Catalonia Presses Spain on Autonomy Even as Financial Crisis Simmers

By RAPHAEL MINDER

BARCELONA, Spain — Xavier Carbonell, the chief executive of Palex, a medical device supplier, might not seem to be a businessman willing to risk a political confrontation between his home region, Catalonia, and the central government in Madrid.

After all, Palex, based in Barcelona, receives about 90 percent of its $150 million of annual revenue from customers in the rest of Spain.

Yet on Tuesday Mr. Carbonell joined hundreds of thousands of fellow Catalans in central Barcelona demanding Catalonia’s independence from the rest of Spain — even though that demand could make Catalonia vulnerable to retaliatory measures, possibly even a Madrid-led popular boycott of Catalan goods. But Mr. Carbonell said such “short-term risks” were secondary to more fundamental economic and political principles.

“A people has the right to manage itself, its resources and its money,” he said.

Even as the Spanish government of Prime Minister Mariano Rajoy finds itself on the front lines of the euro debt crisis, Catalonia has thrust itself to the fore of Mr. Rajoy’s domestic challenges. Catalonia is so heavily in debt that it recently asked for a emergency loan of €5 billion, or $6.47 billion, from Madrid. But here in this region with its own language and sense of identity, the financial crisis has also brought longstanding cultural and economic resentments to a boil.

Catalan society remains divided over whether the breakaway demands should be limited to fiscal sovereignty from Madrid or go beyond that. Despite the unprecedented turnout at Tuesday’s rally, recent opinion polls show that only a thin majority of Catalans favors full independence. But Mr. Carbonell’s aspirations reflect the extent to which separatism has recently shifted from fringe to mainstream thinking among both the politicians and business leaders of Spain’s most economically powerful region, which accounts for almost one-fifth of the country’s economic output.

And that in turn presents yet another significant challenge for Mr. Rajoy, whose relationship with Spain’s regions has already been strained by the crisis and his insistence that support for Catalonia and other heavily indebted regions requires greater regional fiscal discipline.

Catalan politicians acknowledge that the separatist push could not have come at a more awkward moment for Mr. Rajoy, as he also faces external pressure to decide whether Spain should seek further European financial assistance through the new bond-buying program agreed last week by the European Central Bank.

“A major economic crisis unfortunately tends to bring to the surface all sorts of issues at the same time,” said Rocío Martínez-Sampere, a Socialist lawmaker in Catalonia’s regional Parliament.

Even if the concept of Catalan independence remains ill defined, Josep Ramoneda, a Catalan philosopher and writer, suggested that it was in fact “the only real political project in Spain at this moment.”

“In a crisis,’ he added, “people need to hold on to some positive vision of the future and not just worry every morning about how high the debt risk premium is.”

Mr. Rajoy, meanwhile, has tried to circumvent the Catalan challenge by calling for national unity. On Tuesday, he urged regions instead to close ranks and focus on together pulling the economy out of recession.

With a €200 billion economy roughly the size of Portugal’s, Catalonia and its 7.5 million inhabitants — 16 percent of the Spanish population — have long been one of the country’s main economic engines. The region blends a powerful financial services sector, led by the big bank La Caixa, with a strong industrial base that includes traditional sectors like textiles and car manufacturing (Nissan and Volkswagen have factories near Barcelona), as well as biotechnology companies like Grifols, a developer of products based on blood plasma.

Officials in Madrid like to point out that it was central government financing of the 1992 Olympics that helped raise Barcelona’s global profile, transforming it into one of Europe’s most visited cities, with about 9 million tourists a year, compared with 1 million before the Games. The metropolitan area’s commercial allure is now such that local authorities last week were able to announce a private developer’s plans for a new €4.8 billion gaming and leisure resort called Barcelona World, to be located 120 kilometers, or 75 miles, south of the capital, near Tarragona, on land owned by La Caixa.

The financial crisis, however, has revealed that Catalonia, like many other regions, has badly managed its public accounts. Mr. Rajoy has blamed the nation’s indebted regions for two-thirds of last year’s fiscal shortfall that has forced Spain to miss budget-balancing targets it had agreed to under its euro zone obligations.

Of total debt of €140 billion among Spain’s 17 regional governments, Catalonia owes the biggest amount: €42 billion. It is in such trouble that it can no longer borrow in the financial markets, which is why Catalonia has had to ask the Rajoy government for emergency financing.

In some respects, Catalonia has continued to outperform the nation as a whole. Against a national unemployment rate of 24.6 percent, Catalan joblessness is marginally better, at just below 22 percent. And many Catalans have concluded that their recovery prospects would be enhanced by loosening or breaking ties with the rest of recession-plagued Spain.

“Until the crisis, many people here saw the advantages of being part of a dynamic Spanish economy, but now all we see is a falling economy run by Madrid politicians who are making it worse,” said Salvador García Ruiz, one of the founders of Collectiu Emma, an association promoting Catalan interests. While he acknowledged that Catalan politicians had also overspent and in some cases were caught up in corruption scandals, “at least they are our own, and a people should have full power to give its politicians a fail or a pass.”

So far, the regional government of Catalonia, led by Artur Mas and his party, Convergencia i Unió, has instead restricted its demands to fiscal sovereignty, starting with the need to convince Mr. Rajoy that Catalonia should be allowed to reduce its contribution to a fiscal system that redistributes part of the tax revenues to other poorer regions of Spain. The two politicians are schedule to discuss the issue at a meeting next Thursday.

But looking ahead to two regional elections next month — in the Basque Country and in Mr. Rajoy’s home region, Galicia — the prime minister is unlikely to strike any deal with Catalonia that could open up a Pandora’s box of new demands by other indebted regions. He is also trying to turn back a threatened tax revolt in the Extremadura region, which despite being controlled by Mr. Rajoy’s Popular Party, said this month that it would only selectively apply a tax increase decreed by Madrid.

But in Catalonia’s case, Mr. Mas and his allies are threatening to escalate the conflict if Mr. Rajoy ignores their fiscal demands. They have raised the possibility of creating a new Catalan tax agency to collect money that now flows into Madrid’s coffers.

“If no agreement can be reached with Madrid, we will be entering a new period of uncertainty that could be very hurtful for the whole Spanish economy,” warned Josep Sánchez Llibre, a national lawmaker from Convergencia i Unió, the governing party.

A fiscal concession by Mr. Rajoy could go a long way toward deflating the Catalan independence drive.

“A lot of people view independence in terms of real feelings, but others only in terms of their wallet,” said Alex Reus, an economist who joined Tuesday’s rally.

Indeed, many Catalans have far more urgent preoccupations than separatism.

A day after attending the demonstration, Jordi Iglesias stood in front of a shop owned by Serra, a company that sells photo equipment, to protest with other employees that along with him were laid off by Serra at the end of August. Mr. Iglesias is also facing the cost of renovating an apartment that was damaged by a tenant who had also lost his job and left without paying Mr. Iglesias three months in rent that he owed.

“I can’t say that everybody is setting a good example for Catalonia in this crisis,” Mr. Iglesias said. “I want an independent Catalonia, but also with clean businessmen and politicians.”

Mr. Rajoy, unlike his Socialist predecessor, José Luis Rodríguez Zapatero, holds a majority in the national Parliament. That makes it far easier for him to brush aside regional political demands.

But Jordi Alberich, director general of the Cercle d’Economia, a Barcelona-based association of 1,500 executives and academics, said that “by trying to remain silent on an independence issue that is threatening to boil over, Mr. Rajoy risks in fact fueling the feeling that Catalans are being dominated by a Madrid government that doesn’t care about their claims, nor even about the pain of all the recent budget cuts.”

“That,” Mr. Alberich said, “could turn out to be a dramatic mistake.”

http://www.nytimes.com/2012/09/14/world/europe/14iht-catalonia14.html?pagewanted=1&ref=global