Catalonia’s Election: What Lies Ahead for Spain and the EU

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Wharton's Mauro Guillen discusses Catalonia's recent election and what lies ahead.

Don’t expect any final resolution on Catalonia’s independence before early 2016, says Wharton management professor Mauro Guillen in this Knowledge@Wharton interview. That is because the September 27 regional vote in Catalonia did not produce clear majority support. Though not an official referendum, the vote was viewed as an unofficial measure of support for independence. Yet, while the pro-independence coalition won a majority of seats in the Catalan parliament, it failed by two percentage points to win more than 50% of the vote — widely seen as the requirement to push an official referendum over the top.

For now, the mixed vote has taken some steam out of the pro-independence movement. Any final resolution must now await national Spanish elections set for December 20, which could potentially soften relations between the federal and regional governments. Up until now, the major factions in Catalonia and Madrid have taken a very hard line towards each other.

A key question is: Will national elections produce more compromise-oriented politicians who can find middle-ground policies that would push Catalonia public opinion decidedly towards remaining part of Spain? Given the corruption scandals plaguing the central government, there is more potential for change today. Guillen also explains what’s at stake for Catalonia, for Spain and the European Union — all would lose with independence — while noting that concessions will likely need to be made on all sides.

Meanwhile, some calming may be in order. According to Reuters, just two days after the election, “Catalonia’s Supreme Court indicted the acting head of the Catalan regional government,” because he had earlier “pushed ahead with a referendum on independence from Spain last year despite such a vote being ruled unconstitutional by the courts.” The charges were leveled against Artur Mas, who is viewed as the chief figurehead of the separatist movement. He was charged with “disobedience, abuse of authority and usurping authority.”

 An edited transcript of the conversation appears below.

Knowledge@Wharton: Mauro Guillen is a management professor Wharton and he’s also a native of Spain, which makes it especially appropriate, because we want to talk about the recent elections in Catalonia. There was a court decision in Spain last year, which prevented a legal vote on independence, but nevertheless these regional elections were viewed by many as a sort of plebiscite, or a proxy for that. And the elections could have serious ramifications. Some thought there was going to be a clean outcome. It didn’t come out so clean, or so clear. Could you put it in context for us? It’s a little bit messy, and it’s going to make the politics messy going forward.

Mauro Guillen: Yes, I think messy is the word. Although as you know, democracies are always messy. But I think the outcome of this particular election is especially messy. And this is only three days after the election … so one has to be careful about over-interpreting the results, because we don’t know exactly what kinds of conversations and coalition-building efforts are being made by the various parties….

I also want to clarify one important thing: I was born in Spain, but outside of Catalonia, although my father was from Catalonia. I don’t claim, though, to represent both sides of the issue. And I think in Spain, in Catalonia, everywhere in the world — there’s always differences of opinion and a diversity of views.

“I think a separation of Catalonia from Spain would be, at least in the short run, very harmful to both Spain and Catalonia.”

But yes, the outcome is messy because on the one hand … the parties that proposed independence for Catalonia won a majority of the seats. But there are two parties there. There were two lists competing for seats. And they don’t entirely agree as to what the process should be, moving forward. That’s one of the problems here.

The other is that although the [separatists] got a majority of the seats, they only got about 48% of the votes. And that is because the electoral law is such that the rural areas in Catalonia have an over-representation in Parliament relative to their population, whereas the greater metropolitan area of Barcelona, which includes many industrial towns around it, is underrepresented in terms of its population weight. But the nationalists, the independent movement, is stronger in the rural areas and the smaller cities than it is in Barcelona itself.

So the result is very messy. And it is fair to say that the last couple of years have resulted in a situation in which a Catalan society is deeply divided. Evenly split, apparently, between these two options.

Knowledge@Wharton: There are a lot of issues connected with an independent Catalonia. There’s the membership in the EU … use of the euro, membership in NATO. There’s also a big issue about debt that Catalonia owes, but that is also tied in legally with Spain, and Spain’s overall debt.

Guillen: If any part of an existing country were to become independent, there are a number of very difficult issues that need to be addressed. One is, there is debt that may be attributed to the region, but a debt that is actually debt of the entire country. But there are also resources. So those conversations, those negotiations in any case, not just in this case, would be extremely difficult — because there are assets, and there are liabilities. And if there’s a divorce, you need to come up with some arrangement as to how you are dividing up not only the assets, but also the liabilities.

The issue of the European Union membership and the issue of NATO memberships, I think those two are separate. But I don’t think they are as severe in this case as they would be in the Scottish case. Because in the case of Scotland, what one has to remember is that most of the population in Scotland is pro-European Union — as it is in Spain and in Catalonia. But if you go to England … a majority of the population is probably against membership in the European Union. And Prime Minister David Cameron has promised a referendum in the U.K. about EU membership, right?

So that’s all one very big difference. That is to say that if Scotland were to become independent from the U.K., then probably England and Wales would leave the European Union. Because most people want to leave, right? But Scotland would remain a member, right? How quickly depends on how fast Scotland would be able to replicate the kinds of institutions that Europe expects you to have, like a central bank and all of the institutions of the state.

In the case of Catalonia, both people living in Catalonia and people in the rest of Spain want to be part of the European Union. So the issue there is, would Catalonia be ready? And the other issue, of course, is whether any existing member country would veto Catalonia’s membership, because Catalonia would need to apply. And people are saying, “Well, Spain might veto it, or somebody else might veto Catalonia.” And that’s obviously a distinct possibility.

“It’s very difficult to set into motion a process of separation, a process of independence, when you have 50% of the people living in that part of the country opposed to it.”

But what I think is very clear — and this is not just an opinion of mine, it’s based on analysis, but of course there are other analyses that come to the opposite conclusion — I think a separation of Catalonia from Spain would be, at least in the short run, very harmful to both Spain and Catalonia. I say this because obviously there is a very long shared history. But more importantly, because it is still a fact that has been demonstrated by this election four days ago, that the support for independence in Catalonia is at best half of [Catalonia’s] population. So it’s very difficult to set into motion a process of separation, a process of independence, when you have 50% of the people living in that part of the country opposed to it. The rifts, the conflicts, the frictions that this would create I think would be so severe that I think most reasonable people would think twice about the benefits from that separation. Catalonia, the elections have demonstrated, is divided.

I would like to add another thing, which is very important. Both the central government in Madrid and the Catalonian government, with their actions, have polarized public opinion and the voters — as if there were only two choices: things remain the same or Catalonia becomes independent.

And there is very good survey research indicating that if you offer Catalonians, people who live in Catalonia, a third choice — somewhere in between, for example, to renegotiate the way in which Catalonia relates to the rest of Spain, or perhaps to create more of a federal system, so Spain is not a federal country like the United States or Germany … then suddenly you get maybe 20% of people want independence, 20% want the status quo. But you have a large majority, like 60% of the population, who would rather take the third, intermediate option.

Knowledge@Wharton: For those who want to become independent, what is their chief complaint? It has something to do with feeling that their region produces more tax per capita … than other regions — so that they’re giving the federal system more than they’re getting back…. So, what are the chief complaints for those that want to break away?

Guillen: First of all, one has to be respectful about people’s identities. I think everybody has to respect that some people may feel more Catalan than Spanish. Or they may feel only Catalan. Or they may feel Spanish, but they also think that they have a connection to Catalonia, right? So, there are all sorts of identities, and shared identities or dual identities that people have. And I, personally, want to be really respectful to all of them, including the people who feel that Catalonia should be an independent country — and they feel only Catalan.

The reality, though, is that those people are in the minority. That is the fact that I think this election corroborates. Now, having said that, there are also other more rational issues at play, because identity, at the end of the day, is an emotional issue. But it should be respected. That’s really important.

There’s the money issue, as you said. Catalonia is one of the three richest parts of Spain, along with Madrid and the Balearic islands, which are on the Mediterranean. Well, in every country in the world, the parts of the country that are richer make a bigger contribution to the budget — just because they’re richer. That happens in the United States. California makes a bigger contribution than Alabama to the federal budget, in the sense that they get back in services less than what they contribute in the form of taxes. This happens everywhere.

So the situation of Catalonia within Spain is different than the situation of Scotland in the U.K., because Scotland, because of the decline of the manufacturing industry, is not as rich as some other parts of England, especially the London metropolitan area. And that’s also the case in Canada, with Quebec. So the Catalonian case is different. So, absolutely, Catalonia is contributing more to the central budget. But that’s not necessarily because it is being discriminated against. A lot of that — I’m not saying that all of it — but a lot of that is driven by the fact that they’re richer. And therefore, in any political system, in any arrangement that you can find, you would always see that richer regions contribute more, proportionately speaking, than the amount of services or the value of the services that they get from the central budget.

“Both the central government in Madrid and the Catalonian government, with their actions, have polarized public opinion and the voters — as if there were only two choices….”

That’s important to clarify. Having said that, once again, there are people who believe that Catalonia should be independent. I think they are more driven by their identity, and their sense of identity, as opposed to by the numbers, although the numbers, as they exist today, exacerbate that feeling of, “Oh, we’re contributing a lot.”

But you see, an independent Catalonia, in the context of Europe, will also be richer than the average country in Europe. So they would also make a net contribution to the rest of Europe. And as you know, Europe has very aggressive programs in place to help relatively backward parts of Europe cope with that backwardness. And they get more money for investments in infrastructure. So, Catalonia will always be — because it’s rich, it’s a successful “country” — a net contributor, even if it became an independent state within Europe.

Knowledge@Wharton: What do you think is most likely to happen? And also, how big is the risk over this debt issue? It’s a fairly substantial debt, as I understand it. And if there were some breakdown between Spain and Catalonia, could that possibly lead to a financial crisis that would affect the rest of Europe?

Guillen: Even if there’s no independence of Catalonia, just the messy political environment in which the relationship between Catalonia and the rest of Spain, or the central government, is as it is now, is something that doesn’t create the right conditions for investment or for job creation. The Spanish economy, including Catalonia, is actually doing quite well. It is one of the fastest-growing economies in Europe right now, growing at slightly more than 3%, which is not bad, given the circumstances.

So this uncertainty is going to be detrimental to economic growth and job creation. But the other big thing that is coming up is, in December we have national elections in Spain. So quite frankly, I think the answer to your question as to what’s going to happen next in Catalonia is that pretty much everything is going to wait until the December election, which is two and a half months away. And depending on the outcome of that election, then we will see what’s going to happen with, essentially, this impasse that we have in Catalonia– in which you have one half of Catalonia being in favor of independence, apparently, given the election results, and another half being opposed to it. Although, remember that I said that if you give them a third option, the situation would change.

But essentially, there are two possibilities here. One is that the new government emerging in Madrid will be similar to the one that we have now, which … has been trying to polarize the issue as if there were only two options. Or there’s another possibility, which is that a different kind of government emerges, one that is willing to propose a third intermediate option.

Knowledge@Wharton: To compromise.

Guillen: Right. And so depending on the outcome of the national election, in which Catalonians would also get to vote, then we will see things evolving in Catalonia itself beginning in January: down the path of more conflict and more friction and continuing gridlock, because essentially the two opposing views are very balanced; or as an alternative, they will go down a path of maybe a constitutional reform, maybe very extensive negotiations as to a redefinition of how — not just Catalonia, but possibly also other parts of Spain — relate to the central government. There is a lot of discussion, for example, about taking some steps toward a federal system.

Image: “2012 Catalan independence protest (75)” by Kippelboy – Own work. Licensed under CC BY-SA 3.0 via Commons – https://commons.wikimedia.org/wiki/File:2012_Catalan_independence_protest_(75).JPG#/media/File:2012_Catalan_independence_protest_(75).JPG

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