Last week the voters in Catalonia went back to the polls to vote on a new government after their former one had been dissolved by Madrid for attempting to declare independence from Spain. In a repeat result, the pro-Catalan independence parties regained control of the majority seats in the region’s assembly.
With an all-time high 82 percent voter turnout, the pro-independence parties groups won 70 of the total 135 assembly seats. Despite the fact that only 48 percent of voters went for these parties, it has been enough to tip Spain back into potential crisis over its economic future.
Geopolitical messes like this in key regions of the world remind you why you need a gold IRA. Gold protects against market crisis as it has all throughout recorded history, which is a good reason to own gold in times of financial crisis. This is why you need to learn what gold goes in an IRA today.
How Spain Reached This Point
This vote was originally called by Prime Minister Mariano Rajoy of Spain back in October. It was at this time that he diffused the escalating Catalan independence crisis by firing the entire regional government of Catalonia as well as dissolving their assembly in Barcelona. To do this, he used the Spanish constitution’s emergency powers found in Article 155.
Though election day on Thursday, December 21st saw Rajoy’s nemesis the former Catalan regional president claim victory, this is far from over. The Spanish prime minister has pledged that he will use the emergency powers again if he has to do so. It reminds Catalans and investors alike that Rajoy could easily dissolve another pro-independence movement government if they elect to challenge the unity of the country under the constitution again.
Where Does the New Election Result Leave The Independence Movement?
It is interesting to note a few results from this divisive election result. With all separatist parties combined, they still only managed to gain 47.5 percent of the total vote. Though they did not win the moral victory of a mandate on independence, it was still sufficient for them to control the Catalan legislature. The graph below shows the breakdown of the Catalan parties and the seats they now hold:
There is another interesting take away. The three primary independence parties may have won the regional election, but none of their parties claimed the largest single total of seats. Instead it was the pro-Spanish unity party Ciudadanos which gained 1.2 million votes and claims the most seats. This at least gives Prime Minister Rajoy an angle in attempting to set up a pro-Spanish government in the region.
The two largest independence parties are in trouble at the moment as well. Carles Puigdemont remains in Brussels after he fled into exile rather than face Spanish courts. Should he set foot back in Spain, he will likely be arrested in the process of the criminal investigation that has been launched against him for his part in the illegally held independence referendum from October 1st. Puigdemont is facing charges from the Spanish Supreme Court for secession and rebellion. He can not be sworn in as president of Catalonia without being physically present.
His Vice President Oriol Junqueras and three other former government separatist ministers are already in prison. Junqueras was the driving force of the independence movement and is another possible contender for new president of Catalonia as leader of the second polling secessionist party. He is not likely to be released until after a judge determines if they were involved in rebellion against the Spanish state.
Clock is Ticking as Spain Pressures the Pro-Unity Winning Party
Add to this unstable mix a new twist. The Spanish prime minister and his political allies are attempting to stop the secessionists from being able to create a new Catalan government. They have more than simply the principle that the two primary leaders are in exile or jail working for them.
Ciudadanos won the greatest numbers of seats of any one party and is vehemently against separating from the country of Spain. The People’s Party of Rajoy is pressuring them to find a means of governing Catalonia even if this means doing so with a minority government. General Coordinator of the People’s Party Fernando Martinez Maillo opined about this on Twitter with:
“There is an alternative and we have to put it to work because anything can happen in Catalonia. After winning the elections, the logical step would be to try to form a government.”
So far, the leadership of Ciudadanos has not encouraged this idea. Their position is that they lack the Catalan public’s support to go against the secessionist majority results. Yet there is another complication that increases the pressure on the secessionists. There is a time limit involved for picking out a new president of the region.
The Catalan assembly has until February 8th to select its new regional president. If they can not, it is likely that the government in Madrid will call for yet still more elections in an effort to break the gridlock and sideline the separatists.
How Can Spain Emerge Whole From the Mess?
Some have hoped that Spain can pull out of the downward spiral it appears to be in through discussions and perhaps reforming the system of government. This was never going to be realistic because Rajoy refuses to permit any action be taken that violates the 1978 Constitution of Spain.
He and others in the national government believe that the Catalans should make their grievances heard in the national parliament in Madrid. This rules out any Catalan referendum for independence.
The government is also unlikely to relinquish any additional responsibilities to the Catalan region. There are complications in doing so as the other regions of Spain will likely clamor for the same treatment if Madrid sets a precedent with Barcelona.
Should they permit the Catalan government to collect taxes directly this would upend the balance of constitutional power in Spain. Not only would this enrage the main supporters of Rajoy as it looked like he was giving in to their demands, but it would likely spell the beginning of the end of a unified Spain.
Impact on Investors Argues for Gold
Investors are watching this continuing crisis closely. Roughly a fifth of the Spanish economy, output, and trade comes from Catalonia. The country could not service its debt without the contributions from the restive region. Economists are watching nervously for uncertainty the ongoing political impasse may create as well. If the new Catalan government defies law and order, Spain will respond firmly and create undesirable international headlines.
Rajoy will struggle to govern Spain if he further strains his ties with the Basque representatives who help him to get legislation passed. This generates further instability in a country that has only recently emerged from recession and banking problems of its own. Already the Bank of Spain has cut its GDP forecasts and 2018 to 2019 national estimates for economic growth. The crisis is taking its toll, and the European Union is watching nervously.
You need to protect your portfolio from a crisis that threatens the world’s largest trading block the EU. There are more than a dozen major independence movements which are closely observing the situation. Groups in countries from Germany and France to Italy and Britain will use any precedent set by Catalonia to try to obtain their freedom as well. This is a potential danger not only to the largest economies in the world but to the European Union itself.
This is why gold makes sense in an IRA. Geopolitical and economic crises like these will always be a danger to your portfolio. Now is a good time to consider how to invest in gold. As history has repeatedly shown, gold offers insurance and protection during market turbulence.