Catalonia Threatens Spain with “Financial Bloodbath”

Catalonia’s independence would set off Spain’s debt time-bomb.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

On Monday El Pais published leaked excerpts from what it claims to be the Catalonian regional government’s road map to independence. The secret document includes a plan for the region to unilaterally break away from Spain should its citizens be prevented from holding a referendum on independence in the fall.

It provoked a fierce backlash from Madrid. “This proposal is an unacceptable attempt to blackmail the state,” Spain’s Prime Minister Mariano Rajoy said in a hastily convened press conference. Spain’s defense minister María Dolores de Cospedal likened the plot to a coup d’état. In the meantime, Madrid continues to refuse to even entertain the idea of allowing a referendum on Catalan independence, despite the fact that in just about every survey of the last few years 80% of Catalans, including many unionists, have requested one.

It would mean the loss of 25-30% of Spain’s gross domestic product (GDP), says Spain’s Minister of the Economy, Luis de Guindos. And that’s something the government “will never let happen.”

But Catalonia knows it has a card up its sleeves: its tick-tocking debt bomb. Catalonia can no longer issue its own debt and depends on the central government’s national liquidity fund (FLA, for its Spanish acronym) for about 60% of its funds. As ratings agency Fitch warned in April last year when it sent Catalonian debt even deeper into junk territory, the region has grave liquidity problems that will require “proactive management” and “close collaboration with the central state ” — something that’s clearly not on the cards any time soon.

At the same time, Spain’s public debt continues to grow, recently bursting through 100% of GDP. Even with historically low interest rates (gracie, Signor Draghi), the price of servicing government debt can spiral out of control. Between 2011 and 2015 Spain’s central government spent €121 billion – the equivalent of 12% of annual GDP – on interest payments.

As Catalonia’s finance minister, Oriol Junqueras, recently noted, Rajoy’s government has already burnt through the €65 billion social security fund surplus it inherited in 2011 and is now using a toxic blend of tax funds and public debt to finance the country’s widening pension deficit, which is forecast to reach between €10 billion and €15 billion a year.

In other words, Spain’s deficit, already one of the largest in Europe, is going to remain high for the foreseeable future, despite all the threats of multi billion-euro fines emanating from Brussels. As the widely renowned Columbia University Professor of Economics (and fervent Catalan separatist) Xavier Sala i Marti recently pointed in an interview on Catalan television, all of the debt, including the debt owed by the Catalan regional government, is in the name of the King of Spain:

It’s (Spain’s) debt. They already have a debt load of 100% of GDP. If Catalonia declared independence tomorrow, and Spain were to say “you’re going to be kicked out of the EU for three generations” and everything else they threaten us with, we’d just say to them, “well, these little papers of debt (bonds), you can have them for the next three generations.” All of a sudden, they’d have a much smaller GDP and a much larger debt overhang (around 125%)… A debt-to-GDP ratio of 125% would not be feasible. Spain would not be able to pay the debt they owe the Spanish banks, the biggest holders of Spanish bonds. And that would ruin them, triggering a financial bloodbath.

Such an outcome has also been postulated by the U.S. rating agency Moody’s: in effect, any default on Catalonia’s debt would be interpreted by the markets as a Spanish default. In other words, whence goeth Catalonia, goeth Spain.

And right now, Catalonia’s government seems determined to stage the mother of all showdowns with the central government in Madrid: a financial fiasco for both sides. Catalans are a notoriously prudent, cautious people. As such, it’s fair to assume that at least some of what lies behind the regional government’s recent escalation of tensions with Madrid is bluff and bluster.

But a big bluff can sometime set one down a very dangerous path from which it can be difficult to extricate oneself. The Catalan government may be hoping that threatening to declare independence unilaterally, or even following through on the threats, will finally push the Spanish government into having to compromise. But it’s a massive gamble.

In some parts of Catalonia, including Barcelona (from where I’m writing this article), public support for independence appears to be on the wain. But for many nationalists in the Catalan government, turning back with so little of substance to show pro-independence voters after promising them so much may not be an option.

As for Rajoy’s government, its staunch defense of the country’s territorial unity is a vital vote winner for its core supporters. And right now, with new corruption scandals engulfing senior members of Rajoy’s People’s Party breaking every week or two, these are votes it can ill afford to lose, especially with new snap general elections growing increasingly likely.

In other words, the prospects of a win-win solution being found in the coming months are by now slim. The chances of a lose-lose outcome are growing by the day. Does this mean that Spain, the Eurozone’s fourth largest economy, is on the verge of breaking up? Probably not. But to prevent that from happening, Madrid may end up having to take drastic (and deeply symbolic) actions, including invoking article 155 of the constitution, which will effectively put an end to all forms of Catalan self governance. And that could merely serve to strengthen the resolve of Catalan separatists while further polarizing divisions within Spain’s richest region. By Don Quijones.

When locals can’t afford to live there anymore, they get restless. Read…  The Backlash to Spain’s New Property Boom Has Begun

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  85 comments for “Catalonia Threatens Spain with “Financial Bloodbath”

  1. Eurocent says:

    Rajoy can and should allow a referendum, which would result in NO, that is, Catalonia would stay and no Armageddon would happen. 80% of catalans want a referendum. That’s how modern democracies solve things

    • Klaus says:


      Modern democracies does not solve anti-constitutional issues through referenda among a small part of the sovereignity.

      Does anyone envision a referendum in Kansas deciding on a US-as-a-whole constitutional issue with the result having to be binding to the other states?

      • Eurocent says:

        There is a clash of sovereignities here. Two sides claiming they do have the sovereignity. You can reconcile that divergence through either vote (modern) or violence (middle ages, banana republics, usw).

        • Klaus says:

          Clash of sovereignty? And where is stated that there is a catalan sovereignty?

          And even if you try to reconcile through vote (modern, as you say), why is that suppose to affect only catalan voters?

        • Gershon says:

          Both sides are and will remain Goldman Sachs looting colonies.

      • Hiho says:

        So following your train of thought, During the cold war, Poland had not the right to have its own state outside the urss despite polish people wanting just that, because it was something that affected the entire URSS. Agree?

        This is just bullshit, according to you africans had not the right to seek independece from their metropolies because hey, the whole empire has to decide.

        Wait, it gets even better, oh, what sovereignity? They do not have their own state so they are not sovereign, so they cannot choose to have their own state.

        Genius. The master of tautologies.

        • Klaus says:

          Poland was a preexisting country invaded and then kept by force.

          Catalonia never, never has been a preexisting country nor a state.

          Sovereignty? All Spaniards (including catalonians) massively decided that sovereignty was in all Spaniards. As you don’t know history, ask tour parents.

          Talking abour comparisons

        • Hiho says:

          That is the standard argument in Spain, it never existed. Well first of all it is not true, and even if it were, it is completely irrelevant.

          The United States did not exist before the indepence war, neither did India as such an united nation before its independence,
          nor syria, nor algeria, nor australia, nor Israel nor every single latin america country, nor even Spain before the islam

          Then we go back to Pangea, the only, the single pure original sovereign territory. Sorry if thatthe does not pass the laugh test.

          It is a shitty argument, it like yeah, so what? Don’t you have something better?


        • Hiho says:

          By the way, do not focus on poland and ignore my other examples. What about the afrikan countries? They did not exist before, whole empires suffered when they became independent.

          Go and tell them that it has been a mistake, they could not become sovereign because the whole french or british empire should have had agreed. Go ahead and tell them, the rest of the colonial armies will come soon to fix this error of history.

        • Klaus says:

          So you don’t like yor own Poland example anymore. Ok, then.

          Let’s talk about African countries seeking independence from their metropolies.

          Are you actually suggesting Catalonia is a colony from…what metropoly exactly?

          No, sir. Catalans are part of a nation, a country and a state called Spain. Called Spain for over 500 years. Something Catalonia has never been for even 5 years. It was a territory run by a French vasal, then a territory part of the Crown of Aragon (being less than on third of the territory), then a territory part of Spain for over 500 years.

          Colony? What are you talking about?

        • Hiho says:

          Oh wow can you read? Catalonia is not a colony, so far so good.

          I just gave examples to ilustrate that your 2 main points are ludicrous:

          1) both parts must agree/vote.
          2) it was sovereign before so it has no right to decide on its own.

          Ludicrous. You just have to read the other comments of non-spaniards around here to realize that noone buys your arguments.

          And please do not manipulatr my words again.

        • Hiho says:

          Mistake. I mean:

          1) it was not sovereign before..

          Anyways the discussion is pointless, as someone has said spain is a colony and also would catalonia.

          Want to know where sovereignity resides? Open your wallet.

          Bye bye

        • Klaus says:

          Hey, they are your examples, not mine.

          And I don’t manipulate your words. It’s your lack of arguments.

          You say my point that “both parts must agree/vote is ludicrous”.

          You see, my point is there are not two parts, but one. It is that single part the one that has to decide its future, according to what was freely and commonly agreed when all Spaniards approved the Constitution less than 40 years ago.

          By the way, the Constitution was approved by 88.5% of voters (with a 67% turnout). In every single Catalan province both the approval and turnout was even larger than those of Spain as a whole.

          These are the rules you don’t want to follow. Is this your sense of democracy?

          On the second point, Catalonia has NEVER been sovereign, so there is not even an historic claim to make.

          Of course you don’t need to have had sovereignty in the past to become independent but, not having a historic claim to make, the ball is on your court:

          What are your basis for your claim? That catalans may want it? Ok, we as a whole decide on it.


          Because we freely and commonly decided that it woud be decided by all

          Because democracy works according to laws and rules we freely agree upon

          Because if you don’t like the laws and rules you have every right to change them…according to the rules to change them. Seek a majority, get it and change them

        • Wolf Richter says:

          Klaus, Hiho, and others… thanks for the discussion. It was very interesting. But it’s time to let go and move on.

      • das says:

        spain modern democracy ? haha nice joke

    • David, by the lake says:

      Things will really get interesting over here in the US when states and groups of states begin having similar conversations. I suspect it will become more commonplace as conditions continue to deteriorate over coming years and decades.

      • Klaus says:

        It may be so interesting, but the core and legal conditions are so different.

        Correct me if I am wrong, but the US is a product of states deciding to create the USA, which is not the case in Spain where Catalonia never was a sovereign state. Not even a state. Never.

        However, Spaniards (and catalans for that sake) massively decided on a Constitution which defines sovereignty residing in all Spaniards. So all Spaniards are the ones having to decide wether or not a territory may secede.

        • TJ Martin says:

          Ahem Klaus but perhaps a history lesson is in order before banging madly away on a subject you are obviously uninformed on at best ;

        • Kent says:

          To be precise, 13 states formed the USA. Then, as Americans moved westward and killed the indigenous populations, new states were formed.

          In 1861, the southern states decided to band together and form a new nation, the Confederate States of America (CSA) primarily due to northern states decision not to enforce certain provisions of the American constitution to return escaped slaves.

          The CSA attacked the USA, but the USA ultimately prevailed in a lengthy war which killed hundreds of thousands of citizens from both sides.

        • Scott says:

          My understanding is that that Catalonia is almost synonymous with the Aragorn, which was an independent country on the Iberian peninsula for centuries. It had a unified monarchy with Castille starting in the 15th century (Ferdinand and Isabella) and the two were largely autonomous for even longer. Even after the creation of a single government for Spain, Catalonia had periodic wars to increase autonomy/gain independence.

          Catalonia historically had its own language, culture, legal systems and economies. It’s case for independence is probably stronger than Scotland’s (as well as those for any number of countries in eastern Europe).

      • TJ Martin says:

        That conversation has been ongoing in VT for over two decades .. with California etc now threatening to enter the conversation along with several Alt Right dominated states .

    • Comment *
      The all premise is false, Catalans voted on referendum is about 25 to 30% of total voters
      from there 80% claims wanting a referendum , so do the maths and will understand the manipulation on it.

      • Wolf Richter says:

        So, yeah, what kind of mandate does any US President have when only 50% of the eligible voters cast a ballot, and only about half of them vote for the winner? This applies to all democratic processes. Nevertheless elections count, even if participation rates are low.

        BTW, the turnout as published by the news media was about 37% (plus some: “however, the number of votes could increase over the next days….” as the article says)

        The Catalan government’s preliminary data put the turnout at 41.6%.

  2. Andy says:

    I agree, let the Catalans have a vote and let people on both sides of the argument try to promote their version of the facts. Let the Catalan voters decide.

    • Klaus says:

      Oh, and why not let all Spaniards decide on something that affects all of them?

      • Eurocent says:

        Brexit, anyone?

        • Klaus says:

          Brexit, voted by all Britons

        • Hiho says:

          But klaus, according to what you said, brexit should have been voted by the entire european union

          That is the far comparison, not “all britons”.

          It is a perfect example to ilustrate that your argument is ludicrous.

          By the way I am catalan and I would probably vote no. But hell, let us decide. It is ironic to think that the more people like klaus insist on us not voting, the more grows the willigness to become independent.

          Democracy, this meaningless word in Spain.

        • Klaus says:


          According to me brexit should have been voted by the whole EU? No!

          Both joining and leaving the EU had rules freely agreed by the UK and the UE. No rule said that Brexit had to be voted by the whole EU.

          Democracy? Democracy is also abiding by freely agreed rules. In the case of Spain they were commonly agreed less than 40 years ago.

          What kind of democracy do you push for? A democracy in which YOUR rules always prevail on any other?.

          Funny you use the word “Ludicrous”. It is a word infamously used by a Catalan foreing affairs official in a BBC interview. I suggest everyone to watch it. He is nowhere to find ever since

  3. Nicko2 says:

    I think we’ve discovered with Brexit, referendums aren’t the most reliable or desirable method of enacting major pieces of legislation.

  4. Andy says:

    I think you will find that people on both sides will give conflicting views on what sovereignty Catalan had in the past, so that won’t be solved here. My point remains, let people on both sides of the argument try to promote their version of the facts – and let all the people living in Catalonia decide.

    Living here I can tell you there are a lot of really sincere and passionate Catalans who believe in the “the cause” and also a lot of people who think a referendum is a “daft idea”. So let them decide.

    • Klaus says:

      I have no doubt that many catalans have a position, as every Spaniard may.

      But I still await one single, legal and rational reason why catalans shloud be the only ones to vote

      • TJ Martin says:

        Read the history !

        • Klaus says:

          Please note Catalina never was a country nor a state. But joined the Crown of Aragon (being less than a third of its territory).

          Te Crown of Aragon then joined by marriage with the Crown of Castille over 500 years ago.

          Therefore Catalonia has never in the last 500 years been a sovereign country or a state. And neither has been previously.

          As you may read, it was a territory run by a vasal

      • Tim says:

        Why shouldn’t they? Seriously.

        Once you’re in a country (even if invaded by force) you lose the right to object?

        Are you insane?

        • Klaus says:

          You have every rigth yo object. And if you hace been invaded you hace every right yo fight foro tour rights.

          But if hoy have freely, sincerely and voted to follow some rules, you have the legal and moral obligation to follow the rules.

          And if you don’t like the rules, you have every right to try to change them…by following the rules to changing them, not by imposing your thoughts on everybody else

        • Hiho says:

          There is no cohesion whatsoever in your own arguments, klaus.

          It makes no sense, just say: Madrid decides so fck off you will not vote.

          Do not try to legitimate what cannot be legitimated. Take a look at history: scotland, poland, latin america, brexit, the usa, india, algeria, syria, Vietnam, taiwan.

          Some of then used to exist as independent countries, some not. Some of them were part of the big country willingly, some not. Some of them voted, others fought. Some were colonies and some not

          Focus on the example you like the most, there will always be dozens more that i
          Invalidate your “”metropolies” also have to vote.”

          And yeah for gods sake, I know that Catalonia is not a colony, just said metropoly to make my point.

        • Klaus says:


          I don’t say Madrid decides so f**k off.

          I say we all got to decide on our country, on our state less than 40 years ago with overwhelming majority approval near 90% (and larger approval in Catalonia).

          It’s your case. I abide by the freely and commonly agreed rules.

          Do you? And if not, why not? Put simply, because you don’t want rule of law and democracy. You want independence by any mean

  5. cdr says:

    It’s difficult for me to follow this intrigue. Spain is in bad shape. Italy is in bad shape. A subset of Spain wants to go it alone and leave one or both in worse shape. Portugal is a mess, too.

    Here’s what I think will happen.

    Nothing. Maybe some noise. Then, Nothing.

    Anything that may negatively impact the public finance fraud called ECB QE will be humored while in the talk stage and then shut down before it can be of any significance. Watch Greece for a hint. Today … troubled talks. In a couple of months when things are about to hit the fan … AGREEMENT for another few years.

    Kick the can … learn from it.

    • Kent says:

      I travel to Spain on occasion. I was in Madrid in 2006 and it was clean, people were working, everything seemed to be humming along quite well. I went back in 2008 and the place had gone to hell. Garbage wasn’t getting collected, businesses were shut down all over the place, and folks were marching in the street under red flags.

      I was in Madrid and Barcelona in 2015 and it seemed just like 2006 again. Both cities are very beautiful and lively. I understand that unemployment is high, especially among young folks, but apparently they’re getting on by living with their parents and playing video games.

      Though I understand the view as an American tourist is likely very different than that of a Spanish worker.

  6. Jaime says:

    Oh dear, Spain the needle stuck on the same track for 100 years or so: the Basques, the Catalans, the corrupt and donkey-stubborn (and brained) Madrid government.

    The pragmatic solution would be to allow a referendum, which would then almost certainly deliver a NO vote, as the majority are wary of independence.

    • Klaus says:

      No problem, but hold the referendum among all Spaniards, as ir should legally and rationally be

      • Jaime says:


        One thing that you must understand is that Spain is not, and never has been, a rational place.

        It is Morocco, Afghanistan, Switzerland and Ancient Rome.

        We are Berbers, Arabs, Jews, Basques, Catalans, Celts, stuck in the cesspit of ancient hatreds and all too long memories…. It is not a happy place for a rational and civilised human being.

        If you can find any translations, the writer Perez-Reverte -an ardent Spanish nationalist, but an intelligent one – has much to say on the subject of the awfulness of Spain.

        For a simple visual demonstration, try viewing some videos on Youtube of the Spanish Legion parading with its crucified Christ -the Christ of the Good Death. They say everything…….

        • Klaus says:

          No doubt the are traditions difficult to understand and I may add some to yours (anybody looking to videos portraying bulls with flames put on their horns in Catalan town parties may be surprised).

          And there is no doubt Spain is a true melting pot of ancient and modern civilizations (isn’t every Meditearranean country?), but some people would like to work for it being a rational place.

          The late 70s, with all its problems, were a good example of it. People freely and commonly agreed on certain rules safeguarding peace, freedom, political participation, freedom of speech, etc with all its limitations and problmes as in every other first-world country. And that work went on during the 80s and so on.

          Now we have some people trying to subvert all that work and exceed their rights eliminating those of the rest.

          As if you and me freely agree to buy a deck of cards and play poker, and all of the sudden you not only determine that the rules for playing poker must be those of rummy but also demand that I accept it and play by your new rules without a say. And in case I refuse, you demand the right to keep the deck.

          Now, that is certainly illegal and surely does not seem rational.

          There are ways to attain independence and I would support them, like holding a nationwide referendum but, it’s just funny how those seeking independence talk about democracy up to the point when reminded that every Spaniard should vote. Then, they deny the right to vote to everyone but Catalans.

          That is their idea of democracy: eliminating freely and commonly agreed rules and setting up the new rules that better suit them

      • Jaime says:


        Here’s another illustration of Spanish reality.

        A common saying among Spanish lawyers is this ‘You will see the law followed in Spain the day the Virgin Mary herself turns up as judge.’

        It’s important to understand that In Spain, there is effectively no real rule of law, in many cases.

        This all leads to considerable cynicism regarding arguments of legality and so on.

        The Spanish Constitution was also in effect an imposition which many voted for out of fear and weariness, not real choice: the aftermath of the dictatorship was pregnant with violence and a very angry Army hovered in the background ready to seize power if the vote went the wrong way.

        The party which most often refers to the sacredness of the Constitution are the Conservatives (PP), the most corrupt party -beating even the Socialists – and the true heirs of Franco.

        Concepts imported from outside simply do not apply in Spain.

        • Klaus says:

          You somehow forget to mention the absolutely corrupt Catalan main party. So corrupt it had to change its name.

          You say “The Spanish Constitution was also in effect an imposition which many voted for out of fear and weariness, not real choice”. I don’t have data on that. Maybe you may share it.

          The data I have is that over 80% of Spaniards (including over 80% of Catalans) voted that Constitution only 40 years ago with an over 80% turnout. Seems like a nice support to the core rules some people want to eradicate…without even trying to follow them to reach their goal

  7. Alan says:


    Because they are the people living there!

    When Scotland held their vote, the English weren’t given a vote, and rightly so, IMO

    • Klaus says:


      I can’t talk about Scotland’s history and rights.

      In Catalonian’s case it’s not legally, historicallly or rationally so to break away a territory this way

      • Raymond C. Rogers says:

        It’s a good thing you were not running the colonies during the revolution in what would be the US.

        “Wait just a second everyone. Now I know you want independence, but we have to hear what the red coats want.”

        • Klaus says:

          Are you actually implying Catalonia is a colony? Really?

          Are you actually implying that abiding by the rules freely and commonly agreed less than 40 years ago is the same as waiting to hearing what the red coats say?


      • Jame says:

        The Catalans have a much weaker legal and historical case than the Basques, who wish to re-establish a sovereign state on the basis of the territory of their old Kingdom of Navarre, which was a viable and wealthy state between the 10th and the 16th centuries, and maintained many privileges marking its special status until the 19th century.

        However, if there were an overwhelming majority, and I mean about 90% of Catalans in favour of secession, including major business leaders, then that would be a good argument in political terms.

        Unfortunately for the nationalists, there is no such support, nor likely to be.

  8. Maximus Minimus says:

    There is a case to be made in favor of bigger state entities vs fractured states. In the world where bullies rule, it can be a defense against bullying. And it might allow to print your own money to pay for other peoples products.
    If people voted with their brain rather than arz, referendums would be a right right form of decision making.
    Separatist referendums are a sign that a society has peaked and is on it’s way down.

    • Klaus says:


      You may be right, but please note separatists don’t want a legal referendum.

      A legal referendum, as said by the Spanish Constitution massively voted by Spaniards (including catalans) just 40 years ago, should be held among all Spaniards.

      Ask any of them if they would accept that. They wouldn’t.

      They just want to secede, even illegally. So their base is not democracy but using whatever argument to their ends.

      Maybe society has peaked, but this should certainly accelerate the way down

    • Jaime says:

      I always make the point to nationalists – Basque and Catalan – that their dream states would be very small fry in the dangerous ocean of international finance and politics.

      States without weight, without allies, without muscle. And with a big, vindictive neighbour determined to either punish them or pull them back in again.

      And as for France ceding any of its territory, which is also their aim……!

      The fanatics just can’t take this on board, their minds are closed, clogged up by decades of rhetoric and emotion.

      Many reasonable people who are inclined towards independence, see this fanaticism and its dangers, and so would vote to stay in Spain, reluctantly in many cases as an escape from the corruption of that state is greatly desired and needed.

  9. Gershon says:

    Spain and Italy are too big to be bailed out. The ECB’s endless can-kicking since 2008 will run out of road if Catalonia secedes and/or defaults.

  10. Maximus Minimus says:

    Off topic, which country is now in better shape overall: Italy, Spain, or Portugal?

  11. Kasadour says:

    If Catalonia defaulted, would Spain allow it? The way I see it, according to the article, Catalonia could threaten to default if the central Spanish govt refused to let it hold its referendum. In that case, Spain itself would need a bail-out, not being about to withstand a Catalan default, and it being the fourth largest economy in the EU. A Catalonia default would be the first domino to fall. It’s hard to imagine the deep state allowing such a thing. However; powerful it is, at some point the deep state is going to miss something regional or relatively small like this, I believe, which could finally bring it down one day. One can hope.

    • Klaus says:


      There is one problem with the assumption: Catalonia’s regional governmenr is broke. Every rating agency has its debt rated deep in junk bond territory.

      However, Spain’s government started a few years ago some programs to alleviate some regional governments with their debt basically implying that the central government lends the money to thses regional governments.

      As a consequence, over 65% of Catalonia’s debt is owed to the cenral government, so no leverage there.

      • Kasadour says:

        Well, that’s the point isn’t it? The article points out that Catalonia is 25-30% of Spain’s estimated gross GDP. Does Spain need Catalonia more than Catalonia needs Spain? The answer to that question is why the Spanish Economic Minister says Catalan independence . . . will never happen. . .. Yeah, because Spain will lose a quarter or more of its economy right there in the tiny region of Catalonia. Furthermore, a default would increase Spain’s debt load to an unsustainable, unfeasable track. No disrespect, but did you read the article? The ECB would have to get involved. Brussels would no doubt order Catalonia back into the the King’s fold in order to save the eurozone.

        A previous article on this subject points out that Catalonia could survive on its tourism revenue alone.

        • Klaus says:

          I did read the article and hope that I undestood it.

          My point is that, since Spain has sold debt to lend the money to regional governments, if Catalonia defaults on its debt the central government would still have to pay the money it raised to lend it to the regional government.

          So Catalonia would “externally” default on some one third of its debt.

          On the other two thirds, Catalonia’s regional government revenues are basically those of taxes whose collection is passed by the central government on to the regional governments, so there would be many easy ways to collect Catalonia’s or any other regional government’s debt.

          Also, it would obviously call for the central government taking over any defaulted regional government finances.

          Final point: it is more rational to be scared of Spain’s as-a-whole astronomic debt than being scared of any of its regional government’s debt.

          Hope I explained myself

        • Klaus says:

          Of course, if you are thinking about a walk away independence, certainly it would raise a serious problem, but believe me when I say that economic one would be far to be the worst of the problems.

          But it remains to be seen if Spain would stay put, if Catalans would change paying taxes to the central government (that after passes on the money to the regional government) to paying taxes to Catalonia overnight.

          Just a history tip: during the Spanish Second Republic (years before Franco dictatorship), Catalonia proclaimed independence in 1934, the central government of the Republic send very few troops and the politicians ended up escaping thorugh the sewer except for the then president who was arrested. All this with little to no confrontation

    • Wolf Richter says:

      I don’t think the questions is a default by Catalonia on its bonds (it’s already a fiscal basket case). The questions is a refusal by Catalonia to honor its financial commitments to Spain (via independence or otherwise). Spain has borrowed to fund Catalonia. And all of Spain’s debt is in Spain’s name. So Spain is on the hook. If 25% of its economy refuses to contribute, Spain cannot deal with this debt any longer and Spain will default. That’s the threat here, the way I see it.

      • Kasadour says:

        Yes. Thank you, thatbis what I was trying to convey.

      • Klaus says:

        Wolf, let me explain a bit how government finances work in Spain:

        Basically every relevant tax is collected by the central government (personal income, corporate income, value added tax, special taxes on gasoline and tobacco, etc). While regional governments may make minor changes in some of these taxes (personal income, for example), they are collected by the central government

        The central government then transfers money to the regional governments, which spend it according to what their regional parliaments decide in their budget.

        It is beyond me how the central government may accept that Catalonia does not honor its debt and do nothing about it, like replacing the regional government.

        If it doesn’t do so, It is beyond me how the central government may accept that Catalonia does not honor its debt (over 65% of the debt owed to the central government) and does not keep the money instead of transferring it to the regional government.

        It is also beyond me how citizens and corporations are going to pay taxes to the regional government overnight instead of paying to the central government.

        I hope I have been clearer this time

        • Kasadour says:

          I think the bigger problem for Spain is that Catalonia is 1/3 of Spain’s economy. Spain can’t afford to lose that, taxes or no taxes. I think die hard separatists would make that sacrifice.

        • Klaus says:

          Just for the record.

          Catalonia is about 20% of Spain’s economy.

          Catalonia’s economy has been declining for years. A couple decades ago, Barcelona was Spain’s capital for the pharmaceutical industry, electronics, business fairs, publishing, manufacturing (together with the basque), port activity and many other industries.

          Today I would say it still Spain’s capital for design, for publishing and has a small edge on pharmaceuticals. Period

        • Kasadour says:

          I’m basing the stats from the article. This writer has been writing for years about Spanish, Italian and Latin American financial and economic news. I trust his numbers.
          But even 20%, that is still too much for Spain to lose.

          Yes, Catalonia has its own economic problems. But I do believe, given a chance at independence, those problems can be successfully addressed.

        • Wolf Richter says:

          That “25-30%” of Spain’s GDP was what Spain’s Minister of the Economy, Luis de Guindos, was cited as saying.

        • Klaus says:

          Again, for the record just checked with National Statistics. Believe official statistics at your own risk ;-)

          According to latest data for 2016, Catalonia accounts for 19.0% of Spain’s GDP (18.9% in 2000).

          Madrid comes second with 18.9% (17.7% in 2000)

          Andalusia third with 13.3% (13.4% in 2000)

          GDP per capita would show something quite different, with Madrid first, Basques second, Navarra third and Catalonia fourth

  12. Kasadour says:

    Klaus: So what if the other two thirds is passed through central govt hands on to Catalonia. Is your implication that it will be withheld? Let them withhold it. That’s not going to fill the gap quickly enough. And Catalonia will still survive. I still say Spain needs Catalonia much more than Catalonia needs Spain. If that isn’t the case, why is Spain’s Economic Minister so nervous? And I guarantee Brussels is directing the EM’s every step, as well as Rajoy’s. That is where the real deep state lies.

    You did bring up the issue of sovereignty, which I agree with. But Europe is a different animal than the U.S. Longer history (obvi) and everyone wants to be a president. That said, doesn’t EU sovereignty trump Spanish national sovereignty? If so, you believe that invalidates Brexit then, right? Yet they held a successful referendum.

    • Klaus says:

      I am implying that it can be withheld as the central government collects the taxes and money it then transfers to Catalonia to spend. I know it’s bit strange by American standards, but that’s how it works.

      Spain needs Catalonia? Of course. Catalonia needs Spain? Of course. I couldn’t make an appraisal of who needs whom the most.

      On Economic Minister nervousness…of course this Catalan issue is a problem as it endangers relationship among citizens.

      Also there are mixed feelings on the government’s work on this issue and if it has done enough. No doubt that the ruling party’s base does not approve how the government has done things (being one of the reasons of its declining voting support). Now that same government is anticipating parliamentary problems, possible snap elections and possibly they are gesturing something of a tougher stance (or maybe they mean this touher stance).

      These may be some exlanations for nervousness

      • Kasadour says:

        And i am saying let them. It’s not going make up for the short fall. And Catalonia will be fine.

        • Klaus says:

          My guess (it’s only a guess) is that if Catalonia defaults on its obligations to the central government, it would be replaced according to Constitution (upper Chamber has to vote it).

          Then the central government would take over the regional government or place some officials in key posts.

          Tax revenues would continue to flow (as they are collected by the central government) and expenditures would be made according to what the replaced regional government.

          If my guess is right, the default would cause a huge PR issue, but in terms of revenues and expenditures, it would be kind of business as usual.

          Again, only a guess

    • Klaus says:

      On soverignty…EU does not trump Spanish national sovereignty.

      Of course there is huge importance of the EU on Spain’s affairs, Spanish people must be among the most pro-EU, Spain changes laws according to EU, etc but the EU is still a treaty among sovereign states… Brexit just proved.

    • Don Quijones says:


      Was just citing to what De Guindos said (link here: I’m sure he knows that Catalonia’s economy accounts for roughly 20% of Spain’s GDP but I presume that he was referring to the huge knock-on effects that would no doubt ensue if Catalonia was to secede from Spain, such as, for example, no longer being able to service over a trillion euros worth of debt, or being able to keep regions like Andalusia or Extremadura afloat.

  13. Jaime says:

    Don Q’s articles are among the best I have read on Spain by a
    foreigner, he knows his stuff and I always read him with pleasure.

    Having said that, unilateral secession of Catalonia and the Basques (including Navarre) will not be permitted by Madrid.

    And it will not -most importantly – be tolerated by the Spanish military: important training grounds for NATO in Navarre, and crucial passes through the Pyrenees are in those territories. That is not negotiable.

    To the military, Spain is Sacred and One. Just as it was in the 16th century. (Generations of my family have been soldiers in Spain, actually for 800 years, have died defending those passes, so trust me on this.)

    It’s very simple: it will not be allowed.

    Any politicians attempting it would be removed from their posts, arrested, and disqualified from ever holding office again.

    The people would not rise in their support, as less than half would, when push came to shove, vote for unilateral independence.

    However, if the rule of Madrid weakens so that it cannot be enforced using the police and military, then the regions with a strong national identity will probably break away, as in all decaying empires.

    Spain is to be understood as an internal empire of great antiquity, it is nothing like the US.

  14. d says:

    “Catalonia never, never has been a preexisting country nor a state.”

    Where does this rubbish come from?????

    Catalonian’s never wanted to be part of Spain. A marriage of its overlord, made it one, against the will of its people.

    Therein lies the root, off the problem, of Catalonia.

    Post Franco, the least Spain could do, to appease hundreds of years of anger.

    Is allow a non-binding referendum, in which it is compulsory to vote. In Catalonia only. To test weather this claimed desire for independence is in reality. The will of the majority, or simply, as in Scotland.

    The one trick mantra of a political movement. Exposed a such when the SNP referendum, fell over on it;.

    The Flawed Brexit referendum, shows that referenda of this type, must have compulsory voting as a condition.

    This is another of those long running European issues, that could be. resolved, by a federated Europe.

    Sadly France and Club med, are moving further from the possibility of inclusion in a federated Europe, by the day.


    If I was in the administration of Catalonia and the state kept on saying no, to the citizens request for some referendum.

    I would simply ensure we spent more ever quarter in total, in the reign, that the region. contributed to the central Government, until they listened to the people.

    If Catalonia defaults, it take Spain with it.

    • Kasadour says:

      I agree. And the US should do the same for Hawaii. Even though it would be entirely symbolic.

      • d says:

        Yes, Hawaii was A VERY dodgy deal. Particularly when you compare it to the way America behaved over Suez.

    • Klaus says:

      Rigth. Catalonians never wanted to be part of Spain. It’s just that they have been over 500 years thinking about it.

      And 40 years ago, when they approved the Constitution with over 90% approval and over 70% turnout, they still didn’t want. They were just kidding everyone elese.

      And yes, voting must be compulsory and against those Constitution rules. Because you are a democratic guy.

      And certainly Repsol, Caixabank, Abertis and Gas Natural will quit paying taxes to the central governement overnight so a Catalan default takes Spain with it.

      It all makes sense

      • d says:

        “And 40 years ago, when they approved the Constitution with over 90% approval and over 70% turnout, they still didn’t want. They were just kidding everyone elese.”

        Spain approved with those numbers.

        Can you get numbers for just Catalonia and prove them??????????? Including this eligible to vote and those that actually did.

        Catalonians knew they would be dragged along with the rest of Spain, AGAIN. This sort of thing effects turnout in non compulsory referendum’s

        “And yes, voting must be compulsory and against those Constitution rules. Because you are a democratic guy.”

        Its only Possibly democracy, if you get EVERYBODY’S view point.

        In a compulsory vote referendum there should also be 3 answers. yes, no, don’t know.

        Constitutional, Or important Referendums with out compulsory voting, give you Brexit, Elections with out compulsory voting, give you TRUMP.

        Neither of those victories are Democratic. As both represent less than 1/3 of the eligible voter Total. Therefore, both, are “Militant Minority Mob Rule” Outcomes. Not Democratic at all.

  15. jarana says:

    This is too much talking.

    We Basques are going to secede from Spain physically overnight. The only real way to do it.

    We already have the saws to cut us out and the rowings to get the fuck out quickly onto the Cantabric sea.

    We estimate about 1000 miles can be gained in one night if all of us row together shouting “EEEEEEEUH”, “EEEEEEEUH”…

    Obviously, keep this between us; we count on surprise factor. People will notice it anyway the day after.


    • Andy says:

      Way to go Basquey !

      I think you are onto something there.

      Good luck with your (shh- secret) masterplan.

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