Damages from Catalexit may exceed those of Brexit
7 October, 2017
If the Spanish region of Catalonia breaks away from Spain in a so-called Catalexit, it would plunge the region into a long period of uncertainty and could end up having negative effects that "proportionally exceed" those of Brexit, according to Dutch bank ING. Catalonia accounts for nearly a fifth of Spain's economy, and leads all regions in producing 25% of the country's exports. It contributes much more in taxes (21% of the country's total) than it gets back from the government. Independence supporters have seized on the imbalance, arguing that stopping transfers to Madrid would turn Catalonia's budget deficit into a surplus. Catalonia has a proven record of attracting investment, with nearly a third of all foreign companies in Spain choosing Barcelona as their base.
In a note titled "Catalonia: the cost of being single," ING economist Geoffrey Minne suggests that the most obvious and immediate likely impact of Catalan secession will be a fall in consumption among Catalan households. A recent poll conducted by Metroscopia showed that 62% of respondents in Catalonia said they were “worried” about the future of their region. “If worries turn into panic then there could also be a run on the banks and capital controls,” the expert said.
Declaring independence would automatically mean that Catalonia would have to leave the EU, which would inevitably cause issues around its membership of the EU's single market. “A consequence would be that investment could be delayed or redirected outside the region,” Minne continued.