In a snap election announced just a few weeks ago, voters in the Spanish region of Catalonia have given a clear majority of votes to parties seeking referendum on independence from Spain. The movement for independence has been heating up since early last year, when Spain’s central government adopted a series of austerity measures that called for serious cuts to regional budgets.
The current government, which once supported remaining part of Spain before switching to a pro-independence stance, failed to get a clear majority during the vote and will have to form a coalition government with a more left-leaning separatist party.
The vote could have an impact on the decision by Spain’s prime minister on whether to seek a bailout from the European Union, the European Central Bank and the International Monetary Fund (the so-called troika). The separatist parties in Catalonia do not support the austerity measures called for in the potential bailout. The central government has declared that any referendum on Catalan independence is unconstitutional and therefore illegal.
Catalonia, which is the richest of Spain’s 17 regions, contributes about a fifth of Spain’s gross domestic product, but receives less than that in return from the central government. Catalans often forget, however, that their own debt is the highest of any region and that the central government already has given Catalonia a €5 billion bailout to avoid default on that debt.
The Catalan vote does not appear to have had much effect on the euro today. It is trading down just 0.06% versus the dollar, at 1.2964.