european central bank

MEPs from different EU parties condemn action of Spanish police against Catalan executive, though European Commission declines to comment

International experts have participated in a day of debate over the hypothetical scenarios and the possible consequences regarding membership or expulsion from the European Union of an independent Catalonia. The panellists ruled out automatic expulsion, as well as automatic membership, in any scenario. Graham Avery, Senior Adviser of the Brussels-based think tank European Policy Centre (EPC), underlined that "the most important" element in deciding what would happen to an independent Catalonia would be "the process" through which it achieves this independence. If it was carried out with the agreement of the Spanish Government, the transition towards full EU membership would be quite fast and smooth. If it was done unilaterally, then a wide range of scenarios are possible, with risks and costs rising. However, a majority of experts have stated that even in the worst case scenario, the costs would not be as high as the Spanish Government is saying. In addition, they affirmed that the EU is likely to adopt a pragmatic approach and that a transition regime is likely to be set up, with basic policies and freedoms not being interrupted.

Figures released by the Barcelona Chamber of Commerce on Monday showed that the economy of Catalonia is set to grow by 1.6% in 2014 and 2.1% in 2015. The Chamber also predicted that by 2015, there will be a 2% rise in Spain’s GDP and 1.4% in that of the Eurozone countries average. According to the President of the Chamber, Miquel Valls, the recovery of Catalan and Spanish economies is "solid", but he stressed that the "austerity in wages" must be maintained. This report comes after the success of all Catalan banks passing the stress tests issued by the European Banking Authority and the European Central Bank, which 25 banks across Europe failed. Related economic news is that the unemployment figures released for third quarter of 2014 set Catalonia’s rate at 19.1% and Spain’s at 23.67%.

The Catalan banking system boasts a strong image after the publication on Sunday of the 2014 EU-wide stress test results, issued by the European Banking Authority (EBA). All the financial entities based in Catalonia have sailed through the EBA stress test, showing they could face the most adverse economic developments with only their own resources. In the most difficult scenario, Barcelona-based CaixaBank – which is the largest bank in the Spanish market – reached a 9.3% equity ratio (CET1), Banc Sabadell got an 8.3% and Catalunya Banc an 8%. The minimum required was 5.5%, which was not reached by 24 of the 123 European banks analysed. Only one Spanish entity, Madrid-based Liberbank, would need additional capital in the worst case scenario.

The President of the Catalan Government, Artur Mas, replied that “nobody believes” in the “apocalyptic” message sent by the Governor of the Bank of Spain, who was appointed by the current Spanish Government in 2012. Mas asked Luís María Linde for “caution” and “to serve the whole of Spain and do not take sides”. Linde stated in Madrid that “independence is unviable”. He argued that the European Central Bank only funds Member States and thus Catalonia would be “obliged to issue its own currency” and have “its own banking supervisor”. On the same day, the Spanish Finance Minister, Cristóbal Montoro, said that if Catalonia were independent it would have “to abandon the Euro” and this could even lead to putting the entire Eurozone at risk. However, in September the European Commission confirmed that an independent Catalonia could continue to use the Euro in different scenarios.

Despite initial fears of violent incidents the European Central Bank’s Governing Council meeting has been held peacefully. 8,000 police officers guarded the event by literally occupying the city. Besides, the ‘indignados’ movement demobilized their forces, and no anti-system protests took place.

Thousands of students protested in Barcelona against the reduction in the university budget and the increase in tuition fees. The demonstration was peaceful and was observed by the police, in order to prevent any possible incidents, since it coincided with the European Central Bank Governing Council, being held in the Catalan capital.

The President of the European Central Bank, whose Governing Council met in Barcelona on May 3rd, praised the Spanish Government’s “significant effort” made in a “very short period of time” to approve structural reforms. However, Mario Draghi, asked Spain “to persevere” in the strategy based on austerity and accomplish further reforms. The ECB’s President emphasised Europe’s need to adopt measures strengthening economic growth but without abandoning the principles of austerity. Draghi recommended continuing to reduce public spending in order to control the deficit. As expected, the ECB is maintaining the interest rate at 1%.

Coinciding with the European Central Bank Governing Council organised in Barcelona, the President of the Catalan Government, Artur Mas, met with Mario Draghi and other members of the ECB Governing Council. Mas took the opportunity to explain to the ECB the Catalan Government’s austerity measures and its efforts to reduce Catalonia’s public deficit. He also spoke of his party’s support to all the reforms taken at Spanish level, despite being unpopular. However, Mas warned the ECB President that reducing the deficit too fast in the middle of an economic recession might worsen the crisis.

The President of the European Parliament is visiting Barcelona; coinciding with the European Central Bank Governing Council meeting that is taking place in the Catalan capital. Schulz asked Member States to be less focused on “budget cuts” and start “working together”, otherwise there is a great risk that the EU might end up “failing”. The German politician praised Catalan culture, and reaffirmed his will to push for Catalan being an official language in the Parliament he chairs. Schulz met with the Catalan President, Artur Mas, as well as with Catalan author Jaume Cabré.

The Spanish Government has taken this measure for the European Central Bank (ECB) Governing Council that will be held in Barcelona from May 2nd to 4th. The cancellation of the Schengen Protocol comes after a request by the Catalan Minister for Home Affairs to prevent the arrival of violent protesters and guarantee security during the meeting. This precautionary measure will come into effect from April 28th to May 4th, both included. It will be combined with 6,500 police deployed on the streets of the capital of Catalonia. All these measures will be taken after an evaluation of the risks of trouble during the event.

The “export vocation” and “good management of economic, tourism and trade competences” will ease Catalonia’s recovery from the crisis. This is the opinion of José Manuel González-Páramo, member of the European Central Bank’s Executive Board.