Catalonia independence could impact the world economy

“It’s Brexit all over again,” says Tim Harcourt, the J.W. Nevile Fellow in Economics at the UNSW Business School. “The only difference is, it’s a non-legal, non-binding vote. There is huge uncertainty about this – and what the economic markets hate is uncertainty.”

Tens of thousands of people took to the streets of Catalonia's capital Barcelona overnight to rally against the region's independence bid from Spain.

“Catalonia is a wealthy province, however much of Spain’s trade is defence and infrastructure focussed – very much dominated by central government in Madrid,” says Harcourt. “The push for independence may not have commercial backing. Businesses will move to Madrid and other Spanish cities and regions.”

Spain’s third largest bank, CaixaBank, is to move its registered office from Catalonia in the latest fallout for businesses from the political tensions in Spain. “Major Spanish firms such as Gas Natural Fenosa and the infrastructure business Abertis are also looking at alternatives, if there is independence.”

“But that’s a big IF,” he adds.

“What we have to watch for here is Independence contagion. Catalonia’s push will lead to more intense push for Basque separatism and other regions in Europe, Wallonia etc undermining the EU further.”

He adds that it may seem like a minor story in Australia. “Australia’s trade with Spain is minimal, dominated by defence contractors and big infrastructure players. Only 721 Australian companies export to Spain compared to say 6218 to the UK.”

However, Tim Harcourt warns it is important to be on top of the macro-economic situation. There is a non-economic big picture geo-political angle as well to consider. “Spain, and Catalonia support for the EU may be important in an uncertain world with Putin pushing for a neo-Cold War Eurasia bloc, tensions in the South China Sea and other global problems. Catalonia must consider all the implications.”

For further comment call Tim Harcourt on 02 9385 3816, 0408 485 479, or Email tim.harcourt@unsw.edu.au.

Media contact: Julian Lorkin: 02 9385 9887