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Catalonian independence referendum

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[caption id="attachment_116119" align="alignright" width="500"]Image: SBA73

Image: SBA73

The decision of the Scottish people to remain part of the UK in September sparked relief across Britain. However, the decision by the British government to grant the Scottish people the opportunity to decide their future may have fuelled demands for similar referendums in other European countries.
Nowhere is this feeling stronger than in Catalonia, the most prosperous region of Spain. Although the region has been a part of Spain since the 18th century, it has kept many of its distinct characteristics, separate from the rest of Spain. These differences have helped to drive its independence movement, for which support has grown substantially since the start of the Eurozone crisis.

The downturn in Catalonia has been less severe than in the rest of Spain, with real GDP only falling by 0.8 per cent, compared to 1.2 per cent for Spain itself. GDP per capita also remains higher at EUR26,666, relative to an average EUR22,279 for the whole of Spain. All of this means that despite only having 16 per cent of Spain's overall population, Catalonians contribute 25 per cent of the income from taxation received from the federal government. As such, they feel they pay disproportionately for Spain's economic problems, such as its high levels of government debt.

In response to the growing public support for independence, on the 9 November, the Catalonian government held a non-binding referendum on whether Catalonia should be an independent country. Although turnout was only roughly 40 per cent of those eligible to vote, 80.8 per cent of those who participated wanted Catalonia to become an independent state. The vote has increased pressure on the Spanish government to give Catalonia a formal independence referendum. However, even though Mariano Rajoy, the Spanish Prime Minister, has said he is willing to negotiate with the Catalan people in order to improve ties between Catalonia and the state, he has refused to hold a referendum.

This is fuelled by fears that if Catalonia was granted independence, other regions might also demand their own referendums. Previously the region has been at the centre of an armed conflict with the Spanish and French governments. While armed militias agreed to a ceasefire in 2011, there are growing fears that the conflict could re-ignite if the Basque Country was not also granted independence.

If Catalonia did gain independence, it could help spark further turmoil in the Eurozone. If creditors were to doubt Spain's ability to repay its debts, government bond yields would once again spike. Such a scenario would likely require Spain to seek financial support such as a bailout. The possibility of this has contributed towards other Eurozone leaders, most notably Angela Merkel, publicly backing the Spanish government's refusal to grant any referendum to Catalonia.

However, it does remain unclear whether Catalonia would remain as prosperous in the event of independence. Much like Scotland, it is not guaranteed membership of the European Union in the event of independence, which would require the agreement of all member states.

Additionally, it could face further barriers to trade with the rest of Spain, which would remain its biggest export market. Given this uncertainty, it is perhaps preferable for the region to reach a compromise with the Madrid government, which could accommodate its demands for greater autonomy.

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