Separatists in the Spanish region of Catalonia moved one step closer to independence on Tuesday when the two largest pro-independence parties announced their intention to form an alliance and push for a referendum in 2014. As the New York Times notes, these two parties hail from opposite ends of the political spectrum and have failed to see eye-to-eye for years. The fact that they are now uniting suggests that Catalonia is getting serious about independence.Madrid did its best to spin the results of the Catalonia election as a defeat for the secessionists, but as we predicted, the new Catalan coalition has united behind the demand for an independence referendum that Madrid says is illegal.This won’t help Spain, and it won’t help the euro. It is, however, good for the coalition partners in Catalonia, who have shrewdly set a far-away date for the referendum. This will allow Catalonia to extract the maximum level of concessions from both Madrid and Brussels as Europe’s power brokers struggle to avoid a destabilizing crisis in a major EU economy.Blackmail Madrid as long as possible, and keep the referendum threat real: This is a smart strategy and one that will be hard to beat. Madrid is now backed into a corner: If it squeezes Catalonia, the prospect of secession increases, investors flee all of Spain, and the euro itself comes under pressure.Madrid is likely to use the threat of a crisis to force better terms from Brussels. Push Spain too hard, it can tell its European partners, and the country will face a crisis that will undermine everything Europe is doing to save its currency.However things work out, the Catalan coalition agreement is going to cost Angela Merkel’s Germany a lot of money—either in bailout funds for Spain, or in emergency ECB and other spending to keep the euro alive as the Spanish crisis worsens.
Spain on Track for Major Crisis in 2014