By Adinah Brown
There is no question that the Catalonians put up a good fight. It was the epic and upward struggle for independence that all came tumbling down on October 27th. The Catalan parliament voted for succession, with much of the opposition party having walked out, 70 votes were cast in favor to constitute Catalonia as a republic, 10 opposed and 2 abstained.
After the vote was tallied the Catalan President, Mr Carles Puigdemont declared “Today, the parliament took a long-awaited and struggled-for step”. But in truth, the step was nothing if just symbolic as the response from Madrid was fast, fierce and forthcoming. The overwhelming majority of the Spanish senate approved the government’s request to exercise constitutional power to intervene in Catalonia, using whatever method necessary to quash the rebellion.
First step was the dismissal of the Catalan government and parliament and its election declared void by Spain’s Constitutional Tribunal. Then, the Senate approved the application of Article 155, a legislative position which enables Spain to apply wide powers that compel a national region to obey its constitution. No holds barred, Article 155 was passed with the overwhelming support of Spain’s opposition party, even despite it being an exceptional decision that throughout Spain’s history has never been applied before.
On the basis that the Catalan administration has “continued a process of anti-democratic decisions, against the law and Spanish and European values”, Spain announced the shutting down of the Catalan government’s offices abroad. It intends to replace commanders of the Catalan police force along with usurping the government’s finances and IT departments, stopping just short of taking over the public broadcasters.
What’s worse is that it appears all this could have been avoided. Up and until then it had been hoped that a compromise could be sought. Just the day before on October 26th, representatives from both Madrid and Barcelona worked out the details to an agreement whereby President Puigdemont would call for a fresh election and in return the government would suspend its plans for direct rule. Yet this agreement was to fall flat, due to the inherent mistrust between the two administrations and fears by Puigdemont that he would lose the confidence and be perceived as a traitor by his own independence movement.
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Which brings us to where we are now; a dissolved Catalan parliament and a swift call to new regional elections which is due to take place on December 21st. The political instability has seen 1,500 companies, including all international corporations, move their domiciles to outside the region and a big drop in tourism, a punch that will hurt its capital, Barcelona.
With Spain’s constitutional court declaring the succession illegal, the impact on the Euro, has been particularly underwhelming. If forex traders have been concerned about the impact of this political turmoil, they have not been showing it. In the days leading up to the triggering of Article 155, the Euro appeared entirely unperturbed as it continued on its merry ascent against the US dollar. While on October the 27th there was an almost 1.5% drop in the EUR:USD, it has since resumed a steady recovery. Spain’s benchmark, the IBEX 35 index did take an acute hit on October 4th with a 3% drop, however come October 30th and the index had fully recovered itself, reaching a high that hadn’t been seen for months prior.
ING currency strategist Chris Turner explained the markets’ non-responsiveness “while the situation continues attracting headlines… the actual impact on the (euro) has been limited” as the common currency becomes “more immune” to Eurozone risks. Jane Foley at Rabobank confirmed this analysis, “Coming just a week after Germany’s national elections, which made the far-right AfD the third largest party in the Bundestag, investors are reassessing the divisions that exist within the eurozone,” to the effect of minimizing the destabilizing impact of any one regional incident.
About the Author:
Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.