Catalonia Wants ECB Seat After Referendum: Euro Credit
The Catalan government is targeting a seat on the European Central Bank’s governing council after the referendum it plans to secede from Spain, regional finance chief Andreu Mas-Colell said.
“Being a member of full standing in the European Union means that,” Mas-Colell said in an interview at his office in Barcelona this week. “We are in favor of having our own state, which would give us solidity and standing in the international community.”
Leaders of Catalonia, with a 194 billion-euro ($262 billion) economy and its own language and parliament, are seeking independence from Spain, the euro region’s fourth-largest economy. Catalan President Artur Mas is planning a referendum next year and is drawing European institutions into the dispute with Prime Minister Mariano Rajoy, who has said any vote would be illegal.
While Catalans have becoming increasingly supportive of independence -- 52 percent want to split from Spain and 81 percent want a chance to vote, according to a survey of 800 people by polling company My Word last month -- the region’s autonomy within Spain has been curbed over the past year after Mas accepted a bailout from the Spanish state.
The spread between debt issued by Catalonia and similar securities issued by Spain narrowed to 176 basis points at 11 a.m. in Madrid from a peak of 826 basis points in August 2012. The gap has tightened as Rajoy backstopped Catalonia with about 17 billion euros, according to estimates by Fitch Ratings, after the region lost access to markets.
“We are extremely dependent on the central government and we don’t like that at all,” Mas-Colell said. “At this point our bank is the Spanish Treasury.”
The biggest obstacle to independence for Catalonia, which already runs its own schools, hospitals and police force, may come from European institutions.
“The Europeans are not interested in having Spain split up,” Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington, said in a telephone interview. “If push comes to shove, the government in Madrid can expect strong European backing for blocking an outright independence movement for Catalonia.”
While Mas, echoing Scotland’s First Minister Alex Salmond, insists Catalonia can negotiate a mechanism for separating from Spain without leaving the European Union or the euro area, the European Commission has said a newly independent state would need to reapply for membership through the same process that Turkey is pursuing. Salmond has persuaded the UK government to allow a referendum on Scottish independence.
Just as the Catalan government is funded by the Spanish state, the region’s banks are plugged into the ECB’s financing operations. Caixabank SA (CABK), which has a balance sheet the equivalent of 167 percent of the region’s gross domestic product, has 21.5 billion euros of debt outstanding from the central bank’s long-term refinancing operation, Chief Financial Officer Gonzalo Gortazar said on a conference call in July.
“They should be very scared,” Kirkegaard said. “They run the risk in an extreme case of being cut off from ECB liquidity which would be very, very difficult. The ECB has a de facto veto over” the push for independence.
Catalan officials haven’t discussed their plans with the ECB, Mas-Colell said. A spokesman for the central bank, who asked not to be named citing official policy, declined to comment.
The ECB Governing Council includes the six members of the Executive Board and the central bank governors of the member states. The council has grown from 17 members when the currency began in 1999 to 23 with the accession of Estonia in 2011, two decades after the Baltic nation gained independence from the Soviet Union.
Nationalist sentiment in Catalonia has surged since Spain’s constitutional court in 2010 struck down a revised statute of autonomy for the region following a challenge by members of Rajoy’s party. The law had been approved by the Catalan and Spanish parliaments as well as a local plebiscite.
“The decision of the Constitutional Court was deeply humiliating,” Mas-Colell said.
Behind him, on the wall of his office, hangs a painting that combines the Catalan flag with the words “volem statut” - - meaning “we want a statute” in Catalan -- which recalls the region’s push for autonomy within Spain following the death of dictator Francisco Franco in 1975.
Rajoy’s People’s Party has retreated since 2000 from the compromises reached during the post-Franco transition to democracy, Mas-Colell said, citing opposition to the statute and “aggressive” moves to restrict the use of Catalan in schools. Rajoy says there’s “no attack” on the language, and proposes dialogue to solve the conflict within the limits of the constitution.
The risk is “a process that is mismanaged and you have social unrest and fighting and no one is able to decide anything,” said Nicola Marinelli, who helps invest $150 million as a portfolio manager at Glendevon King Ltd in London. “That would be very bad.”
On Sept. 11, 1.6 million Catalans turned out for a pro-independence demonstration on the 299th anniversary of the fall of Barcelona at the end of the Spanish War of Succession, according to the regional government. Rajoy says their demands are unconstitutional.
“If they think that they can go forward oblivious to everything else, they should do that at their own risk,” Mas-Colell said. “The situation here is explosive.”
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