU) has said that an independent Catalonia would no longer be part of the EU but would instead be “a third country.” If it wished to rejoin the EU it would have to garner support from all members of the bloc, including Spain, which is unlikely. No longer being a member of the bloc would most likely raise the cost of goods exported from Catalonia making it more expensive for European members to import those products.
Thus, the EU “has sided with Spain’s government and has ignored appeals from Catalan leaders to step in and shepherd talks.” Catalonia’s declaration of independence could open up the proverbial “Pandora’s box . . . [with] [n]ationalist in Scotland, Flanders, Padania, Madeira, Bavaria, Scania and elsewhere . . . clamouring for [their own] independence.” This would have both economic and politically destabilizing effects which by some accounts could have “negative effects that . . . exceed those of Brexit” on the European Union.
Concerns about provocation of Madrid are perhaps one of the reasons the EU has decided to abstain from intervening with the situation with Catalonia. The EU is maintaining that they have “complete confidence in Rajoy [the Prime Minister of Spain] to resolve the situation” and they stated that the situation with Catalonia“[is] an internal Spanish matter.” The truth is that no matter what the EU does or does not do, it is likely to be criticized. If it helps by mediating talks they would likely be seen as inappropriate given that “one of the two parties forms part of the decision making body” of the EU. On the other hand, not intervening may be viewed by some as a lost opportunity for the EU to persuade Spain to resolve the matter in a peaceful and respectful manner. What has been failed to be considered is that “the EU cannot dictate how member states organize themselves or interact with their region.” Article 4.2 of The Lisbon Treaty states that the EU “shall respect [the member state’s] essential State functions, including ensuring the territorial integrity of the State, [and] maintaining law and order.”
How independence may impact Catalonia
Although supporters of Catalonia’s independence probably believe that with the weight of the hefty taxes being paid to Spain lifted off their shoulders their wealth will exponentially grow, the reality is not that simple. Being a small country that is not a member of the World Trade Organization (WTO) would create “significant trade barriers for Catalonia.
The cost of imported goods will likely go up and unemployment will be increased due to job losses. Unemployment in Catalonia is at 13.2 percent, but is estimated by some to likely double if it gains its independence.
Companies, including banks, have already begun moving their world headquarters out of Catalonia since the October 2017 referendum. “[M]any companies say they want to retain protections under EU laws” which they would lose if they remain in Catalonia after it becomes independent and is no longer an EU member. There are other signs of lack of confidence in Catalonia’s future stability.
For example, Standard & Poor (S&P) after the October 2017 referendum placed its ratings for Catalonia on “CreditWatch with negative implications,” saying that “it may downgrade the sovereign debt rating in the next three months.” The rating agency released a statement saying that “[t]he Catalan government’s political confrontation with Spain’s central government has escalated following a referendum in Catalonia on October 1st on the region’s independence.” The statement also said “[w]e see a risk that this escalation may damage the coordination and communication between the two governments, which is essential to Catalonia’s ability to service its debt on time and in full.”
What’s next for Catalonia
It is not likely that the current leadership in Catalonia and the government of Spain will ever see eye to eye. The Spanish government does not see the vote for independence as legitimate or legal and Catalan President Puigdemont does not seem to view Spain as having legitimate reason other than oppression to deny Catalonia the right to independence. With the “Spanish government’s crackdown on [the] vote [that took place in early October by] . . . seizing ballot boxes, the beating of unarmed voters and protesters, and the firing of rubber bullets,” Catalonia is likely to seek independence even more fervently. Catalonians may see this as reminiscent of the aggression by the dictator Franco, who was not only responsible for repressing the culture and language of Catalonia, but also for the deaths of thousands who opposed his political views.
Rajoy has triggered Article 155 of Spain’s constitution allowing for direct rule in the event of a crisis in any of the autonomous regions. If Article 155 gets Senate approval—and it likely will—it would single handedly essentially nullify the referendum vote for independence and suspend some of the autonomy of the region. By exercising this power, it appears that Rajoy is planning to oust Puigdemont from office. “[A] spokesman for the Spanish government said . . . that Madrid was ready to use ‘all the means within its reach to restore the legality and constitutional order as soon as possible.’”
While there appears to be a wave of potential new states seeking their independence like Catalonia, it is a difficult road to travel. What this attempt by Catalonia has proven is that without having provisions in place and international support it can be a futile effort.
 Thomas Oliver, Why does Spain have so many autonomous regions? blog (Nov. 29, 2013, 12:53 AM), https://www.eyeonspain.com/blogs/iwonderwhy/11849/Why-does-Spain-have-so-many-autonomous-regions.aspx [https://perma.cc/H5GH-Z6YL].
 Harriet Alexander & James Badcock, Why does Catalonia want independence from Spain? The Telegraph (Oct. 10, 2017, 8:06 AM), http://www.telegraph.co.uk/news/0/does-catalonia-want-independence-spain/ [https://perma.cc/48UV-22DF] (explaining why Catalonia is seeking independence from Spain) [hereinafter Alexander].
 Daniel Capurro, What an independent Catalonia could look like: debt crisis, closed borders, and immigrants fleeing the country, The Telegraph (Oct. 4, 2017, 1:15 PM), http://www.telegraph.co.uk/news/2017/10/04/independent-catalonia-could-look-like-debt-crisis-closed-borders/ [https://perma.cc/G4DS-9CNM] [hereinafter Capurro].
 Will Martin, A Catalan split from Spain could be even worse than Brexit, Business Insider (Oct. 2, 2017, 3:52 AM), http://www.businessinsider.com/catalonia-split-spain-economic-impact-ing-2017-9 [https://perma.cc/L4SC-V38V] [hereinafter Martin].
 Josep Ma Reniu, Could Catalonia Become Independent, 42 Int’l J. Legal Info. 67, 67 (2014) (discussing the history of Catalonia’s efforts to maintain some form of political autonomy since 1283, when the court established a “co-legislative role” with the king).
 See Martin, supra note 5.
 See Alexander, supra note 2.
 See 80% Vote for Independence in Catalonia. How Should Madrid Respond?, debating eur. (Nov. 10, 2014), http://www.debatingeurope.eu/2014/11/10/catalan-independence-referendum/#.WewoTWhSyCp [https://perma.cc/LL9F-SEJ5] [hereinafter 80%].
 See Capurro, supra note 4.
See Will Martin, Euro drops after Catalan leader says the region has ‘won the right’ to independence, Business Insider (Oct. 2, 2017, 7:10 AM),http://www.businessinsider.com/catalan-independence-catalonia-spain-euro-market-reaction-2017-10?r=UK&IR=T [https://perma.cc/K2WP-27C5].
 See Brussels Says an Independent Catalonia Would Need to Leave EU, EURACTIV.COM (Mar. 27, 2017), http://www.euractiv.com/section/eu-elections-2014/video/brussels-says-an-independent-catalonia-would-need-to-leave-eu/ [https://perma.cc/M68P-P3LD] [hereinafter Brussels].
 Ivana Kottasová, Spain loses 20% of its economy if Catalonia splits, ( Oct. 2, 2017 4:46 AM), http://money.cnn.com/2017/09/29/news/economy/catalonia-independence-spain-economy/index.html [https://perma.cc/5548-2WFL] [hereinafter Spain].
 Lauren Frayer & Laura King, Independence crisis intensifies as Spain prepares to strip Catalonia of local powers, Los Angeles Times (Oct. 19, 2017, 1:10 PM), http://www.latimes.com/world/europe/la-fg-spain-catalonia-20171019-story.html [https://perma.cc/K5E9-B8HZ] [hereinafter Frayer].
 See 80%, supra note 10.
 See Martin, supra note 5.
 See 80%, supra note 10.
 Robin Emmott, Catalonia finds no friends among EU leaders Reuters (Oct. 19, 2017, 4:53 PM), https://www.reuters.com/article/us-spain-politics-catalonia-eu/catalonia-finds-no-friends-among-eu-leaders-idUSKBN1CO31E [https://perma.cc/957Y-U837].
 Susi Dennison, Where’s the E.U. in the Catalonia Crisis?, The New York Times (Oct. 16, 2017), https://www.nytimes.com/2017/10/16/opinion/catalonia-eu.html [https://perma.cc/HT4Z-899H].
Garret Martin, Why the European Union’s hands are tied over Catalonia, The Conversation (Oct. 18, 2017, 7:38 PM), http://theconversation.com/why-the-european-unions-hands-are-tied-over-catalonia-85661 [https://perma.cc/4T5F-ATRA].
Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community, May 9, 2008 O.J. (C 115) 1 [hereinafter Lisbon Treaty], available at http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-european-union-and-comments/title-1-common-provisions/5-article-4.html [https://perma.cc/YX6B-7PQ2] (last visited Oct. 22, 2017).
 See Spain, supra note 15.
 See Spain, supra note 15.
 See Capurro, supra note 4.
See Can Spain’s economy survive a Catalan secession? Al Jazeera (Sept. 30, 2017), http://www.aljazeera.com/news/2017/09/spain-economy-survive-catalan-secession-170930163702214.html [https://perma.cc/6MHD-6PAE].
 Ross Logan, ‘We will not let it happen’ Spain warns Catalonia independence will DOUBLE unemployment, Sunday Express (July 24, 2017 9:00 PM), http://www.express.co.uk/news/world/832587/Catalonia-referendum-independence-spanish-minister-double-unemployment [https://perma.cc/JW67-FCN7].
 Íñigo De Barrón et al., How and why capital fled Catalonia: The global repercussion of the Catalan crisis has alarmed international companies, pushing them to move their legal headquarters, El Pais (Oct. 18, 2017, 4:29 PM), https://elpais.com/elpais/2017/10/16/inenglish/1508139705_469301.html [https://perma.cc/FPD7-GXRW] [hereinafter Barrón].
 See Frayer, supra note 17.
 See Brussels supra note 14.
 See S&P says it’s thinking of downgrading Catalonia’s debt rating, The Local (Oct. 5, 2017, 9:37 AM), https://www.thelocal.es/20171005/catalonias-debt-rating-standard-and-poors-downgrade [https://perma.cc/42B8-N45B].
See Nick Miller, Catalans ready to declare independence as Spain denies legitimacy of vote, The Sunday Morning Herald (Oct. 2, 2017), http://www.smh.com.au/world/catalans-ready-to-declare-independence-as-spain-denies-legitimacy-of-vote-20171002-gysv19.html [https://perma.cc/WT35-R64C].
 See Sarah Wildman, Why part of Spain is trying to secede — and why the Spanish government cracked down on it, Vox (Oct. 2, 2017, 3:40 PM),
History.com, (2009) http://www.history.com/topics/francisco-franco [https://perma.cc/M9VC-FBVX] (last visited Oct. 22, 2017).
See Catalonia independence: Puigdemont ‘will not accept’ Rajoy plan bbc (Oct. 22, 2017), http://www.bbc.com/news/world-europe-41710873 [https://perma.cc/4MML-8VZ6].
 See Raphael Minder, Artcle 155: The ‘Nuclear Option’ That Could Let Spain Seize Catalonia, The New York Times (Oct. 20, 2017) https://www.nytimes.com/2017/10/20/world/europe/catalonia-article-155.html [https://perma.cc/N6MW-7CYW].