All You Need to Know About the Catalonian Referendum

Most Spaniards are worried about the uncertainty going on these days in Catalonia (7.5 million people, 16% of Spain). There are too many legal issues floating around and strong emotions are overflowing in Dali´s region, bringing even newer unanswered questions to the fore.

Certainly, events are developing very fast. And, since we are in a brinkmanship situation, things can change in just a couple of hours...

It's similar to a sad divorce procedure that needs a lot of dialogue, and one party still loves the other very much.

That said, this is what you need to know about the Catalonian crisis.

Will Catalonia declare independence?

The regional president of Catalonia, Carles Puigdemont, insists that he will declare independence unilaterally after the “Yes” vote won last 1-O (Sunday 1st) with more than 90% of support in the controversial referendum. Although the vote was held in very dubious circumstances and it's considered illegal by the Spanish government, almost half of the electorate cast a ballot. Exactly 37% of census voted Yes. Nevertheless, Mr. Puigdemont had already announced that when the Catalan Parliament (with a narrow majority of secessionist MPs) meets again, they will declare independence.

Do all Catalonians want independence?

No. The feeling of belonging to Catalonia has always been strong. They are fiercely proud of their heritage, with cultural, historical and language differences with other parts of Spain. Many people feel both Spanish and Catalonian. In fact, prior to this weekend's events, the last polls indicated that only about 41% wanted independence from Spain.

How will it affect daily life for a foreigner?

The immediate and visual change is that all the Spanish flags will be removed from town halls, municipalities and official buildings. The good weather, nice beaches and the charm of cities as Barcelona will continue too. But during political crisis you should be aware that many demonstrations will be going on in the main plazas and "Spanish" buildings. If you ask the Spanish Finance minister he will uphold that if Catalonia declares independence it would immediately leave the EU and therefore its GDP will be reduced by at least 25%.

How will it affect tourists?

Catalonia is the main recipient of foreign tourism in Spain. Over 8.6 million tourists had already visited the region during the first half of the year. The region is very well prepared for tourists and entertainment. The tourism industry contributes to 20% of Catalonia´s GDP and the regional government has plans to raise it to 25% over the next three years. We hope that uncertainty won´t spoil the Catalonian government plans.

How it will affect a British expat?

The euro has taken a modest (2%) decline this week. Unless things take a violent turn for the worst, currency should stay fairly stable vs. dollar and pound. (Different from the UK, Spain is after all, only a small part of the euro). If the crisis continues, the pound might recover some of its lost strength after the Brexit referendum. But still, some warn about the domino effect of the secession that could give wings to the Scottish nationalists (and other separatists movements) and generate more uncertainty.

How would it affect a French citizen?

President Emmanuel Macron stands behind Spanish head of Government and the Spanish constitution. Also, the EU will expel Catalonia from the European club and the euro. Regarding borders, it´s not known, as Catalonia hasn´t enough forces to protect its frontiers. There are already around 48.000 French citizens living in Catalonia, mostly in Barcelona (more than 35.000). Everybody would try to search for a smooth transition in case Catalonia leaves Spain. Many French residents have been worried about the use of force during the illegal referendum on Sunday and shown their solidarity. Some working in the bank sector are also concerned about the fact that some important financial entities might change their headquarters from Barcelona to other Spanish cities if Catalonia declares independence. Would Barcelona still be an international hub? We can´t secure 100% after indepedence. Not only the French economy is observing really close it´s neighbour, also Paris hopes Catalonia doesn´t boost separatist movements in French regions as Corsica. Besides that, you should really read the news these days as big demonstrations, strikes and a bit of unrest will be common.

How would it affect a German expat?

There are around 28.000 Germans already living in Catalonia and enjoying the warm climate. More than 21.000 have their residence in Barcelona. And the number was supposed to rise after Brexit. Chancellor Merkel has been a firm supporter of PM Rajoy in his efforts to uphold the Spanish constitution and the rule of law. Germans should also be aware that Catalonia could be expelled of the EU and the euro and the economical consequences of this move. As said before, Catalonians don´t have any problem with foreigners, only differences with the Spanish central government and the way it is handling the secessionist desires. In terms of creditors, Spain has said that it will guarantee payments to all lenders of the Catalan administration.

Can Catalonia survive on its own?

Even though the Catalonians secessionists are confident, on an economical basis it is very difficult to predict.

At the very least, short-term, it would enjoy a lower standard of living. Many financial experts have acknowledge that Catalonia has an annual gross domestic product of about 215 billion euros, the largest of any of Spain's autonomous regions, and even bigger than Greece´s. Having said that, it´s also true that many goods are supplied by the Spanish state. Conceivably Spain, it's main export market, would boycott its goods. On the other hand, Catalonia is the third most indebted autonomous region of Spain. In numbers it is around 35.4% of its GDP. Regarding unemployment, Catalonia has a lower rate than other regions of Spain, currently around 13.2%. According to the Spanish Finance minister if independence is declared it would double.

Will other countries recognize Catalonia?

One of the most complicated problems once a region becomes an independent country is international recognition. Under EU law it would automatically leave the European Union. Thus, no country in the EU will recognize it. In fact, to reenter the EU would require a unanimous decision. And Spain would never allow it. Many countries and international organizations have critized the use of force and repression on Sunday´s votation. But that doesn´t mean they will give fully support to the Catalonian administration.

Over the last several years we´ve seen Kosovo´s struggles for international admission. Abjasia, South Osetia are only recognized by few countries. Only leaders as president Nicolás Maduro from Venezuela, UKIP European MEP, Nigel Farage, or Wikileaks founder Julian Assange, are for the moment willing to recognize Catalonia as a state.

Will Mariano Rajoy invoke article 155 to stop the independence process? - updated, see below

The Spanish government will not recognize Catalonia´s independence declaration. Rajoy can invoke article 155 of the Spanish constitution and take over the regional government. Although this article has never been used in the history of Spain. To sum up, this legislation permits the government rule the autonomous region because it´s not fulfilling the obligations delegated by the central government. Some influential voices have already asked Rajoy to invoke it, but he is reluctant and avoiding that moment. It would mean a turning point and maybe an escalation of the crisis.

Although things look uncertainly rough right now, we believe a sensible peaceful solution to this regional conflict will be found short term. Catalonians are known for their "seny" a pragmatic, noble approach to life. After threatening divorce, some couples come back together stronger.

-- Update 19th October 2017 --

How many companies are leaving Catalonia?

According to the public registry of commerce office, there are 805 business (until 19th October) moving their headquarters from Barcelona to other regions in Spain. Due to the lack of legal certainty, big and small companies are taking their central offices elsewhere. The exodus caused by the secessionist challenge will damage the Catalonian economy and generate further problems. Not only Ibex companies such as Caixabank or GasNatural are relocating their head office but also many mid-size business, from all kind of sectors, have already leave or planning to do so.

What happens after article 155 is invoked?

Today, 19th October, regional president Puigdemont had to clarify if he had declared independence of Spain on the 10th October or not. The truth is his statement was very ambiguous, even for secessionists. The Spanish government established a deadline today at 10 am, so after the deadline has passed, this is what is going to happen:

On Saturday, Spanish president Mariano Rajoy will hold a special cabinet meeting and invoke Article 155 of the Spanish Constitution. This means the central government will take control of the autonomous region of Catalonia because it has broken the law. This is the first time in the history of modern Spain when this extraordinary measure is going to be triggered. Rajoy has announced he has full support from other political forces in Spain. Opposition parties such as Partido Socialista back this decision but they emphasize it should be applied “proportionately”. After Saturday´s cabinet meeting, this unusual measure will then have to be voted on in the Senate.

A call for new regional elections is the solution to the secessionist challenge for many experts in Spain. Once the Spanish government takes control of Catalonia it would take around three months to hold regional elections. Also, and still on the table, Puigdemont can call for elections and avoid Article 155's implementation. For the moment, a demonstration has been convened for Saturday in Barcelona.