Time to tackle the Catalonia crisis, Financial Times, editorial, 6.05.14

Time to tackle the Catalonia crisis

Editorial
FINANCIAL TIMES, 6.05.14

Split from Spain would be an error but autonomy is needed

Spain is starting to emerge from the crisis that has blighted the country, with recent data showing the economy growing at its fastest rate in six years. But one political issue casts a shadow over the nation’s political future and shows no sign of resolution: the demand by millions of Catalans for independence.

The cause of Catalan independence has ebbed and flowed in Spanish politics for nearly a century. But in the past few years the Catalans, now 7.5m strong, have voiced their secessionist demands more forcefully than ever. Polls show that almost half of the Catalan people favour independence and about 75 per cent want a referendum on the issue.

One of the leading arguments for secession, in addition to the region’s history and separate language, has been economic. It is home to a seventh of Spain’s population and is among the wealthiest and most productive parts of the country. For years a healthy chunk of its tax revenues has in effect been given away to help fund the rest of the country’s public services. The sense that Catalonia is bailing out the poorer Spanish regions has become increasingly painful for its people.

Secessionist demands have created a rolling crisis involving Catalonia and the national government in Madrid. Artur Mas, the Catalan president, has called an independence referendum for November 9. But last month the Spanish parliament declared it would not tolerate such a move, striking down the formal request. Mariano Rajoy, Spain’s prime minister, insists such a referendum would violate the 1978 constitution.

While the Scots are set to vote this September in an independence referendum that has been formally approved by the UK parliament, no such compromise has been achieved in Spain. Mr Mas has admitted he will not press ahead with the referendum if it lacks legality. But he has warned that popular sentiment must find an outlet one way or another.

If a head-on collision is to be averted, a “third way” between secession and the status quo must be found. Many moderate Catalans, including business leaders, recognise that a complete break with Spain would be dangerous, raising questions about Catalonia’s membership of the EU and the region’s financial arrangements. Madrid must therefore give Catalonia more autonomy, under a new national constitution.

The core issue here would be finding a new fiscal settlement between Catalonia and Madrid. Mr Mas has argued that Catalonia’s fiscal deficit – the difference between what it sends to Madrid (in the form of taxes and contributions) and what it receives – is about 8 per cent of Catalan gross domestic product. Clearly, there are limits to how far Mr Mas and his fellow politicians could reduce their national contributions without triggering a fiscal crisis in Madrid. And in any federal state, however loosely constituted, there are bound to be transfers from rich regions to poor. But Madrid cannot ignore the legitimate concerns of the Catalans that their own public services should not be underfunded when compared with those in other parts of Spain.

Striking a deal on these issues will not be easy. But Mr Rajoy must shake off any illusion he may have that the strength of feeling in Catalonia will fade once the economy strengthens. Catalans’ desire for independence is not some passing political whim.

Spain’s prime minister must look for a compromise. It is disingenuous of him to hide behind the Spanish constitution, arguing that it blocks the route either to a referendum or to secession. In the strictest terms, that may be so. But the constitution should be able to accommodate several core Catalan demands without bringing about the break-up of Spain. It is time for Mr Rajoy to recognise this.

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