Originally published in Expansión. Interview by Amparo Polo / Roberto Casado.
Former Minister meets with investors in London to discuss the secessionist challenge. “An escalation would scare markets”.
Josep Borrell (La Pobla de Segur, 1947), former socialist minister and former President of the European Parliament, affirmed yesterday in London that the City is particularly concerned about the impact that the latest events in Catalonia can have in banks based in the region, such as CaixaBank and Sabadell.
“The first question City investors asked was what’s going to happen with Sabadell and La Caixa, the banks they call Catalan,” Mr. Borrell explained in an interview with EXPANSIÓN, that took place after the socialist politician met with several fund managers to explain the situation that his native region is going through after the Generalitat [the regional government – TN] called for an illegal referendum on October 1st to decide on separation from Spain.
The day before yesterday [on September 20th -TN], after a dozen [Catalonian-goverment -TN] civilian servants were arrested for their involvement and the start of protests in the streets of Barcelona, the big Spanish banks headquartered in that region saw the biggest falls of the day in the Bolsa. Yesterday, these securities recovered part of the lost value, but Mr. Borrell is concerned that nervousness may return to markets.
“The unease among financial investors is noticeable”, Mr. Borrell states. “They are all concerned about the banks”. According to a Merrill Lynch report “it’s not surprising that the banks with the largest presence in Catalonia could be affected in the markets, since an eventual unilateral declaration of independence, their membership in the Euro zone and access to European Central Bank (ECB) liquidity would be in danger.”
The former minister, who now presides the Foundation for European Progress Studies (FEPS), tried during the aforementioned meeting to calm investors. In his opinion “it’s clear that CaixaBank and Sabadell are Catalonian banks only in origin, but they now have businesses in many other places. In the worst case scenario, which I don’t think will pan out, they could change their place of registration in 24 hours. For example, no one would say today that Santander is a bank from Cantabria, although they are registered in that region.”
A change of borders
Mr. Borrell, now 70 years old, has, during the last weeks, one of the most resounding voices against the independence plans. There’s no room for ambiguity in his messages. “The referendum is a coup without tanks, that deposes a legitimate order to impose another one without any basic guarantees,” he stated last week during a visit to Brussels. In London, in a conference organized by Canning House, he made clear that the Catalonian crisis can become an European one. There was scant room for optimism in his speech. “What is happening in Catalonia can have repercussions throughout all of Europe,” he affirmed. “For the first time since the end of World War II there’s an attempt to alter borders. This can have a domino effect.”
The latest events have left Mr. Borrell worried, although he acknowledges that any sensible person knew the situation could end up in the crisis now unfolding in Catalonia. “The separatists re delighted with the raise of tensions. Their motto is that they need to put the State against the ropes to get a harsh reaction.” In his opinion, “the referendum was not called to know what the Catalonians think, but as an instrument of agitation.” According to the former minister, the separatists want to push the State into the use of force and provoke an action-reaction chain. “They know that without conflict they will get nothing”. But what makes him stay awake at night is that the verbal violence now on display in Catalonia may lead to physical violence, something that would have a strong effect in the perception of this crisis and an impact in markets. “If the situation deteriorates and violence increases, we will enter an open conflict situation. In the worst scenario, there could even be a clash between the different police forces that exist in Catalonia”, Mr. Borrell states. “If we reached this point, it would be a harsh blow on the Spanish economy. Confidence is essential to capital markets and uncertainty is pure poisson”.
The dialogue option seems unfruitful in the short time, Mr. Borrell says. “Dialogue means stops along the road, but they [the secessionists] have a very clear direction” he explains. “It’s been demonstrated that every time the central government has acquiesced on something, it has only served to give way to a new demand.”
Mr. Borrell, using fluent and paused English, acknowledges that it’s not easy to explain abroad what’s going on in Catalonia. In London he had meetings with media like the BBC and Bloomberg and also with members of the Labour Party. “Here it seems jarring that the referendum is not allowed, because it goes against their way of understanding democracy,” he admits. It’s also not easy to make a good reading of the political situation. “Catalonian politics is complex. ‘Who are these CUP people’? They ask me. There are many new phenomena and it’s not easy to understand,” he asserts. “The bourgeois middle class that used to vote for Pujol bears no resemblance to the young people who have endured the crisis, job insecurity and evictions and that clamor for independence today. These youngsters have no memory of a better time and they just want to blow up the current system.”
Images: Universidad de Deusto on Flickr and Bernard Rouffignac on Flickr.