Flying the flag stirs the soul, but it won’t pay the bills


Flying the flag stirs the soul, but it won’t pay the bills

Over the past few weeks, Europeans have been watching the Catalan drama unfold with bated breath. There was a vote for independence, of dubious constitutional legitimacy but with an approval rate of 90 percent. Nobody will be able to forget the dramatic scenes in Barcelona on Oct. 1.
Ten days later the Catalan President Carles Puigedemont declared independence, only to suspend it immediately and ask for dialogue with Madrid. The Spanish Prime Minister Mariano Rajoy gave the Catalan leader an ultimatum to specify whether he had actually declared independence or not. If Puigedemont does not back down, Rajoy has threatened to invoke article 155 of the Spanish constitution, which would allow the central government to take over the regional government. This is the gravest constitutional crisis in Spain since an abortive military coup in 1981.
The Spanish drama is indicative of a deeper malaise: History and politics go through moods, just as people do. The phenomenon is called “Zeitgeist”. 
Populism, a quest for independence of regions and a desire to leave organizations, has been shaping a good part of this decade. It started with the Scottish independence referendum in September 2014, when Scots voted to remain in the UK. Since then there have been elections in Europe and beyond in which populists fared well. There was also the Brexit vote last year, which put the workings of the EU in turmoil and continues to pose a threat to both the British economy and the EU’s way of doing business.
The latest manifestation of this sentiment was the drama in Catalonia and the vote in the Kurdistan Region for independence from Iraq. As with everything in the Middle East, the situation with Iraq and the Kurds is fiendishly complex and fits only partially into an analysis of quests for independence — not least because the Sykes-Picot Agreement of 1916 and subsequent wars and conflicts have left behind a quagmire of conflict and untold human suffering. 
However, all these quests for independence have at least two of the following three factors in common: They were formulated using sentiment and heart rather than economic considerations, they challenge either national constitutions or international treaties, and they have ramifications far beyond the affected country.
Scotland and Catalonia both argue that they are paying, or have paid, more than their fair share of taxes into the central government. In the case of Scotland, it came from oil revenues and in the case of Catalonia from tax revenues due to good economic performance. That may be so, but none of the separatists take into account that they also share in the national debt (just shy of 90 percent of GDP for the UK and 100 percent for Spain). The economic calculation would look different if these regions had to accept their fair share of the national debt and provide administrative services traditionally provided by the central government. Both Scotland and Catalonia would like remain in the EU after independence. In both cases the EU has been clear that this desire is not mutual. Losing access to European Central Bank financing and EU subsidies, as well as the common market and the customs union, would be difficult for Catalonia. It is therefore little surprise that the two biggest banks in Catalonia (Caxia General and Banco Sabadell) have moved or are considering moving headquarters, as has the major Cava producer and another 20 large companies.

From Scots to Kurds, from Catalans to Brexit Brits, populists and separatists are learning the hard truth that sentiment and emotion are no match for economic reality and international pragmatism.

Cornelia Meyer

This economic argument in favor of staying in the EU also reverberates through Britain every day as the country undergoes the painful Brexit negotiations.
The Spanish constitution does not allow for secession of any entity, neither does the Iraqi one. In both cases the central government was clear on the issues, as were international organizations, such as the UN in the case of Iraqi Kurdistan or the EU in the case of Catalonia. This is self evident when considering the consequences of independence: 
When it comes to the Kurdistan Region, Turkey and Iran have large Kurdish minorities and no interest in risking the integrity of their countries’ territorial integrity. Syria may be a failed state, but it has the same concerns. The world at large fears that there is plenty of instability in the Middle East without inserting a new level of complexity. This reasoning goes a long way to explain why so many countries followed Iraq’s request to stop flights to Irbil. Since then the Iraqi federal government has taken an even tougher line, and launched military action to regain control of the Kirkuk oil fields and other disputed areas held by the Kurds since 2014. 
Spain faces similar issues on a different level. The desire to leave Spain is not unique to the Catalans, but shared by many Basques.  The EU fears that all these regional independence movements could spread like wildfire: The Flemish in Belgium, Corsica in France or even northern Italy have their own independence movements. An “atomization” of regions would do little to streamline the bureaucracy and overcomplicated processes in the EU. It would also undermine the very justification of the EU’s constitutional architecture, as it is based on nation states.
International law generally comes down on the side of the nation state, because it tries to ensure a certain level of stability and predictability on the international stage.
Populists have brought emotions to the forefront of politics over the past few years. They did so cleverly just mentioning their side of the argument. Emotions can be a good thing, but only when paired with a realistic outlook on economic, national and international consequences. 
It seems that Puigedemont and the UK’s Brexit negotiators, as well as others, are learning this home truth the hard way.
• Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources
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