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Financial News

Oct 4, 2017

Catalonia’s Vote to Secede from Spain: What It All Means

By Team Stash

How politics of a small region in Spain can affect markets.

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Politics can affect stock markets. Just ask Spain.

On Sunday, roughly two million people in the Spanish region of Catalonia voted to separate from the rest of the nation and form its own country.

The vote was immediately declared unconstitutional by Spain’s top courts, and police moved quickly to squash protests by voters in favor of secession. The vote even prompted King Felipe VI of Spain, who usually stays quiet on political matters, to condemn the move to secede.

The vote in Catalonia would be roughly equivalent to a state like Texas voting to secede from the U.S., which from time to time it has seemed to consider doing.

Why does the vote in Catalonia matter?

Politics affects economies and stock markets. Following the Catalonia vote, something called the IBEX, which is roughly equivalent to the S&P 500 in the U.S. but contains 30 of the largest company stocks in Spain, fell about 3% on Monday.

The euro, the common currency of the European Union (a bloc of 28 countries, primarily in Western Europe), also reportedly fell 0.5% on Monday, the day after the vote.

Catalonia is responsible for roughly 20% of the country’s economy, and a quarter of the country’s exports

Spain has only recently emerged from a crushing, decade-long recession that has left nearly 20% of citizens there unemployed. Catalonia, a small region in the northeast of Spain, is an economic powerhouse, responsible for roughly 20% of the country’s economy, and a quarter of the country’s exports.

One of the country’s most vibrant cities, Barcelona, is located there. And while the rest of Spain has suffered from high jobless rates, its unemployment rate is reportedly lower at 13%.

Catalonia vote: Part of a trend

The Catalonia vote is part of wave of separatist and nationalist sentiment sweeping Europe.

Greece has toyed with the idea of leaving the European Union due to a debt crisis that began more than a decade ago. In 2016, Great Britain voted to leave the European Union in an event that has come to be known as Brexit.

The roots of the Catalonia vote are complex and longstanding. The region has its own language and culture, and was also key in the Spanish Civil War in the 1930s.

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Written by

Team Stash


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