Thoughts from Galicia: 7.10.17

Spanish life is not always likeable but it is compellingly loveable.

- Christopher Howse: A Pilgrim in Spain. 

If you've arrived here because of an interest in Galicia or Pontevedra, see my web page here.

Life in Spain

• Cataluña 1: I guess everyone's seen the news of Madrid's apology for the injuries doled out by the Guardia Civil and also the claims that some of the latter are phony.
• Cataluña 2: I opined yesterday that: It would all depend on finance/money/cash. It really isn't necessary to send in an army, unless you want to show how tough (and stupid) you are. The Spanish government, backed by the EU and the ECB can surely cut off the cash, forcing the Catalan government to 'see sense'. Capital flight would undermine the government completely. So, it's not a huge surprise to read the article by Ambrose Evans Pritchard below this post. Seems to hit the nail on the head. 
• Cataluña 3: It should all be about face-saving now on the part of the Catalan nationalists. But nationalists - and their far-left supporters - don't think like the rest of us. So, might not act as rationally as your or I might. Vamos a ver, come Monday and the (possible) 'illegal' meeting of the Catalan parliament and then the (possible) 'illegal' unilateral declaration of independence. Which will surely go down in history as one of the emptiest gestures ever. Whatever happens - as reader Maria's comment yesterday shows - the scars will run deep in Spain. And might not scab over any time soon. It's all left me wondering whether the post Civil War Pact of Silence wasn't - on balance - a good thing. In truth, at only 40 years old, Spain's democracy has been painfully - and understandably - revealed to be less than mature. Though Britain's Daily Express is probably off-beam to talk of the possibility of another civil war. If only because Cataluña doesn't have an army.

[As you'd expect, I see this rather endorses my view that the EU project was over-ambitious, too hasty and vainglorious. Like stitching together a patchwork quilt with pieces that are straining to get away from each other. Oh, and then there's the rampant political corruption. In Spain, I mean. Though it doubtless exists elsewhere as well.]

• Cataluña 4: Here's Don Quijones on the money theme. As he says - and as I commented yesterday - In Spain it’s incredible how fast the wheels of legislation and justice can turn when the government and major corporations need them to, and how slowly they turn when senior representatives of the government or corporations suddenly find themselves on the wrong side of the law. And as he summarises very recent developments: The last two days of frenetic developments are a lesson about the power of money that Madrid and Corporate Spain are trying to teach Catalans, that their strive for independence will come with pain, sacrifice, and disruption, and that money can be extremely fickle and fearful, that it can leave without notice, especially when political turmoil is on the rise

Moving on . . . If you're driving to Merseyside in the UK, it's worth thinking about going 'across country' from the M5 or the M6, on the M54 and the A500 respectively. For one thing, you avoid the accident-prone stretch north of Sandbach and for a second - more important - thing, you drive through some lovely countryside. Going via the M54 and then the A41 towards Whitchurch and then Chester, takes you through the rolling green hills of first Shropshire and Cheshire, both of them truly beautiful counties. Where the architecture suddenly changes from red brick:-

to 'Cheshire magpie':-

If you go via Congleton, you can even stop off and take a look at my old home there:-

Anyway . . . As I was happily motoring along the A41 and thinking of writing the above, I was met by a large sign: THE A41 HAS COLLAPSED. CHOOSE ANOTHER ROUTE. A tad ironic, I thought. For Spanish readers, 'collapsed' in English doesn't mean brought to a halt by a traffic jam. It means the road is . . .  well, collapsed. Developed a huge hole.

Finally . . . That sign appeared just after I'd passed - inevitably - a pub called The Cheshire Cat, as I was ruminating on the number of villages whose names ended in ton. This, it's said, was the Old English word for 'enclosure', 'farm' or 'estate'. From which we get the word town, of course. Examples are Christleton and nearby Littleton, Broughton and Huntington. Not to mention Rowton and Waverton. You get the picture. But how many of you knew that Preston was 'The priests' estate'?

THE ARTICLE

Economic exodus quickly chills Catalonia's independence dream: Ambrose Evans Pritchard

The flight of banks and top corporations from Catalonia is turning into a stampede as the Spanish state tightens the garrote on the rebel government in Barcelona, exposing the desperate weakness of the independence movement. 

Spain’s top gas and electricity group Gas Natural is drawing up contingency plans to relocate its headquarters as the Catalan ‘Generalitat’ threatens to declare unilateral independence next week.

The infrastructure giant Abertis is taking similar steps, as is insurer Catalana Occidente, and the sparkling wine group Freixenet so popular among British consumers. “Independence is no joke. It’s a true catastrophe, a non-starter,” said Freixenet’s president Jose Luis Bonet. “People are getting frightened. I think it is time for the politicians to stop gazing at their navels and think about the citizens they are supposed to serve,” he said.

Catalonia’s biggest bank CaixaBank - and the largest internal lender in Spain by branch networks - held an emergency board meeting on Friday to switch its legal registration to Palma in Majorca, where the institution first began as a pension and savings bank in 1904.

The Spanish government has rushed through an executive decree allowing decisions to be taken without a vote by shareholders, effectively rewriting the laws of commercial governance on a whim. “It is very sad to see important companies leaving Catalonia. It is not their fault: it is the fault of those generating this worry,” said Luis de Guindos, Spain’s finance minister.

The legal legerdemain has prompted fury in Barcelona. Oriol Junqueras, Catalonia’s vice-president, accused Madrid of trying to orchestrate an exodus of companies and to foster generalized panic through a strategy of economic, legal, and political strangulation. He insisted that the corporate defections were “temporary”. “There will not be a flight of companies. We have heard these sorts of forecasts many times and it never actually happens,” he said.  It remains to be seen whether the Catalan people still believe such assurances as household names and icons of Catalan prosperity all rush for the door.  

Catalonia’s second biggest lender, Sabadell, agreed to relocate its headquarters to Alicante on Thursday after 136 years as the pillar of Catalan industrialisation. It was careful to state that this shift would not necessarily lead to job cuts in Catalonia. It is not yet clear how many corporate transfers are just ‘brass plate’ switches. 

The precautionary action by the two banks ensures that they will maintain unfettered access to the liquidity window of the European Central Bank, heading off a potential deposit flight and a bond rout on financial markets. Their top executives have been in daily contact with the Bank of Spain, Spanish premier Mariano Rajoy, and King Felipe VI. 

Neither bank is in good shape. Both are still struggling to meet tougher rules on capital adequacy and to work off non-performing loans dating back to the property crash and the economic post-2008 economic depression.  Spain has been enjoying a V-shaped recovery for the last three years but the legacy damage ran deep.

This week’s drama shows just how hard it is for a separatist region to safeguard its financial system when debts are in a hard currency beyond its control - in this case euros - and it has no lender-of-last resort. As the Leftist Syriza government in Greece discovered, the ECB’s control over the banking system of eurozone member states is a formidable instrument of pressure. 

Those companies announcing relocations - or intentions to do so - have seen an instant surge in their share prices. Oryzon Genomics, the telecom group Eurona, the payments company Service Point, Dogi lingerie, and Proclinic orthodontics, have all joined the rush. The car manufacturer Seat, owned by VW, has dismissed reports that it is planning to leave Catalonia as “rumour,” although this was not a categorical denial.

The early bounce for CaixaBank and Sabadell is already fading as the deeper issues resurface. The long-term showdown between Madrid and Barcelona is far from over, even if the separatists fall short this time. 

There are already calls from Left-wing separatist groups for a boycott of the “traitor’ banks and those companies deemed part of a capitalist conspiracy. Hardliners are pushing for the creation of new cooperative banks and or a Catalan ‘Landesbank’ under local political control.

The International Monetary Fund warned on Friday that a prolonged dispute could start to damage the Spanish economy as a whole. Standard & Poor’s recently recoiled from an upgrade to Spain’s sovereign rating that might otherwise have been justified by the fundamentals. 

Mr de Guindos revealed this week that one unnamed multinational carmaker had frozen a large investment in Catalonia pending the outcome of the dispute. In this case it is not switching the operations to the rest of Spain. It is a net loss to the Iberian peninsular.

For Catalonia’s leadership, it is a bitter awakening. They won the battle of images last Sunday when the Guardia Civil bludgeoned hundreds of people trying to vote in the unofficial referendum, but it has not taken long to discover what the movement is up against as the dust clears - or to discover the ‘correlation of forces’ in Marxist terminology.

To their astonishment, the EU has backed the violent crackdown as “proportional”.  They certainly have the sympathy of the European Left. The grass-roots campaign DiEM25 is so disgusted by the events that it declared Europe “dead” as a meaningful motivating force. Clearly these events will echo for years - like the 1968 eruption in Paris - but that does not help Catalonia’s leaders right now.

The leaders of the Catalan police or Mossos d’Esquadra faced court on Friday charged with sedition for refusing to join the repression of voters. Resistance is being systematically broken.

The Vatican has refused to mediate and warned that the Catalan quest for independence does not meet the threshold for legitimate national self-determination, a judgement largely shared by experts in international law. It applies only where the dominant power is not democratic or if a people is subject to colonial rule.

Spain’s top court has issued a writ prohibiting the Catalan parliament - under pain of criminal prosecution - from meeting on Monday even to discuss a declaration of independence. Catalan nationalists plead with the world that the tribunal is not a constitutional court in the American or German sense, citing criticisms made by the (non-EU) Council of Europe.

It has quasi-executive powers. It can sack officials and impose large fines at the flick of the fingers. Catalan leaders say it acts in a political fashion as the tool of the Spanish power-structure. Whether or not that is true - and how you view the cause of Catalan independence depends greatly on this point -  the world has so far given Madrid the benefit of the doubt.

There is little doubt that Spain will invoke Article 155 of the constitution and seize control of Catalonia immediately if the rebels press ahead with independence next week. The Barcelona Autumn of 2017 already seems to be slipping away. Catalan nationalists will have to bide their time.