MADRID – A global rating agency advised its subscribers on Monday that the Catalan independence bid could have negative consequences on the overall Spanish economy and its sovereign rating, suggesting a solution could lay in resolving certain fiscal and financial issues.
In its report, Moody’s reviewed the Catalan independence process, keeping in mind Catalonia’s size, that it represents 19 percent of Spain’s Gross National Product and 16 percent of the Spanish population, with a per capita income slightly above the country’s national average.
Catalonia’s “independence would weaken the strength of the Spanish economy,” the rating agency pointed out.
Moody’s next Spanish financial outlook review is due Oct. 20.
However, the ratings agency confirmed its future forecast will be based on the premise that the separatist process will not succeed and Catalonia will remain in Spain.
The presence of numerous obstacles to Catalan independence was noted, such as Spain’s constitutional safeguards or the fact the secessionist movement does not count with an overwhelming majority.
Even in the event the independence referendum did take place on Oct. 1 and the secessionist vote succeeded, “the lack of any legal foundation and the absence of a minimum voting percentage would undermine its legitimacy,” the agency said.
Moody’s also pointed out that the political relationship between Spain’s central government and Catalonia would continue to be tense and that a solution would require addressing Catalonia’s main demands, including larger tax resources and a restructuring of the framework governing its regional finances, all within Spain’s constitutional framework.
The report acknowledged Spain as one of the EU’s most decentralized states regarding public sector expenses, but to a lesser degree when contemplating fiscal matters.
The rating agency also warned of the negative consequences the secessionist process could have on Catalonia’s own rating outlook.
This currently stands at Ba3 with a negative outlook forecast should political tension increase, which would also affect the Spanish State’s financing of this regional autonomy.
In a few weeks, both Moody’s and Standard and Poor’s rating agencies are to review their financial outlook on Spain, which currently stands at B, which translates as stable.