Why Public Finance Matters

Author(s): Alejandro Barón

Source: The SAIS Review of International Affairs , Summer-Fall 2015, Vol. 35, No. 2,
Flying the Flag: Considering Nationalism in its Modern Incarnations (Summer-Fall 2015),
pp. 91-103
Published by: The Johns Hopkins University Press

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Why Public Finance Matters:
Evolution of Independence
Movements in Catalonia and the
Basque Country during the
Twenty-First Century

Alejandro Barón

This paper analyzes trends of regional devolution throughout Spain’s modern history—
as well as equivalent trends of public favor for such devolution—to inform ongoing
discussions on how the country can maximize its political and economic efficiency,
while accounting for constituencies’ preferences and a federal affirmation of sub-state
identities. The article describes evolution of public support for secession in the Basque
Country and Catalonia; assesses the historical-institutional framework of region-state
relations following Spain’s transition to democracy; and evaluates economic motivations
of political interest groups across the Basque and Catalan regions. Having considered
these frameworks, the piece concludes by discussing obstacles toward secessionist move-
ments in Spain within the EU and United Nations frameworks.

A mong the world’s nationalist independence movements, Spain’s Basque

Country and Catalonia cases offer stark contrasts on the evolution of
independence campaigns within a nation-state. Over the past fifteen years,
Basque support for independence has stalled, while Catalan calls for sovereignty
boomed. Why have demands for sovereignty evolved so differently in both
territories? Economics—particularly competition between state and regional
administrations over the control of public finance—provides perhaps one of
the strongest explanations of this phenomenon.

Support for Independence: A Comparison

Catalonia: From “Seny” (Reasonableness) to “Rauxa” (Passion)

Government and private polls conducted in Spain overwhelmingly suggest that
Catalan support for Catalonia’s independence from the country has increased

Alejandro Barón is a second year MA Candidate in European Studies and International

Political Economy at Johns Hopkins University’s School of Advanced International Studies
and co-editor of the international relations blog “Passim.” Prior, he worked as junior
researcher with the Madrid-based think tank FRIDE, focusing on Spain’s European and
foreign policy.

SAIS Review vol. 35 no. 2 (Summer–Fall 2015) © 2015 Johns Hopkins University 91

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 92 SAIS Review Summer–Fall 2015
significantly since 2005, reaching its highest peak so far in 2015. According to
the Centre d’Estudis d’Opinió (Center for Opinion Studies, CEO)—the official
statistical department of the Catalan government—during summer 2005, only
13.6 percent of Catalan respondents stated their top choice out of four possible
degrees of devolution from Spain would be full independence.1 In contrast, 31.3
percent preferred Catalonia to be a fully-federal state under Spain; 40.8 percent
wanted to maintain the regional status quo, with fiscal dependency on Madrid;
and 7 percent desired a recentralization of powers, or returning authority to
Spain’s federal government.
By April 2014, the rates of these preferences had substantially changed:
45.2 percent of respondents preferred independence from Spain; 20 percent
desired a fully-federal Catalonia under Spain; 21.2 percent sought the status
quo; and 2.6 percent preferred more centralization of government authority. 2
The notable shift among Catalans in favor of the region’s independence—if not
at least heightened sovereignty relative to the federal government—owes at least
in part to the European economic crisis, which first erupted in 2007 and 2008.
Since 1991, the Instituto de Ciencias Politicas y Sociales (Institute of Politi-
cal and Social Sciences, ICPS) of the University of Barcelona has conducted an
annual survey on public preferences for Catalan independence. The survey al-
lows for respondents to provide one of three answers to the question of Catalan
independence: “yes,” “no,” or “not interested/
. . . trends in CEO and don’t know.” In 1991, 35 percent of Catalans
expressed an affirmative answer to the ques-
ICPS polling clearly suggest tion.3 By 2013, the same response accounted
that Catalan support for for 49.4 percent of those polled. 4 More starkly,
“no” responses plummeted from 50 percent to
independence has increased 19.4 percent during the same period.5 Simi-
by non-neglig ible le vels larly, CEO surveys indicate that during the fall
throughout the last decade. of 2014, 57 percent of respondents supported
independence, compared to 20.5 percent in
opposition.6 Thus, trends in CEO and ICPS
polling clearly suggest that Catalan support for independence has increased by
non-negligible levels throughout the last decade.
Furthermore, the CEO reports that the amount of Catalans self-identi-
fying as exclusively Catalan—rather than Catalan and Spanish or exclusively
Spanish—has increased by nearly fifteen percentage points over the last decade.7
Although this trend aligns with growing calls for Catalan independence, the
absolute percentage and growth rate during the last decade of those indicating
a preference for Catalan independence are higher than the equivalent levels and
rates of those self-identifying as exclusively Catalan. This suggests the public’s
desire for an independent Catalonia incorporates more diverse justifications
than simply a want for governance that matches self-identification.
Often, the Catalan population’s wanting independence from Spain reflects
the perception that greater autonomy would economically benefit the territory,
as well as allow for more representative governance. The 2014 annual ICPS
survey asked Catalans to identify their motivations towards independence. Of
the citizens who supported independence, just 19.1 percent said they did so

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 Why Public Finance Matters 93
for identity reasons, while 80.7 percent said they reached their decision due
to political or economic reasons. Among those opposing independence, 23.2
percent selected identity as their most important motivating factor, while 73.3
percent pointed to political or economic motivations. 8

Basque Country: Stagnating Nationalism

Support for independence in the Basque Country shows a comparatively
more stagnating trend than the case of Catalonia. In fact, polling data suggests
Basques do not support independence more in 2015 than they did during the
early 2000s. Thus, Spain’s economic crisis, in addition to the Basque Country’s
institutionalization of the pro-independence far-left, has not led to prominent
effects on Basque calls for independence.
According to the Euskobarómetro, a twice yearly study published by the
University of the Basque Country, 33 percent of study respondents had a “great
or moderate desire” for independence from Spain in spring of 2006. 9 In con-
trast, 47 percent of respondents had “little or no desire for Basque sovereignty.”
By the spring of 2010, these ratings had shifted to 30 percent and 55 percent,
respectively.10 In spring 2014, the equivalent ratings were 34 percent and 52
percent.11 This indicates relative stagnation in Basque public opinion towards
independence between 2006 and 2014.
The same Euskobarómetro poll asked respondents for their preferred
form of government. During spring 2006, 37 percent of respondents selected
secession from Spain; 34 percent supported the creation of a federal Basque
state; 31 percent favored the status quo; and 6 percent opted for a greater cen-
tralization of powers under the Spanish government.12 By spring 2014, support
for Basque independence had decreased to 24 percent. In comparison, 66 per-
cent of Basques believed either the status quo or the establishment of a federal
Basque state within Spain was preferable to the creation of an independent
state.13 Moreover, in 2014 the percentage of interviewees defining themselves
identity-wise as “only Basque” instead of “more Basque than Spanish,” “as
Spanish as Basque,” or “only Spanish” has very slightly increased during the
last several years.14 This suggests that perceptions of self-identity are not likely
justifications for Basque feelings on the desired political role for the Basque
Country relative to Spain.
Overall, polling data suggests that while support for independence has
spiked in Catalonia—likely triggered by a range of nationalist, economic, and
political motivations—in the Basque Country, overall support for the territory’s
independence has not increased.

A Taste of History

Historic Rivalries
Tensions among the Spanish population over political systems featuring cen-
tralism, moderate decentralization, and quests for sovereignty have existed
since the early eighteenth century, when centralist Bourbons overthrew the
pro-regionalist Habsburg dynasty.15 Throughout the nineteenth century, three

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94 SAIS Review Summer–Fall 2015
Carlist Wars (Guerras Carlistas) of 1833-1840, 1846-1849, and 1872-1876 pitted
liberal centralists against Aragonese, Basque, Catalan, and Navarre conservative
regionalists in civil conflicts that had influential effects on state-periphery rela-
tions. During this time, persistent rural-urban divides and structural limitations
of central administration within the regions proved to be triggers of tension
between Madrid and the rest of Spain.16
During the twentieth century, a reactionary coalition headed by General
Franco emerged victorious from the Spanish Civil War (1936-1939), which
ruled Spain with an iron fist for almost forty years, from 1939 until 1975.
Franco and his supporters imposed a monolithic national-Catholic ideology on
Spain, and in so doing repressed political and cultural rights of the country’s
regions. Ironically, a significant portion of the Basque and Catalan elites sup-
ported Franco’s military crusade financially. The elites’ doing so provided for
protection of their business interests, but indirectly repressed their own distinct
political and cultural rights.17
After Franco’s death in 1975, political leaders of Spain at state and sub-
state levels had the unique opportunity to build a democracy in which vary-
ing political interests and cultures could coexist. The result came in the form
of a new Spanish Constitution, which was enacted in 1978. The text created
a framework for relations between the state and regions, protecting distinct
territorial rights at a constitutional level for the first time in Spanish history.
More precisely, the new constitution made explicit references to the existence
of “nationalities” within Spain that were distinct from the rest of the country’s
regions. Although not explicitly named in the Constitution, the Spanish popula-
tion and government in practice understood the “nationalities” to refer to the
Basque Country, Catalonia, and Galicia. While the Constitution granted both
nationalities and regions higher degrees of decentralized political authority
than under the prior political system, it fostered devolution of authority to
nationalities quicker and more comprehensively than it did for the country’s
remaining regions.
Per the new Constitution’s framework, the post-transitional Spanish
government undertook three essential policy adjustments—some related to
recognition of sub-state territorial rights and some related to execution of these
rights—to devolve power to the nationalities and regions. First, the Spanish
state granted the Basque Country and Navarra fiscal independence, thereby
creating a special economic regime for those territories. Second, the Spanish
state devolved broader powers to the nationalities and regions according to one
of three possible forms of power distribution between the federal and regional
governments. According to this three-tiered system, authority for policy issues
was either exclusive to the state, dedicated to the territories, or co-shared be-
tween both levels of government.
To effectuate devolution of powers in alignment with these categories, the
Spanish government initiated a fast-track decentralization procedure open to
nationalities, but not regions. Using this process, Spain’s government provided
the aforementioned three nationalities with immediate authority over policies
related to culture, education, health, education, and linguistics. For context, the
Spanish federal government maintained responsibility for monetary and general

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 Why Public Finance Matters 95
economic affairs, security, and foreign policy. The third important devolution
development codified by the country’s new constitution was that all delineated
nationalities and regions within Spain developed Estatutos de Autonomía (re-
gional constitutions), which the Congress in Madrid and regional parliaments
had to approve jointly.
Of the three sets of changes catalyzed by Spain’s new Constitution, only
the third applied to all nationalities and regions. Thus, the country’s new legal
framework created seemingly asymmetric regulations and policies for auton-
omy between Spanish regions. This in turn fostered resentment by large seg-
ments of populations
in regions that did not
receive benefits afforded Of the three sets of changes catalyzed by Spain’s
to other regions. new Constitution, only the third applied to all
To c i r c u mv e n t nationalities and regions. Thus, the country’s new
this perceived injustice,
politicians in Andalu- legal framework created seemingly asymmetric
sia used a loophole that regulations and policies for autonomy between
the Constitution had Spanish regions.
inadvertently created to
assert their legitimate
authority to the preferential rights given “nationalities.” After Andalusia won
a regional referendum in 1980 on their ability to exploit this loophole—and
thereby acquire devolution rights given to the preferred regions—other regions
attempted to employ the same process. This tendency became popularly known
in Spain as “café para todos” (coffee for all).
Over time, Spanish regions seeking greater autonomy promulgated
widespread devolution, to the effect of more equal footing statewide in terms
of sovereign authority. This political momentum toward regional devolution
continued even through the early 2000s, when Valencia adopted a most-favored-
region clause that stated any further devolution to other regions—absent con-
stitutional reform—should extend automatically to the region. As in the case of
Andalusia, other territories subsequently copied Valencia’s legislation. In turn,
widespread employment of most-favored-region clauses effectively ending non-
constitutionally mandated asymmetry that favored nationalities over regions.

Diverging Paths
In 2004, a group of Catalonia’s opposition parties—including prominently the
Partit dels Socialistes de Catalunya (Catalan Social-Democrats, PSC)—proposed
to change the regional constitution in order to expand decentralization from
Madrid, and thereby achieve their aim of weakening the region’s nationalist
coalition in power. The federal government in Madrid—headed by José Luis
Rodríguez Zapatero, a minority Social-Democrat government—received this
proposal cautiously, but agreed to negotiate with Catalan authorities. In re-
sponse to the government’s amenable reaction to Catalonia’s proposal, Spain’s
national right wing and unionist mainstream party, Partido Popular (Popular
Party, PP), expressed adamant opposition to further decentralization.

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96 SAIS Review Summer–Fall 2015
Despite PP opposition, negotiations between Catalonia and the federal
government resulted in a new regional constitution. Before going into effect,
the newly negotiated conditions between Spain’s central and regional govern-
ments required approval of the parliaments in Barcelona and Madrid, as well
as a referendum at the regional level in Catalan subsequent to parliamentary
approval. Those favoring additional devolution easily won the referendum’s
vote, which took place in 2006. As a result, Catalonia implemented the new
regional constitution, which provided the region with judicial authority and
a reallocation of shared tax collection between Madrid and Barcelona in favor
of the latter.
In retaliation, the PP presented a formal lawsuit to the Spanish Constitu-
tional Tribunal that claimed Catalonia’s new regional constitution violated the
country’s constitutionally mandated authority. After four years of deliberation,
the constitutional Tribunal rejected part of Catalonia’s regional constitutional
reform. This judicial decision fomented a wave of unrest among the Catalan
population, as well as a movement on the part of almost all regional nationalist
parties to support calls for Catalonia’s independence.
In the Basque Country, regional politics developed differently. The
mainstream Partido Nacionalista Vasco (Basque Nationalist Party, PNV) politi-
cal party faced conflicting interests between its responsibilities as negotiator
with Madrid, manager of the regional budget, and buffer between the federal
Spanish government and the more leftist nationalists who supported the pro-
independence terrorist group Euskadi Ta Askatasuna (Homeland and Freedom,
ETA). In an attempt to gain additional autonomous powers, PNV leader Juan
José Ibarretxe tried to pass a new regional constitution in the early 2000s with-
out negotiating with the Spanish government akin to the process undertaken
by Catalonia. Ibarretxe’s plan divided his own party, and found support only
among the far left parties in the Basque Country. Unlike the Catalonia case,
in 2005 the Spanish Parliament rejected the “Plan Ibarretxe” with more than
80 percent of the votes against the motion. Widespread rejection of the plan
reflected the Spanish government’s belief that the Basque Country government
had acted inappropriately by behaving unilaterally rather than seeking negotia-
tions with the state.
No major protest movement took root in the Basque Country as a result
of this vote. On the contrary, all major parties chose to respect the existing
political and fiscal arrangement with Spain. Lack of political and public discord
in the Basque Country over this vote has many justifications. First, preexisting
fiscal devolution had rendered the region’s political actors more aware of the
potential economic costs of independence.
Second, during the 2000s violence undertaken by ETA and its support-
ers against the state’s security forces started to wane, leading to a more stable
security atmosphere within the status quo. Since the late 1960s, ETA’s terrorist
activities had targeted Basque civil servants and businessmen, as well as promi-
nent civil society figures throughout Spain who opposed Basque independence.
But throughout the last decade, ETA’s organizational capacities had severely
diminished subsequent to several key strikes against the group by state security
forces. In the resulting climate of relative peace, moderate Basque nationalists;

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 Why Public Finance Matters 97
non-nationalist political and civil forces; and economic interest groups pur-
sued a normalization of the political situation within the region. In turn, most
Basque political groups focused on reconciliation processes inside the Basque
Country at the expense of contesting the region’s status with Madrid.

Fiscal Independence and Interest Groups

At this stage of partial devolution between the Spanish government and the
country’s regions, it is valuable to consider what additional powers would be
potentially beneficial—for both the federal government and the regions—to
devolve. One of the most relevant areas where additional decentralization could
yield significant outcomes would be in the regions’ fiscal regimes. The Basque
Country already has fiscal autonomy. Of note: Catalonia’s gaining fiscal inde-
pendence would likely foster unique consequences for the region compared to
the manifestation of fiscal independence in the Basque Country.

Regional Political Actors and the Recent Quest for Independence

Since Spain’s return to a constitutional democracy in 1978, Catalan nationalist
parties have acted as key partners with Spanish governments, working collab-
oratively to build coalitions and pass national budgets. In particular, Conver-
gencia i Unió (Convergence and Union, CiU) has dominated Catalan politics
since the mid-1970s and been very collaborative with the central government.
Industrial capitalists based in Barcelona and middle classes in smaller urban
centers form the CiU’s unstable alliance.
In return for its support of the federal government, CiU seeks additional
agreements with successive Spanish governments, with which the party can
achieve maximum autonomy possible for Catalonia, within the existing consti-
tutional framework. However, in 2012 after a particularly large pro-sovereignty
demonstration in Barcelona, CiU leader Artur Mas announced that his own
political party, named Convergència Democràtica per Catalunya (Democratic
Convergence for Catalonia, CDC), would back Catalan independence. Mas’
policy decision likely reflected his recognition of shifts in opinion polls favor-
ing Catalonia’s independence, as well as ongoing difficulties in pursuing talks
with the federal government concerning fiscal devolution. As a consequence of
the CDC decision, confederalist force Unió Democràtica per Catalunya (Demo-
cratic Union for Catalonia, UDC) broke with its coalition partner in June 2015,
thereby dissolving CiU.
Three other political parties have significantly impacted Catalan politics
since Spain’s transition to democracy. They are: the Partido de los Socialistas de
Cataluña (Socialists’ Party of Catalonia, PSC), an offshoot of the countrywide
social democratic party and a pro-federalist group that represented the work-
ing classes in Barcelona’s industrial belt; Esquerra Republicana per Catalunya
(Republican Left for Catalonia, ERC), a leftist, rural, republican and staunchly
pro-independence party; and the regional party of the PP. Starting with Cata-
lonia’s 2010 regional elections, the ERC has made significant electoral gains,
along with another new pro-independence party named Candidatura d’Unitat

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98 SAIS Review Summer–Fall 2015
Popular (Candidacy for Popular Unity, CUP), which has regrouped the far-left
youth element of the spectrum.
Since Franco’s death, the PNV has dominated Basque politics. The party
represents a moderate nationalist right wing force that has some support in the
countryside, but is more popular among middle and upper classes in indus-
trial centers such as Bilbao and San Sebastian. Since the passage of Spain’s new
constitution, the PNV has headed Basque government, except for a short-lived
three-year period from 2009-2012. Along with the PNV, regional offshoots of
the Partido Socialista Obrero Español (Spanish Socialist Workers’ Party, PSOE)
and PP have demonstrated to be influential Basque political groups. The final
important force in the Basque political scene is the independent, pro-ETA,
extreme left party formerly known as Herri Batasuna (Popular Unity, HB)
and today reincarnated as Sortu. Sortu remains an important force in Basque
politics—consistently earning more than 20 percent of votes in elections and
presiding over important town councils such as in San Sebastian—even though
the Constitutional Tribunal has outlawed it on several occasions since 2002
because of its close links with the terrorist group ETA. 18

Economic Interest Groups and the Quest for Independence

The Basque Country’s concierto fiscal (fiscal independence)—which marks the
largest degree of fiscal devolution in all of Spain’s regions—favors almost all of
the territory’s interest groups. For the Basque electorate, benefits of the current
system and potential costs of further regional sovereignty are clear. According
to current policies, the Basque administration collects its own taxes, organizes
regional spending, and receives annual funding from Madrid to compensate for
the share of the value added tax generated in the Basque Country but collected
by Madrid, which amounts to nearly two billion euros per year.19 Moreover, the
Basque Country does not have to redistribute fiscal resources to other Span-
ish communities, but benefits from central services in diplomacy, defense, and
infrastructure, among others.
Basque politicians belonging to essentially all regional political parties
have used the Basque Country’s fiscal pact with Madrid as a red line in their
relations with the federal government and other regions. True, the Basque
Country’s economic successes since 1978 reflect impacts of more than just the
fiscal pact.20 However, Basque politicians and populations largely treat the fiscal
pact and region’s economic achievements as having a direct—if not exclusive—
cause and effect relationship. Furthermore, sociologist Ignacio Sánchez-Cuenca
argues that, in terms of social policies, the Basque Country has features close
to a continental neo-corporatist social model.21 In effect, this means economic
adjustments in the Basque Country closely link with intra-company social
dialogue between unions and corporate representatives.
The special fiscal rights given the Basque Country could explain why
unemployment levels in the region have traditionally been the lowest in Spain.
Furthermore, Basque authorities pressured local banks not to invest excessively
in risky assets during the first decade of the twenty-first century. Unsurpris-
ingly, in part because of this policy, as well as the region’s favored fiscal pact,
the Basque regional bank Kutxabank has outperformed all other Spanish caja

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 Why Public Finance Matters 99
(regional banks) in repeated stress tests undertaken at the national and Euro-
pean levels since 2012.22
It is natural that governing Catalan politicians would desire the same
authority as the Basque Country over their regional economic system. However,
it is necessary to consider what Catalonia would gain from fiscal independence.
In pecuniary terms, the Catalan government has opted to compute its yearly
fiscal deficit under the method of direct payments (or direct observation) as
proposed by reputed nationalist economists such as Xavier Sala-i-Martí and
Andreu Mas-Collell.23 A direct observation of the fiscal imbalances between
Catalonia and the state—identified by taxes levied in Catalonia but transferred
to the Spanish state minus direct expenditures of the state in the Catalan ter-
ritory—renders a fiscal deficit of approximately sixteen billion euros per year
in the period 2009 to 2010.
Furthermore, Catalonia transfers more than one percent of the Spanish
gross domestic product (GDP) in redistribution to poorer regions and other
obligatory payments.24 As of today, this is the second highest interregional
deficit on per capita terms after Madrid, whose GDP per capita is the second
highest in Spain after the Basque Country. 25 In this context, fiscal indepen-
dence in Catalonia at the same level of that in the Basque Country would
not only entail more budgetary resources for the Catalan government, but
also more economic leverage for its government.
Given this framework, what do Catalonia’s interest groups stand to
gain from the region’s hypothetical secession? Theoretically, because the
annual funds now allocated to other regions would instead be kept in the
region, the Catalan government could lover the region’s tax level without
hindering overall fiscal receipts. This would benefit industrialists and entre-
preneurs who seek favorable tax conditions, as well as pensioners looking for
increases to their entitlements. Workers and youth, who suffered cuts during
the economic crisis and demand improved social programs, would also gain
from lowered tax rates. Additionally, with greater fiscal independence, rural
constituencies in Catalonia would not have to redistribute finances to oth-
ers in the south of Spain. Thus, it is not surprising that the interest groups
who back CDC (industrialists and middle urban classes), ERC (rural areas)
and CUP (largely youth) are more inclined to favor greater autonomy for
the region.
In contrast, who would lose from Catalonia’s gaining fiscal independence?
In short: big banking, service groups, and infrastructure groups operating
outside of Catalonia, and in many cases even earning the majority of their rev-
enues from the rest of Spain, could see their profits called into question. Also,
workers in Barcelona’s industrial belt and low-skilled service workers born in
other regions of Spain or who have non-Catalan-born parents would lose the
ability to redistribute finances to family links in poorer regions of the country.
Finally, Spanish civil workers who work in Catalonia are less likely to support
independence on the basis that their jobs would be threatened. Thus, it is not
surprising that the PSC, PP, and UDC, parties representing the traditional work-
ing classes, high administration, and businessmen with links with the rest of
Spain are more likely to oppose Catalonia’s having greater fiscal independence.

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 100 SAIS Review Summer–Fall 2015
It is worth noting that some scholars dispute the fiscal deficit numbers
that persist between Catalonia and Spain’s federal government. Economist
and politician Josep Borrell has repeatedly argued the method the government
uses to calculate rates of direct expenditure is flawed because it leaves aside the
implicit transfers the state gives to Catalonia in areas such as security, defense,
justice, telecommunications, and other services managed by Madrid.26 Similarly,
the rates do not include the Spanish state’s transfers to the European Union
(EU) or its diplomatic and consular activities. Current centralization of these
powers represents savings to the Catalan government. Based on these caveats,
arguably the total net transfers from Catalonia to the rest of Spain account for
less than one billion euros annually.27 According to fiscal expert Ángel de la
Fuente, gains from Catalonia’s potential fiscal independence are so small that
over the long run, an independent Catalan government would be incapable
of honoring promises made to the Catalan electorate, since the economic
consequences of independence will entail slower growth and less international
trade.28

The International Limits to Secession

In today’s international environment, possible regional secession from the

Spanish government carries a host of uncertainties. Potential immediate con-
sequences of breaking from an
established state are risks of higher
In today’s international environment, interest rates and capital flight.
possible regional secession from the Over the short-term, additional
Spanish government carries a host of devolution could entail a region’s
exclusion from international insti-
uncertainties. tutions. This consequence could
very possibly carry over into the
long-term, pending secession punishment rules that some multilateral organi-
zations have already adopted.
The EU’s legal structure has no provision regarding what would happen
in the event a region of a member state secedes from the country. This has led
some scholars to argue in favor of Catalan secession, as the international gains
of small, open economies staying in the EU would likely largely offset the costs
of independence.29 However, despite being initially vague in its statements, the
European Commission (EC) removed the possibility for ambiguity on the issue
in response to a potential Scottish Independence in 2014, arguing that after se-
ceding from a member state, a new entity would need to apply for membership,
subject to a unanimous vote.30 The EC’s president, Jean-Claude Juncker, recently
made a similar comment about Catalonia, as has the ex-attorney general Jean-
Claude Piris.31 Furthermore, the European Central Bank has warned against
traumatic costs of exiting the EU without an “exit clause” for the territories
involved, as well as the near-impossibility of that region’s returning to the euro
in the short-run.32 For its part, the EU’s Committee of Regions, of which both
Catalonia and the Basque Country are a part, has stated that it would consider

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 Why Public Finance Matters 101
any region seceding from a state to be a third state, and that once a state secedes
from an EU member, EU law no longer applies for that territory. 33
It is also doubtful that the United Nations (UN) would immediately
recognize a new state as a member of the international community. The UN’s
charter recognizes secession in the case of a territory being subject to colonial
rule, and provides these territories with certain legal guarantees. 34 However,
this does not apply to the case of Catalonia

Conclusion

Identity and romanticism have played key roles in shaping historical concep-
tions of nationalism. However, economic motivations linked to the capture
of fiscal resources have also
been important. In comparing Identity and romanticism have played
pro-nationalist movements
in the Basque Country and key roles in shaping historical conceptions
Catalonia, the fact that Basque of nationalism. Howe ver, economic
governments are fiscally self- motivations linked to the capture of fiscal
sufficient and exercise fiscal
autonomy raises questions resources have also been important.
about what benefits a fiscal
devolution from the Spanish state to Catalonia would entail. In the Basque
Country, groups that prize identity over economic motivations have consis-
tently opposed the current status quo and called for independence. On the
contrary, In Catalonia the pro-independence wave reflects not only calls for
more political and cultural rights, but also more economic freedom, particularly
with regard to budgetary autonomy.
As events unfold, the worst possible outcome for the Catalan government
would be maintenance of the current fiscal regime. In contrast, total indepen-
dence would entail significant economic and political costs. In between these
two options is the possibility of greater fiscal autonomy in the region, akin to
the system in the Basque Country. This option would mitigate political costs of
additional devolution, and would likely prove preferable for most of the region’s
interest groups. For pro-independence supporters, this option would allow for
significant devolution of powers and greater room for economic maneuvering
than in the case of the status quo. For the opposing side, fiscal independence
would still beneficially provide security for entitlement holders and business
owners with links to the rest of Spain, as well as the region’s consumers.

Notes
1
“Baromètre d’Opinió Política” [Barometer of Political Opinion], Centre d’Estudis d’Opinió,
Generalitat de Catalunya, July 2005, 15.
2
“Baromètre d’Opinió Política” [Barometer of Political Opinion], Centre d’Estudis d’Opinió,
Generalitat de Catalunya, April 2014, 91.
3
“Sondeig d’Opinió, 1991” [Opinion Poll, 1991 issue], ICPS, Universitat de Barcelona, 1991, 84.
4
“Sondeig d’Opinió, 2011” [Opinion Poll, 2011 issue], ICPS, Universitat de Barcelona, 1991, 21.
5
Ibid.; “Sondeig d’Opinió, 1991” [Opinion Poll, 1991 issue], 84.

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102 SAIS Review Summer–Fall 2015
6
“Baromètre d’Opinió Política” [Barometer of Political Opinion], Centre d’Estudis d’Opinió,
Generalitat de Catalunya, Fall 2014, 36.
7
Comparison of “Baromètre d’Opinió Política” [Barometer of Political Opinion], Centre
d’Estudis d’Opinió, Generalitat de Catalunya, April 2014, 64; “Baromètre d’Opinió Política”
[Barometer of Political Opinion], Centre d’Estudis d’Opinió, Generalitat de Catalunya, June
2005 p. 12.
8
“Sondeig d’Opinió, 2014” [Opinion Poll, 2014 issue], ICPS, Universitat de Barcelona, 2014, 22.
9
“Estudio Periódico de la Opinión Pública Vasca – Euskobarómetro” [Periodical Study of the
Basque Public Opinion – Euskobarómetro], Universidad del País Vasco, Spring 2006, 32.
10
“Estudio Periódico de la Opinión Pública Vasca – Euskobarómetro” [Periodical Study of the
Basque Public Opinion – Euskobarómetro], Universidad del País Vasco, Spring 2010, 40.
11
“Estudio Periódico de la Opinión Pública Vasca – Euskobarómetro” [Periodical Study of the
Basque Public Opinion – Euskobarómetro], Universidad del País Vasco, Spring 2014, 48.
12
“Estudio Periódico de la Opinión Pública Vasca – Euskobarómetro” [Periodical Study of the
Basque Public Opinion – Euskobarómetro], Universidad del País Vasco, 2006, 48.
13
“Estudio Periódico de la Opinión Pública Vasca – Euskobarómetro” [Periodical Study of the
Basque Public Opinion – Euskobarómetro], Universidad del País Vasco, Spring 2014, 46.
14
Ibid., 46.
15
Santos Juliá, Joseph Pérez, and Julio Valdeón, Historia de España [A History of Spain], (Ma-
drid: Espasa, 2006), ch. 4.
16
Juan Pablo Fusi and Jordi Palafox, España (1808-1996): El Desafío de la Modernidad [Spain
1808-1996: The Challenge of Modernity], (Madrid: Espasa, 2006), ch. 2, 3.
17
Jose Angel Sánchez Asiain, La Financiación de la Guerra Civil Española [The Finance of the
Spanish Civil War], (Barcelona: Crítica, 2012), ch. 2, 3, 9.
18
Despite sharing similarities, manpower, and organizational features, Sortu has made an clear
effort to create distance between itself and terrorist activities in order to avoid prohibition of
its political activities and be able to contend to elections.
19
Carlos Sánchez, “El Régimen Foral del País Vasco le Cuesta al Resto de Regiones 1.800 Millones
en IVA” [The Basque Autonomous System Costs the Remaining Regions 1,800 Million in VAT],
El Confidencial, May 21, 2012, http://www.elconfidencial.com/espana/2012-05-21/el-regimen-
foral-del-pais-vasco-le-cuesta-al-resto-de-regiones-1-800-millones-en-iva_226563/.
20
Patricio Pérez González and David Cantarero Prieto, “Descentralización Fiscal y Crecimiento
Económico en las Regiones Españolas” [Fiscal Decentralization and Economic Growth in the
Spanish Regions], (working paper, no. 5/6, University of Cantabria, 2006).
21
Ignacio Sánchez-Cuenca, “¿Por qué no nos hacemos todos vascos?” [Why Don’t We All Become
Basques?], Infolibre, April 28, 2015.
22
“Todos los Bancos Españoles Superan los Test de Estrés del Banco Central Europeo” [All the
Spanish Banks Passed the Stress Test of the European Central Bank], El Confidencial, October
26, 2014, http://www.elconfidencial.com/empresas/2014-10-26/todos-los-bancos-espanoles-
superan-los-test-de-estres-del-banco-central-europeo_411044/.
23
“Sala i Martín: ‘16.000 Millones van de Cataluña a España a Cambio de Nada’” [Sala i
Martín: ‘Sixteen Million Go from Catalonia to Spain for Nothing], El Economista, July 21,
2013, http://www.eleconomista.es/espana/noticias/5009611/07/13/Sala-i-Martin-16000-mil-
lones-van-de-Cataluna-a-Espana-a-cambio-de-nada.html.
24
Núria Bosch and Marta Espasa, “Viabilidad de Cataluña como Estado” [Viability of Catalonia
as a State], (working paper, Institut d’Economia de Barcelona, Universitat de Barcelona, 2012).
25
“Balanzas: el Déficit Fiscal de Madrid Crece en 2000 Millones y Duplica al de Cataluña” [Fiscal
Imbalances: Madrid’s Fiscal Deficit Grows by 2000 Million and Doubles Catalonia’s], Expansión,
July 21, 2015. Data from the Spanish Finance Ministry.
26
Josep Borrell and Joan Llorach, “¿Dónde están los 16000 millones?” [Where are the 16 billion?],
El País, January 20, 2014, http://elpais.com/elpais/2014/01/19/opinion/1390153695_441521.html.
27
Josep Borrell and Joan Llorach, “Los 16000 Millones que no Aparecen” [The 16000 mil-
lions that don’t appear], El País, January 31, 2014, http://elpais.com/elpais/2014/01/28/opin-
ion/1390929008_779694.html.

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 Why Public Finance Matters 103
28
Angel De la Fuente, “Sobre el Pacto Fiscal y el Sistema de Concierto” [On the Fiscal Pact and
the System of Fiscal Concert], (UFAE and IAE working papers 902.12, Unitat de Fonaments
del’Anàlisi Econòmica (UAB) and Institut d’Anàlisi Econòmica (CSIC), May 2012).
29
Roland Vaubel, “The Political Economy of Secession in the European Union” (working paper,
University of Mannheim, 2013).
Severin Carrell, “Barroso Casts Doubt on Independent Scotland’s EU membership rights,”
30

The Guardian, September 12, 2015, http://www.theguardian.com/politics/2012/sep/12/

barroso-doubt-scotland-eu-membership.
31
Claudi Pérez, “Breakaway Regions Lose EU status, European Commission Confirms,” El País,
September 17, 2015, http://elpais.com/elpais/2015/09/17/inenglish/1442498331_707359.html;
Jean-Claude Piris, “Catalonia and the European Union,” El País, August 31, 2015, http://elpais.
com/elpais/2015/08/31/inenglish/1441037020_524342.html.
32
Phoebus Anastassiou, “Withdrawal and Expulsion from the EU: Some Reflections” (legal
working paper, no. 10, European Central Bank, December 2009).
33
European Committee of Regions, opinion 13/31, May 12, 2013. Most specifically, “The
question about the EU integration of a region having achieved independence was also a
main focus of debate and was heavily discussed. CoR members agreed on the view that
such a new sovereign state wishing to join the EU should be required to make a formal
application to the Council and to follow the accession procedure as laid down in the EU
Treaties, in the same way as any other country wishing to become an EU Member State.”
34
United Nations General Assembly, Resolution 1514 (XV), “Declaration on the Granting
of Independence to Colonial Countries and Peoples,” December 14, 1960, point 6. Un-
less in cases of colonial rule, “any attempt aimed at the partial or total disruption of the
national unity and the territorial integrity of a country is incompatible with the purposes
and principles of the Charter of the United Nations.”

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