Eurozone Crisis Increasing Regional Separatist Sentiment

Although it is quite obvious that European fiscal issues are exacerbating tensions between wealthy member states and poorer ones, it is also becoming increasingly apparent that the crisis is leading to greater separatist sentiment in regions within EU states.

Many EU sovereign states have regions with distinct cultural, linguistic, or economic identities that have shown varying degrees of separatist tendencies. Examples include Catalonia and the Basque region in Spain; Scotland and Wales in the United Kingdom; Flanders in Belgium; and Northern Italy. Even when global economic conditions were good during the 2000s, separatist sentiment bubbled beneath the surface. Now that the economic climate is distinctly bleak, separatist forces are using these circumstances to make the case that their regions would be better off going their own way.

Catalonia And Scotland Leading The Way

Catalonia is currently drawing our attention. Located in the north-east of Spain and centred on Barcelona, Catalonia has its own language and is more prosperous than the rest of the country, generating 19% of Spanish GDP and providing 21% of the central government’s tax intake with only 16% of Spain’s population. The region has legislative elections on November 25, and the separatist parties are in the lead. The regional president is meanwhile promising to hold an independence referendum. All this comes hot on the heels of pro-independence groups having won elections in the Basque Country on October 21.

At the same time, Scottish First Minister Alex Salmond has been busy preparing the grounds for an independence referendum which he wants to hold in June 2014 to coincide with the 700th anniversary of the Battle of Bannockburn, which saw a Scottish victory in the wars against England. The Scottish case is somewhat different from the Catalan example, because the UK has not experienced a crisis like Spain has. Also, Salmond has been actively pushing for independence for many years, and although opinion polls show that only around 30% of Scots favour independence, he is clearly hoping that the emotionalism of the Bannockburn effect and promises of a better economic deal will swing voters towards independence. We regard this as a long shot and ascribe only a 10% probability of a yes vote for independence.

Although there is no direct connection between putative referenda in Catalonia and Scotland, whichever vote comes first could conceivably reinforce the other. So, if Scots were to go their own way, they could provide inspiration for the Catalans, and vice versa. Separatists in both regions will also be watching closely to see whether a putative new sovereign Catalonia or Scotland will be permitted to stay in the EU or will have to apply to join the union. If an independent Catalonia needs to apply for membership, it could be vetoed by Spain.

Going forward, it is not the case that central governments in Madrid or London will react in the same fashion to a separatist vote. The British government appears grudgingly supportive of a Scottish referendum, and it is difficult to see military force being used to prevent Scottish secession. By comparison, the Spanish government views a Catalan referendum as illegal. In theory, we could thus see a diplomatic stand-off between Madrid and a newly independent Catalonia, which might ask the EU to intervene politically in its favour. This would put the EU in a tremendously awkward position.

Elsewhere, in Belgium, the wealthier Dutch-speaking region of Flanders has been pushing to reduce ties with French-speaking Wallonia. More broadly, Belgium has been in political crisis for some years, on and off. A break-up of Belgium would be a particularly negative sign for European unity, since Brussels is the EU’s seat of power and Belgium has been a core state of the European Union from the beginning.

What we see across Europe is a rise in separatist sentiment by wealthier regions fed up of subsidising poorer ones, especially where there are ethnic or cultural faultlines.

Economic Crisis Hastened Yugoslavia’s Collapse

This is not new. Although the collapse of Yugoslavia was generally attributed to ‘ancient ethnic hatreds’, this was an oversimplification. During the 1980s, Yugoslavia experienced a severe economic crisis that saw rising levels of foreign debt, hyperinflation, very high unemployment, and steep economic decline. Against this backdrop, the more economically advanced republics, Croatia and Slovenia, got tired of subsidising poorer republics such as Bosnia, Serbia, and Macedonia. The resurgence of long-suppressed nationalism that was itself bolstered by the economic crisis prompted Croatia and Slovenia to decide that their future belonged outside Yugoslavia. Slovenia, being very homogenous, was able to leave the Yugoslav federation peacefully, but Croatia succumbed to war, because its substantial Serbian minority wanted to stick with Belgrade (and were armed and supported by it).

Asian Financial Crisis Nearly Destroyed Indonesia

Indonesia, too, found that economic collapse in 1998 triggered a wave of separatist sentiment across the giant archipelago, as peripheral regions came to perceive that the main island of Java was exploiting their natural resources and not transferring back enough profits. The country also saw considerable violence between the Muslim majority and the Christian minority, and between Indonesians and ethnic Chinese, who dominated key businesses in the economy. At one stage in the late 1990s and early 2000s, it seemed as if Indonesia would see a handful of new states emerge from its territory (in the end, only one did – Timor-Leste).

Although Spain and the United Kingdom are far more politically and economically mature than Yugoslavia or Indonesia were in the 1990s, they are still suffering from the same forces of separatism that has been bolstered by economic forces.

Western European Separatism Could Encourage East

If Catalan, Scottish, or Flemish separatists are successful, their new sovereign states could significantly complicate the eurozone crisis, because there would surely be lengthy negotiations over the division of debt and wealth. They may also give a new impetus to separatists elsewhere in Europe, such as Transnistria in Moldova, Republika Srpska in Bosnia, Serb-dominated northern Kosovo, and Albanian-dominated western Macedonia. After all, it would be much harder for Europe’s major powers to insist on the sanctity of fixed borders in Eastern Europe, while accepting the creation of new states in Western Europe. Given that any separation in Moldova and the Balkans is unlikely to be peaceful, much is at stake.