Spain’s next threat: Losing 20% of its economy

Updated 7:44 AM EST, Sun November 25, 2012

Story highlights

Catalans go to the polls on Sunday November 25 in a vote that trigger a referendum for independence

Catalonia is home to tourist attractions -- Barcelona Football Club and the Gaudi House Museum

The CiU is raising the debate on sovereignty at a time of public frustration over taxes in Catalonia

(CNN) —  

It’s September 11, 2012. The National Day of Catalonia. And an estimated 1.5 million people are on the streets of Barcelona waving banners “Catalonia – The next state in Europe” and “Independencia.”

Separatist Catalans are calling for sovereignty from Madrid and the rule of the conservative Popular Party, led by Prime Minister Mariano Rajoy.

Losing 20% of the economy is the last thing the Spanish government needs right now. But if those calling for independence get their way, that could be exactly what happens when Catalans go to the polls this weekend.

Catalonia – a region in the northeast of Spain and home to global brands and tourist attractions including Barcelona Football Club and the Gaudi House Museum – represents one fifth of the Spanish economy.

The Catalonia issue comes at an inconvenient time for Rajoy’s government, which opposes any talk of independence. Spain, part of the eurozone mainstay, is grappling with unsustainable borrowing costs and a soaring public deficit while trying to placate public anger over a lack of jobs and stringent austerity.

Out of the hardship, regional disputes in northern Spain have started to resurface, particularly in Catalonia. Economists at Deutsche Bank say the political turmoil in such a prosperous region could be the catalyst that forces the Spanish central government into seeking aid from Europe’s permanent bailout fund, the European Stability Mechanism.

As the industrial heartbeat of the eurozone’s fourth largest economy, Catalonia is the most important economic region in Spain. Situated on the Mediterranean and bordering France, the area is home to seven million people and made up of four provinces: Barcelona, Lleida, Tarragona and Girona.

Calls for independence

The debate over Catalan independence is not new. Strained tensions between Madrid and Catalonia have been around for centuries.

But Salvador Giner, sociologist and president of the Intitut d’Estudis Catalans, told CNN the vehemence of the debate fluctuates depending on the political and economic zeitgeist.

Artur Mas, head of the Catalan government, has announced a snap regional election on November 25. If his nationalist CiU party win, a referendum on Catalan independence is expected to follow shortly after, according to Gilles Moec, co-head of European economic research at Deutsche Bank.

Giner told CNN that a victory for Mas and CiU should be considered a certainty. He said: “The socialist party in Catalonia is in disarray. He [Mas] knows that he’ll win hands down.”

However, Xavier Sala-i-Martin, a professor in economics at Columbia University, says that Mas is simply “following the crowd” on calls for sovereignty.