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Is the EU Safe If Spain Splits?

October 3, 2017
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Spain is in the midst of a serious identity crisis. For over half a century the country has struggled with the identity and autonomy of its various cultural regions, but none more than Catalonia.

The region has its own language, culture and history that has given it a strong, independent identity within Spain. Now however, the system is coming apart at the seams.

After a referendum on whether or not Catalonia should be independent was held on Sunday ruled over 90% in favour of separation, there are some serious questions to be asked. Quartz published an article about the referendum’s fallout, citing Catalonian president Carles Puigdemont saying:

“It is not a domestic matter. It’s obvious that we need mediation. We don’t want a traumatic break. We want a new understanding with the Spanish state.”

This has two separate effects. The first is that this is a major departure from the previously stated aims of the Catalonian leadership, which was to call for independence immediately according to Business Insider.

Puigdemont has fanned the flames of genuine expectation that independence is a possibility within Catalonia’s grasp, rather than a notional ambition to be worked toward in moderate steps.

Now that they have shown that they are going to try and get Europe to intervene, the issue takes a more regional context. This is the second issue: While Europe refuses to take a role in the situation, a massive deterioration in the Spanish economy may force its hand.

Quartz reports that “analysts at Bank of America Merrill Lynch see increasing risks to the country’s economy stemming from political instability.” Catalonia has seen massive general strikes in the wake of referendum and any sustained effort on the part of the unions to coerce Spain into action will only make matters worse. In the end, the EU may be forced to get involved and try to solve another crisis in one of its key member nations.

Investors should keep an eye on the situation in Spain and be sure to react accordingly.

To read Quartz’s article on the call for the EU to mediate the Catalonian separation, click here.

To read Business Insider’s article on the degeneration of Spanish-Catalonian relations, click here.

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