These days there are so many important referendums going on in the world that it is hard to know which ones you should pay attention to when you are attempting to protect your retirement portfolios. Today the Kurds are voting on their independence from Iraq in a move that could destabilize half the Middle East.
One referendum that you may not be paying close enough attention to right now is the Catalan referendum on independence which the citizens of Barcelona, Spain are preparing to hold in direct violation of the Spanish government, national law, and the country’s courts.
This virtual Mexican stand off over the impending October 1st referendum has been called almost surreal. Just this past week, the increasingly hostile stance between the Catalonian regional leaders and the powers in Madrid took a new turn for the worse. It started with hundreds of the local mayors being called in to stand before a prosecutor for backing the referendum in the first place. The 740 area municipal leaders were all in danger of being charged with crimes ranging from civil disobedience to misuse of public funds to abusing their offices.
The Spanish police took matters a step further afterward by raiding as many newspaper offices and print shops as they could in their desperate hunt for voting ballots, ballot boxes, and campaign leaflets. The top court based in Catalonia warned the local newspapers against publishing any campaign notices for the referendum.
Spain has now deployed an extra contingent of national police to Barcelona to back up the local police who are even now busy arresting local regional pro-independence politicians, seizing referendum ballots, and breaking up excessively large or disorderly demonstrations. We are just one step away from someone making a mistake and causing the police to begin an armed confrontation to stop the referendum from occurring in Catalonia and Barcelona.
Meanwhile the Spanish finance ministry has warned the Catalonians that they will suffer a “brutal” impoverishment should they split away from Spain. This would start with a deep and immediate plunge in their regional economic output and trade, per the Spanish Economy Minister Luis de Guindos:
“The general impoverishment of the society would be brutal. GDP could fall anywhere between 25 and 30 percent and unemployment double. The independence of Catalonia would be absolutely irrational from an economic point of view.”
The newly independent Catalonia would immediately exist outside of the EU and Euro Zone. This would mean that fully 75 percent of their regular exports would incur punishing tariffs. Banks would be forced to relocate. The newly independent region would be forced to establish its own currency as well.
The bigger danger though is what the independence of Catalonia and Barcelona would mean to Spain, one of the trillion dollar economies of the Euro Zone and world. At approximately the size of Belgium and numbering 7.5 million inhabitants, Catalonia amounts to fully 20 percent of the entire Spanish economy. It shares the title of wealthiest region of Spain with the capital province Madrid.
Is Your Retirement Portfolio Protected by Gold From the Potential Breakup of Spain?
The European Union can ill afford to have one of its key members fall apart just as it is struggling with poll-leading euro-skeptic movements in both Italy and the Czech Republic. A blow to one of their top four largest GDP nations would be a severe setback to the Euro Zone, which has only recently sidestepped the Global Financial Crisis, the Sovereign Debt Crisis, and the (still-unfolding) Italian Banking Crisis. The result of a shattered Spain threatens the future continuity of the entire European Union as well.
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