Saturday, February 8, 2014

The Catalan economic mess

The Catalan government wants to be independent but its economy is a mess. The government that hates Madrid so much is receiving a bail-out from the Spanish government to the tune of €6.347bn, making a total of more than €30bn in three years. Almost €2bn will go to the Catalan deficit, which at 2% is higher than the official ceiling of 1% allowed to Spain’s autonomous communities. And that’s part of the problem. It is Madrid that is responsible internationally for the Spanish economy as a whole but a large part of it is in the hands of the 17 autonomous communities that make up the country. There has to be some kind of control of their activities.

Catalonia’s bonds are at junk status and it cannot access the financial markets. How could an independent Catalonia operate when it can’t pay its bills now? In November the pharmacies closed for half a day because they were owed a total of €416m or €140,000 each shop with 22 impounded as security for the debt. (Spanish link) They are all independent traders, no pharmacist can own more than one licence in Spain.

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