Catalonia calls off independence referendum

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Another European referendum bites the dust.

Less than a month after Scottish nationalists lost a vote that would have seen Scotland bolt from the United Kingdom, Catalonia has dropped plans for a similar referendum. On Tuesday morning, Catalan president Artur Mas announced that the planned Nov. 9 vote would not go ahead for messy constitutional reasons.

The national government in Madrid had asked the constitutional court to declare the referendum illegal. In late September, the court suspended the referendum until it rules on the case, which could take years. The country's 1978 constitution, which came into effect three years after the death of dictator Francisco Franco, prevents any region from making a unilateral decision that would affect all Spaniards.

End of story for potential Catalan independence? Not in Madrid's dreams. Mas instead plans an informal vote on independence, a "consultation of citizens," as he called it at a press conference in Barcelona. "There will be ballots and ballot boxes," he said. "We can't apply the decree [to hold a referendum] but it will be possible to vote."

In other words, the vote, to be held in November, would be a sentiment indicator.

A snap election is also possible, perhaps likely. If the collection of pro-independence parties were to win, the independence issue would surge back. "It's possible that if they were to achieve a clear majority, they could use it as a platform towards ultimately declaring independence," said analyst Nick Greenwood of Afi, a Madrid economics consultancy. "But that would be a risky strategy because independence would not be recognized by Spain or the European Union."

Catalan independence would be a nightmare for Spain, which is only now slowly recovering from the post-2008 economic collapse that sent the jobless rate to 27 per cent, the highest in the Western world, and youth unemployment to a staggering 56 per cent. Unemployment has dropped to just under 25 per cent, meaning the jobs crisis is still fully intact even if Spain's recession has officially ended.

Independence would have thrown Spain and the EU into economic and political turmoil. Catalonia is traditionally Spain's richest region and industrial powerhouse; it is responsible for about 20 per cent of Spain's gross domestic product. Negotiating Catalonia's share of national debt and assets would have been an ugly process. Ditto any negotiations with the EU to grant Catalonia EU membership. Catalan nationalists, like Scottish nationalists, would want EU membership. But Brussels, wary of encouraging separatists movements elsewhere, probably would not have granted it readily.

Catalonia has long complained that it sends more tax revenue to Madrid than it gets back in return. But during the recession, Madrid emerged as Catalonia's lifeline. "Our only bank is the Bank of Spain," Catalan cabinet minister Andreu Mas-Colell told The Globe and Mail at the height of the Spanish crisis, in 2012.

Catalonia's vow to hold a referendum failed to rattle Spanish debt markets, no doubt because few investors thought the region could make a clean break from Spain. But it did rattle Catalan bonds. In September, the spread, or yield gap, between Catalan debt maturing in 2020 and equivalent national debt widened by half a percentage point. With the referendum off the table, that spread is bound to narrow, bringing down Catalonia's borrowing costs.

In spite of the junked referendum, the ERC, the main independence party and Mas's coalition partner, isn't giving up the fight. Polls suggest the ERC would make strong gains if a Catalan election were held today. "There is only one path: that parliament make an independent declaration of independence," the ERC said in a belligerent statement.

The Scottish independence movement appears to be on hold, and could stay on hold for many years. Not so the Catalan independence effort. The Catalan election could happen within the next half year and only a sound trouncing of the pro-independence parties – an unlikely event – would bury it forever.