Spain loses 20% of its economy if Catalonia splits

Catalonia: What you need to know

could going of which alone work for Catalonia?

The Spanish region will be holding an independence referendum on Sunday with major economic implications for the country — along with Europe.

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The vote, which will be fiercely opposed by Spain’s central government, comes as the country emerges by nearly a decade of economic trauma. Catalonia will be its most economically productive region.

Here’s what’s at stake:

Richer on their own?

Catalonia accounts for nearly a fifth of Spain’s economy, along with leads all regions in producing 25% of the country’s exports.

of which contributes much more in taxes (21% of the country’s total) than of which gets back by the government.

Independence supporters have seized on the imbalance, arguing of which stopping transfers to Madrid could turn Catalonia’s budget deficit into a surplus.

Catalonia includes a proven record of attracting investment, with nearly a third of all foreign companies in Spain choosing the regional capital of Barcelona as their base.

Volkswagen (VLKAY) along with Nissan (NSANF), for example, both have plants near Barcelona.

Related: Catalonia on collision course as banned referendum nears

Big risks

nevertheless there are many unanswered questions — including continued membership within the European Union.

If Catalonia was forced to independently apply for EU membership, of which could have to convince all of the bloc’s current members to agree — including Spain.

“We currently see no practical way for Catalonia to become an independent country within the EU, as most supporters of independence want,” economists at Berenberg Bank wrote in a research note.

Dropping out of bloc could likely raise the cost of exporting goods produced in Catalonia to EU members along with some other nations.

“of which could join the smaller list of countries of which are not World Trade Organization members, meaning of which could face significant trade barriers,” said Stephen Brown, an economist at Capital Economics.

Barcelona: The jewel in Spain’s economy

Brown said the move could increase the cost of imported goods in Catalonia along with result in job losses.

Independence could also make of which more expensive for the region’s government to borrow. Credit ratings agencies Moody’s along with S&P both downgraded Catalonia’s debt rating in 2016.

The region could continue using the euro as its currency, nevertheless could not have a seat at the European Central Bank.

What about Spain?

Spain’s highest court has banned the referendum, calling of which unconstitutional. nevertheless the separatist regional government will be pushing ahead with the vote.

A split could leave a hole in Spain’s finances along with dramatically increase uncertainty.

If Catalonia declares independence unilaterally, of which might also refuse to take on its share of the national debt.

“While there does not appear to have been any serious effect on the wider Spanish economy so far, of which will be likely of which business along with consumer confidence could deteriorate if Catalonia were to secede,” Brown said.

What’s next

The buzzword for investors will be uncertainty.

“As with Brexit, we believe of which any Catalexit could plunge the region into a long period of uncertainty along with could most probably be negative for the private sector,” ING economist Geoffrey Minne wrote in a research note.

Kathleen Brooks, the research director at City Index, said a referendum win for the separatists could cause the euro to decline by as much as 5%.

However, even a decisive “yes” vote will be unlikely to result in Madrid or the EU recognizing Catalonia as “independent.”

“The Catalan government will instead attempt to use a positive referendum result to boost its leverage in future negotiations with the Spanish government,” said Laurence Allan of IHS Markit.

sy88pgw (London) First published September 29, 2017: 11:15 AM ET

Spain loses 20% of its economy if Catalonia splits

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