Wednesday, January 20, 2010

An independent Catalonia and the fiscal deficit

Something you hear a lot in Catalonia is that the central government in Madrid takes more in taxes than it invests back into Catalonia.

There is some research to back this up, the most recent being a 2005 BBVA study that estimated this to be approximately €1094 per capita.

"Aha!" says the hard working, financially responsible Catalan, eyes lighting up with Euro signs. "If only we were independent, we could use this money for something better than supporting lazy Andalucians. Eh?"

Not so fast. What this independent minded person doesn't realize is that redistribution also happens at the European Union level. Richer countries contribute more than poorer countries and see less money back. The theory is that this money will stem the tide of Polish plumbers taking away jobs in richer countries.

Now suppose that the Republic of Catalonia wanted to be part of the EU. Catalonia would be relatively well off (buh bye Andalucia and Extremadura!), with a GDP per capita about the same as the UK or Austria. (note for Pedants: the EU budget process uses GNI, which is similar to GDP but would be slightly higher in Catalonia due to the large Catalan banks that lend money across Spain)

How much more per capita does the UK and Austria pay into the EU budget than it receives back? Drum roll please... €937 and €1024 respectively.

So nothing has changed, except that Catalonia would be supporting lazy Greeks instead of lazy Andalucians.

Las balanzas fiscales de las comunidades autónomas con la Administración Pública Central, 1991-2005


Albert said...

Hi santcugat, thanks for your comment and I'm sure we'd somehow have to contribute to the redistribution of wealth to other poorer countries in the EU, including Spain, but the difference would be that we'd have the sovereignty to negotiate to some extent and still we'd be much better off since now the fiscal deficit amounts to 21000 euros, which is about 3000 euros per capita every year and we have no say or limit in this redistribution. You can find more info here. Also, very importantly we would be able to make politics that make sense to our country and protect our language and culture, instead of funding a government that rules openly against us.

santcugat said...

€3000 is higher than any estimate I've seen. IRLA thinks it might be €2622. I'm a bit too sleepy right now to figure out exactly why there's such a difference in estimates.

I've posted the study I cited in the post.

Albert said...

The data you link there is from 2005, the fiscal deficit from 2008 is around 21000 milion euros. That's around 3000€ per capita since the GDP increases in time and the Spanish steal a similar percentage every year.

Albert said...

Finally, you'll be delighted to know that if before you were not too happy about subsidizing the lazy Spanish with 1000€ every year now that you live in Catalunya you have just tripled your generosity, nice move!

Rab said...

There is no equivalence in the two alternatives.

Under Spain, the fiscal plundering is compounded by a pervasive Catalanophobia, as can be observed listening to certain Spanish radio stations, reading newspapers, commercial boycotts based purely on product origin, etc.

As an independent state in the EU, not only Catalonia would have the sovereignty to look after itself (something that does not happen under Spain) as the poster above points out, but Catalans would not be second-class citizens in their own country and would not have to put up with the permanent hatred coming in from most of the Spanish media. The Greek or Romanians would not despise Catalan people for being so. That alone is priceless.

santcugat said...

I haven't seen any studies for 2008 (the GDP has only grown 20% since then, so I don't see the number tripling), if you have a link, please share. It's not exactly trivial to figure out what the deficit is, since it depends on your definition of what benefits Catalunya.

One of these days when I'm bored I'll plug the IRLA and BBVA studies into Excel and see what's going on.

Even beyond what these studies cover, other large costs, such extending the AVE network across Spain indirectly benefits Catalunya with better connections and cheaper service due to economies of scale. In addition, less poverty in the rest of Spain means less migration from the poorer parts to the richer parts. As part of the EU, Catalunya wouldn't be able to restrict immigration from Spain.

As Catalunya's largest trading partner, Spain would still have a huge influence on the Catalan economy, and the ability to inflict damage via boycotts or discriminatory regulations would probably increase rather than decrease.

Would the rest of the world recognize Catalunya as a country and negociate as equals? Not as easy as you might think. Most other countries have their own seperatists and would rather not encourage them (just look at how few countries recognized Kosovo).

Spain has the ability to totally fuck over Catalunya on that front. Imagine if Spain(ex-Catalunya) does what China does to Taiwan (if you recognize Taiwan, they won't talk to you). Who are countries going to chose to talk to, Catalunya or Spain?

Albert said...

The video I linked above explains the current estimates for the fiscal deficit. About the recognition of Catalonia by other countries, they'll have no choice once we do a declaration of independence backed by an official referendum and since Catalans are already members of the EU we'd automatically be part of the EU so no attack coming from one member to another inside the EU will be tolerated and the other countries will have no choice but to recognize us. Regarding the influence of Spain over Catalan economy, as opposed to 1975 when only 10% of our economy was exported now this amounts to 40% at least and plus the extra money we'll gain that now the Spanish steal will balance things out making it a good move on the short term and the best possible one on the long term. Regarding the infrastructures and motorways, not sure of you've had a chance to check the Spanish ones, which are free and first class whereas in Catalunya we have toll roads. Spain has treaties with dozens of countries to stop them to fly directly to Barcelona, the AVE to France should have been completed ages ago but the Spanish know how much that'll boost Cataln speaking countries. An so on and so on, I could be going on all day.

Rab said...

"Spain has the ability to totally fuck over Catalunya on that front."
And it does so already, with the blessing of the PP and its media allies, so leaving Spain behind would be like getting rid of an abusive and violent partner.

"Imagine if Spain(ex-Catalunya) does what China does to Taiwan (if you recognize Taiwan, they won't talk to you). Who are countries going to chose to talk to, Catalunya or Spain?"

Are you seriously comparing the international influence and power of China with that of Spain?
Spain is a country which is economically bankrupt so nobody would give a shit about what Spain says as long as there is no violence (Army intervention) on their part.

Since it is more likely that it will be the Spanish side who will use violence (as they routinely remind us) and it is in their wont to do as per the 1978 Constitución, it is more likely than not that any attempts by the Spanish state to prevent the democratic right of self-determination of Catalonia would not be well received by the international community –excluding Russia, Serbia and possibly China, those bastions of democracy and human rights. Basically the same states that do not recognise Kosovo’s independence.

The bottom line is that being part of Spain is a disadvantage to Catalonia from a political, economical and cultural point of view, decline in every front being a certainty. Independence in the EU, being a normal state like Denmark or Netherlands, is the best thing that can happen to anyone living in Catalonia, and the only way to ensure that Catalan interests are looked after by people who actually care.

santcugat said...

Okay, suppose that Catalunya has their referendum and the people say they want to leave.

What happens then? Pretty much nothing.

The EU definitely has no power to redraw borders and there's no "automatic" right for Catalunya to join the EU, as it would require unanimous consent, which unless the rest of Spain and France agree, won't happen.

Internationally, very few countries are going to recognize Catalunya as an independent country unless the UN Security Council passes a resolution redrawing the borders (unlikely since France has a veto and doesn't want to give support to its own independent minded people (link).

I think people wishing for independence are deluding themselves if they think that they are going to get support from the international community. National governments generally look out only for themselves and are highly unlikely to do anything that could encourage people at home to start thinking revolutionary thoughts.

Albert said...

Are you Spanish? You sound like one. Most existing countries in the world have become independent in the last 200 years and they are now happy normal countries, just like all the Spanish excolonies, the process of emancipation of the colonies of Spain is not yet over (Catalunya, Euskadi, Galicia) and people like you said exactly what you say now about the new countries but all of them are now happy normal countries and none of them would go back to being a colony, that's exactly what will happen to Catalonia. Nothing strange here. By your reasoning I imagine you come from a country with some inside nation wanting to secede like UK, Canada or Belgium.

On the other hand, Catalans are EU citizens and there is no disposition in the EU to kick out a part of it under any circumstances should we secede we'd be part of it automatically, and the EU can't afford to leave Catalunya out of it anyway and in the case that happened then "the new Spain" would also be kicked out since it would be a different entity, and Catalunya would get back in faster than "the new Spain" because it is better prepared. The tides are turning and they are going in Catalunya's favour now.

santcugat said...

I'm not Spanish. I'm just trying to realistic about how the world looks at separatist movements (ie badly). Here's a nice list of the 200 or so new countries that are waiting for the moment in the sun. Practically every country in the world has some culture that thinks it's unique enough to have its own country.

Catalans are Spanish citizens, which is the sovereign entity that has signed the EU treaties. There is no clause in the founding treaties for allowing for separation. This means unless a new treaty is signed (which Spain can veto), Catalunya does not have the authority to issue EU passports or participate as an EU member.

I'm not saying this is good or bad, it's just the way the world is.

Unfortunately there is no world policeman that's going to come and help, Catalunya and Spain are just going to have to work it out between themselves.

Albert said...

The only reasonings you have given so far are based on fear of the consequences of the independence of Catalunya.

It is the same arguments a husband who hits his wife says to her so that she doesn't leave. Fear, fear, fear, "you are stupid, nobody else will love you, what are you gonna do if you leave, you deserve what I do to you". As Dorothy Thompson said "Only when we are no longer afraid do we begin to live." I'm not afraid of freedom. Thanks for you opinions. Goodbye

santcugat said...

This ends this week's episode of "Arguing with crazy nationalists". Thank you all for participating.

Next week the question will be: "Gravity: a plot by Madrid to keep all us down?"

Albert will be providing a demonstration by fearlessly driving his dos caballos off the nearest cliff.

Anonymous said...

Hi santcugat, where did you get your data about UK and Austria?

Numbers I have seen speak about 6billion pounds per yer, about 10.000M€ for all of UK.

Catalonia's is between 19.000M€ and 22.000M€. Considering the UK population is about 9 times larger...

Get your numbers right, please.

santcugat said...

This is why there are hyperlinks in the post. So you can see where the numbers came from.