Catalonia vote: Investors should not fear a Spanish break-up

Investors should not fear an imminent break-up of Spain after separatists in Catalonia won control of the regional parliament but did not get over 50% of the popular vote, says Robeco’s Chief Economist Léon Cornelissen.

The regional elections were treated as a referendum on independence as the Spanish government has refused a Scottish-style real one, saying it violates the constitution. Secessionist parties together won 72 seats in the 135-member Catalonian assembly, but only garnered 48% of all votes cast.

Financial markets took it all in their stride: the benchmark Spanish bond rose slightly in value as investors perceived the result to be good news in the short term, while Spanish stocks barely moved.

“Catalonia is important because it accounts for 19% of Spanish GDP; it’s the richest and most important region within Spain,” says Cornelissen. “The elections had been framed as a referendum on the independence of Catalonia, and so was it interpreted by the electorate.”

“However, despite the record turnout, the popular vote for independence was under 50%, though the pro-secessionist parties won a majority of seats. The leader of Junts pel Sí (‘Together for Yes’), the main secessionist party, has said he now wants to press on with his 18-month plan for independence. He says the majority of seats proves that he has a mandate, but the lack of a clear majority in the popular vote makes the claim for a mandate a bit far-fetched.”

“So I would say that the chances of secession in the short term are very low, and basically this is positive news for investors. The Spanish government now has to make major concessions to the Catalans to keep them within Spain, but that will be a matter for the next government after the general elections for the whole of Spain in December.”

Difficult negotiations
The situation is similar to that of Scotland, whose separatist movement lost an official referendum to leave the UK in September 2014, but forced the UK government to devolve far more powers to the Scottish parliament which is controlled by the Nationalists. “So difficult negotiations lie ahead,” says Cornelissen.

He says it was significant that the anti-independence party Ciudadanos (‘Citizens’) came second while the leftist party Podemos (‘Yes We Can’) did badly, seeing its share of the vote fall from a more than (virtual) 20% in the polls only months ago to a factual 8%.

“Podemos represents the anti-establishment fringe, so you could say this is good news for the upcoming national elections. Ciudadanos is a new centrist opposition party which interestingly enough originated in Catalonia. So the constructive opposition is doing exceptionally well, and that also bodes well for the general election in December.”

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