This Sunday, millions of voters in Catalonia will go to the polls. And this isn't any ordinary election. Polls indicate that pro-independence parties are poised to win a big majority, which could pave the way for an eventual referendum on whether Catalonia should secede from the rest of Spain.
Catalan nationalism isn't exactly a new force. The region, which borders France, has its own language and has long seen itself as distinct from the rest of the country. But calls for independence have been growing louder during the euro zone debt crisis. Back in September, 1.5 million Catalans took to the streets for a pro-independence rally.
One big recent issue is taxes. As my colleague Edward Cody recently reported, Catalonia is one of the wealthiest regions of Spain, and many Catalans feel that their taxes are being used to subsidize other, poorer states. When the Spanish economy was booming, that was an annoyance. Now that Spain is locked in a never-ending recession, with unemployment at 25 percent, Catalans want a greater say in their own finances.
So what would happen if Catalonia did break away from Spain? A recent research note (pdf) from Credit Suisse has a few notable charts and estimates. Their basic takeaway is that secession would be economically disastrous — and for that reason it's unlikely to happen.
For starters, the rest of Spain would become much, much poorer. With 7.5 million people, Catalonia makes up 20 percent of Spain's economy, and its per-capita GDP is one-fifth higher than the rest of Spain. Catalonia by itself (CAT) would be roughly in line with the euro zone average. The rest of Spain (ES ex. CAT), by contrast, would be one of the poorest countries in the euro, down with Greece and Portugal:
At first, that looks like a pretty good deal for Catalonia. But there's a catch. If the region did formally secede, it might have to leave the euro and the E.U., at least temporarily. (European Commission President Jose Manuel Barroso has said that Catalonia would have to reapply for membership.) Leaving the euro could cause a fair bit of economic disruption. And Catalonia's regional government remains highly indebted — that would be a problem if it could no longer count on the euro zone's bailout funds.
All told, Credit Suisse estimates that Catalonia's GDP would fall by as much as 20 percent if it seceded, as businesses fled and trade with the rest of Spain suffered. "A 20% fall in Catalonia’s per capita income would leave Catalonia falling below the wealth level of the remainder of Spain," the report estimates. "And this is not taking into account the likely effects coming from capital flight, financial instability and the introduction of a new currency."
Indeed, that's one reason why Credit Suisse thinks the calls for independence are more of a bargaining ploy by Catalonia's government than a serious possibility. Not only would secession require a change to Spain's constitution — something the central government is unlikely to permit — but it could cause economic havoc. Indeed, as E.U. and Madrid keep emphasizing these questions, support for the separatist parties in Catalonia appears to be waning a bit in the polls.
"It is thus extremely unlikely," the report concludes, "that Catalonia chooses the option of declaring unilateral independence." Though, of course, that's still not a certainty.