Catalonia, a region in Spain that includes Barcelona, plans to vote on independence this Sunday in a referendum that has been declared illegal by Spanish authorities. The question over the referendum has turned into one of Spain's "biggest political challenges" since the country returned to democracy after the death of dictator General Francisco Franco in 1975.
The Spanish government has recently taken a strong stance against the referendum by raiding offices, shutting down pro-independence websites, and arresting officials. The pro-independence movement in Catalonia, meanwhile, insists the vote will continue as planned this weekend.
Catalonia, which has its own language and culture, is one of Spain's economic powerhouses. It contributes nearly one-fifth of the country's total GDP, and has an economy larger than that of Portugal.
About half of the residents in Catalonia support leaving Spain, according to opinion polls cited by the New York Times, which reports that the movement gained speed after the pro-independence government won the majority in the regional parliament back in 2015.
There has reportedly been a "widespread" belief in Spain, especially on the political right, that the government has been too lenient about Catalonia's inching towards independence in recent years. Others argue that the recent crackdown has only helped to further unite the pro-independence groups in Catalonia.
Even if the government manages to stop the vote, the simmering tensions could pose a challenge for the administration going forward, analysts say. "We continue to think the vote is unlikely to lead to Catalonia's exit from Spain (Catalexit), and that snap regional elections will follow," a Citi Research team led by Antonio Montilla said in a note to clients earlier this week. "We stress, however, that the risk of even larger confrontations between the sides post-referendum is rising."
Tensions rising between Madrid and pro-independence movement Tensions between the regional Catalan pro-independence government and the central government in Madrid have escalated significantly in recent weeks. And the government of Prime Minister Mariano Rajoy, who was described earlier this year as "famously cautious," recently made "unprecedented efforts" to halt the referendum.
Last week, Spanish police raided three regional government offices in Catalonia and arrested 12 senior officials. Catalonian officials said Spain's Guardia Civil, or paramilitary national police, searched several government departments, including the offices of the presidency, economic affairs, and foreign relations, on Wednesday morning.
Madrid also shut down websites and advertising campaigns promoting the vote, sent thousands of police officers from outside of the region, and raided the offices of the companies that would print the paper ballots, according to the New York Times.
The Spanish government has taken control of Catalonia's essential public spending, a move that might suggest Madrid is taking a step forward to clamping down on the region's fiscal autonomy, Montilla argued.
US President Donald Trump said earlier this week that "Spain is a great country, and it should remain united," while State Department spokesperson Heather Nauert said earlier this month that the US has no position on the referendum. Tensions go back decades, but taxes appear to be a recent sore spot Tensions between Catalonia and Spain go back decades. According to Bloomberg, the region's push for autonomy was a factor in the Spanish Civil War; afterwards the Franco regime cracked down on the language, on Catalan institutions, and on the people themselves.
After the dictator's death, the Spanish constitution of 1978, which says the nation is "indivisible," gave Catalonia language rights and control over its healthcare and education.
Recently, nationalists in Catalonia have pointed to the region's language and culture, and have argued that it subsidizes the rest of Spain in an unfair redistribution of tax revenues. The region pays about €10 billion ($11.8 billion) more in taxes than it gets back, according to data from the Spanish Treasury, as cited by Reuters. By comparison, Andalusia, the poorest region, gets almost €8 billion ($9.4 billion) more than it pays. "One key explanation for the rise in independence supporters in the past few years is tax. Madrid has refused to allocate more funds to Catalonia after the financial crisis," according to HSBC research analysts Ioannis Sokos and Anne Karina Asbjorn."Since 2011, support in favour of independence has risen from around 30% to 50%."
Catalonia held an independence referendum back in 2014, but the Spanish government did not intervene in that case, despite the constitutional court's order to stop it.
"[N]ow the situation is different. In 2014, the tensions between Madrid and Barcelona had not escalated to the current levels," Fabio Balboni, European economist at HSBC, said in a note to clients last Thursday.
"There was not a government elected on a pro-indepedence platform, and no threat to proceed unilaterally after a 'yes' vote. There was also no intervention by the civil guard to seize the ballots, even though the Constitutional Court had also deemed the referendum illegal then," he added. "In our view, the chances of a similar outcome to 2014 are low."
Back then, the majority voted in favor (80.7%), but turnout was relatively low (37%), according to data from HSBC.
Catalan President Carles Puigdemont suggested that if the "yes" vote wins, the government's pro-indepedence government might declare indepedence within days. Should that happen, some have argued there's a chance the Spanish government can choose to invoke Article 155, which allows the Spanish government to intervene directly in autonomous regions like Catalonia, according to the FT. It has never been invoked.
As HSBC's Balboni explained: "If Catalonia goes ahead with the referendum, and afterwards declares indepedence, unilaterally — on a low turnout, 'yes' is more likely to win — passing a new constitution, and possibly establishing regional Ministries and even armed forces, Madrid will probably trigger Article 155, and tensions are likely to escalate rapidly. In turn, this could affect negatively consumer and investor confidence, harming the economy [...] and leading to broader political and economic consequences that are hard to predict at this stage." Also notably, if Catalonia were to leave, it would have to reapply for EU membership, which Spain can block.
