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Catalonian elections: Madrid is bad, austerity is worse (+video)

Voters in Catalonia dealt a blow to the Spanish region's ruling party, rejecting its pro-austerity economic policies despite its popular efforts to seek Catalonian independence from Madrid.

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“We don’t see risk of secession,” says Wolfango Piccoli, European practice director of the Eurasia Group, a global political risk consultancy based in New York. “It’s more an issue of noise. Catalonia and others are using the crisis to increase their leverage vis-à-vis the central government and upping the ante. It’s going to be noisier in 2013, but Catalonia is not leaving Spain anytime soon.”

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Fractured independence aspirations

Mas tried to rally Catalonians around the independence issues after around 1 million of the region’s 7 million people marched in September demanding a path toward creating a “new European state.”

The majority of Catalonians feel they are getting a bad deal from the region’s fiscal association with Spain, paying more than what it gets back to support poorer Spanish regions in the south. That has been debatable for years, but when negotiations with Spanish Prime Minister Mariano Rajoy over the fiscal balance collapsed, Mas challenged the central government by setting a path toward a referendum to let Catalonians decide, one that would be destabilizing as it’s not contemplated in Spanish or European legislation.

Most Spaniards agree that the constitution needs reforms to adapt to a much different reality from its postdictatorship framework from 1978, which would translate into making Spain more of a federation, as opposed to a group of regions with varying degrees of power in relation to the central government, each pushing different visions of nationhood. 

Catalonia’s economy is the size of Portugal’s, but like other Spanish regions, it over-indebted itself during times of bounty, and credit markets all but shut it out. Spain’s central government already bailed out Catalonia, crippled by a public deficit and a contracting economy. Regional austerity cuts have been more severe than in most other regions.

Mas’s declared goal was to capture an “exceptional majority,” meaning enough votes in the regional parliament to govern by itself in order to implement its road map to hold a binding referendum on the question of independence by 2016.

But the government of Mr. Rajoy and the country’s main parties had promised to block any referendum, which would have inevitably added constitutional instability to the mix of the political and economic crisis that is already shaking Spanish pillars.

If the central government were to budge on Catalonia, others would follow, making Spain ungovernable. Any reforms, most Spaniards agree, have to be the result of a national consensus, one that will be elusive amid the economic crisis.

Spain’s recession is expected to continue through 2012 and 2013, and unemployment – already topping 25 percent – is expected to increase. Europe is expected to lend around €42.5 billion ($55 billion) to bailout its banking sector.

Additionally, the government is still expected to request a bailout like the one Greece, Portugal, and Ireland already have, although the timing is uncertain due to government concerns over imposing even more unpopular austerity.

But as far as what the Catalonian elections suggest, it appears that Spain can relax for the time being about potentially destabilizing secessionist movements. At the same time, though, the results also show growing antipathy toward austerity and crisis management, regardless of nationality.

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