Catalonia and Europe: What’s next?

On October 14th 2019, nine of the 12 separatist leaders of Catalonia stood trial for their roles on the referendum of 2017- declared illegal by Madrid- receiving prison sentences from 9 to 13 years. The crimes that they were trialed on included sedition, misuse of public funding and civil “disobedience”. Almost immediately after the verdict was made public, protests sparked in Barcelona and later on, across the entire region. On October 19th 2019, more than 500,000 people attended the pro-independence peaceful rallies that quickly became violent. The feeling of resentment by some Catalans towards Madrid is nothing new and thus, their reaction comes with no surprise.

 

Historical Context

Indeed, the richest region of Spain has always had a turbulent past with the Spanish capital’s centralism. With the Spanish Civil War, which ended in 1936 with the victory of the Nationalists over Republicans (mainly supported by Catalans) led by Francisco Franco, the region lost its autonomy, and its culture was heavily repressed by the central government: the public use of Catalan was prohibited,  only allowed to be publicly and freely spoken in the Stadium of Barcelona, and, later, at the very well-known Camp Nou, FC Barcelona’s stadium and symbol of the independentist movement. Thus, there’s a historical resentment that arises every time the central government interferes some bit on regional matters. Also, the 2008 economic crisis contributed to the bitterness towards Madrid, as Catalans felt they had given more to the central government than what they had gotten back from it. In 2017, the region represented 20 percent of Spain’s total GDP.

 

2017 Referendum

The increasing discontempt in the region culminated on September 6th 2017 when Carles Puigdemont, President of Catalonia, announced to the government of Catalonia that a referendum would be held on the 1st of October 2017, questioning its citizens if they wanted Catalonia to become an independent state in the form of a republic. Unlike the 2014 referendum (which was merely informative), this one would be binding and it would be done with or without the approval of the central government. This sparked tensions between Madrid and the autonomous region, with the former declaring it illegal and denouncing the lack of democratic guarantees. Nevertheless, the referendum was held, amidst Spanish efforts to stop the voting. 90% of people who voted chose independence, even though only 43% of eligible voters actually participated. As a consequence, the central government triggered Article 155, dissolving the autonomy of the region.

 

An Independent Catalonia?

What would an independent Catalonia mean? To Spain, this situation would imply the loss of its most prosperous, innovative region. Regarding Catalonia, even though the region has almost complete autonomy (in economic, fiscal, social and cultural terms), the path to independence would have a major impact on many levels: firstly, its relationship with the European Union; the institution has been an important supporter of Spain’s monitoring of the situation and has declared that if Catalonia became independent, it would be automatically out. If it wanted to be part of it, it would have to join through the normal lengthy process, which could take years. Consequently, it would be out of the Europe Group and could not enjoy the backing of the ECB. Thus, the economic consequences of leaving the European Union are undeniable: with closed borders, tourism could be affected, as free movement would be constrained and demand for tourist activities could shift to other places; shipping costs would increase as well as the possibilities of tariffs, if no trade deal was struck. Jobs would, therefore, be affected. Also, foreign and internal investment would decrease, as companies would re-allocate their headquarters to more stable places. Indeed, over 2000 companies have already moved their fiscal quarters to other parts of Spain, due to the instability in the region. Thus, economically speaking, it seems that the negative effects of independence outweigh the positive ones.

 

Catalonia and the EU

Nevertheless, independently of the negative economic impact of leaving the EU, how do Catalonians actually feel about the institution? The support (or the lack of it) from the EU has been crucial in politically dividing separatists and unionists. The EU has actively supported Madrid and legitimized its action, which many consider “undemocratic” (as the exercise of voting was denied by the Spanish central government). On the separatist side, many have called for European mediation and action to protect fundamental rights (freedom of speech, the right to vote, which the separatist faction considers that it was not respected), which was denied by the EU.  The fact that the EU has supported the Spanish central government and didn’t attend the separatist demands reflects on the trust towards the institution. Knowing this, trust in the EU has risen to those who consider that Catalonia should be a region of Spain (with no autonomy) and those who defend the current situation (as an autonomous region). On the other hand, trust in the European institution has been steeply decreasing to those who think that Catalonia should be an independent state or should be a state within Spain. Thus, as the desire for autonomy increases, so does the mistrust towards the EU and the greater is the breach between unionists and separatists. This difference was particularly sharp in 2017, especially after the referendum on October 1st. The (in)action of the EU and the Spanish authorities aggravated even more the already existent fracture in Spanish society.

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Also, before 2017, Catalan regionalism and “nationalism” was very pro-Europe, unlike other nationalist movements. For instance, Catalan participation in the European elections was 13 pp above the European average. However, after 2017, the relationship with Europe has bittered. As shown by the increasing of eurosceptic electorate by the party, PDeCAT (Catalan European Democratic Party), the most pro-Europe party in the region in 2016 became the third most eurosceptic, in 2017, also, newly elected Catalan Members of the European Parliament Carles Puigdemont and former minister Toni Comín were among those whose access to the EP was denied after the 2019 European elections.  With this, Catalonians felt attacked by the EU, as the MEPs chosen by 1.7 million citizens to represent them were denied accessibility to exercise their democratic rights. Naturally, this situation changed the feelings of attachment to the EU, varying among territorial preferences. Due to the events of 2017, independentists and people who identified themselves as only Catalan have naturally grown resentment towards the EU, while unionists and people who identify as only Spanish have increased their European support. Thus, the region’s relationship towards the EU has definitely depreciated.

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Beyond borders

Besides having consequences within its own borders, Catalonia’s pro-independence movement could also have repercussions outside. This could strengthen other separatist movements, such as in Lombardy and Venice (in Italy), Flanders (in Belgium), Scotland, Northern Ireland and Wales (UK) or the Basque country (Spain, again). This would divide Europe even more (as the unity and cohesion of the continent is constantly being threatened  over the last few years,  with the growth of right-wing nationalist parties and most recently, with Brexit).  For instance, in Flanders, the New Flemish Alliance, a nationalist, conservative party which has a relevant representation in parliament has been striving for a gradual and peaceful secession of the region from Belgium. It has been reported that the party even hung a Catalonia flag to support its pro-independence cause. In Lombardy and Venice, there’s more of an autonomy issue, as the northern regions of Italy feel that their taxpayer money is being used to support the poorer south rather than investing in the regions. In 2014, a non-binding referendum was held in Venice, with 89% of voters voting for independence. In the case of Scotland, the country also held a binding referendum in 2014, with separatists losing, having 45% of total votes. Nevertheless, with Brexit and the will of Scotland to remain in the European Union, the independence issue is constantly arising. Thus, pro-independence movements are still alive and the example of Catalonia can have a propeller effect and expand to other regions that have the same sentiment.

 

EU’s position


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Generally speaking, the EU has been regarding secessionist movements as a domestic issue,  meaning that these matters are out of the EU’s competences scope. If a region wants to emancipate as independent and wishes to remain in the EU, it must take all the steps, which can be a lingering, lengthy and costly process, to both parties. However, nowadays, this impartiality has to be questioned. With the rise of right-wing nationalism and populism (started with the refugee crisis of 2015) and Brexit, the very own existence of the Union is  threatened, as Europe is more and more divided. Thus, an independence movement would only imply, in the short-run, a greater division and a fall-out of the ideal of a united Europe . This helps explain why the EU has been a strong supporter of Madrid and “closed its eyes” to some questionable methods used by the central government. It may explain why it didn’t let Catalonia MEPs enter the European Parliament, even though it assumed itself as “impartial” regarding the whole matter. Thus, when the unity of the EU is at stake, any domestic matter becomes a European one.

As for now, protests continue in Catalonia, whether in the form of rallies at the Plaça de la Universitat or by blocking the Spain-France highway. Scots, Venetians, Flemish and all other pro-independence regions watch carefully how the Catalonian story unfolds. Nationalist societies, such as Poland, Hungarians and Russians also observe attentively the whole situation. The rise of identity politics, on both sides of the political spectrum, is a reality that the European Union cannot ignore anymore.

Veni, vidi, Salvini: Consequences of the migration crisis in Italy

A Hungarian border fence built to stop migration flows, threatening the future integrity of Schengen. A founding member of the European Union, until very recently in the hands of far-right nationalists. A Mediterranean graveyard of 18,989 migrants who’ve drowned attempting to cross since 2014.

Facts don’t lie: more than poor, Europe’s handling of the migration crisis has been outright catastrophic.

Italy is always on the forefront whenever talking about the European migration crisis which started in 2014, both regarding the mass numbers of immigrants arriving at their shores and their controversial migration policies. Matteo Salvini is an unavoidable figure, steering Italy’s course on migration for over a year. It’s easy to point the finger at Salvini’s arguably inhumane practices. Nevertheless, Salvini is mostly a product, rather than the cause, of the lack of an effective European-wide response on migration.

With Salvini ousted from power in September, it’s important to reflect on his rise and migration policy, the real impact of immigration and what Europe can do to correct its past mistakes.

Salvini Ascending


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Discontent towards Europe was undoubtedly a major driver to Salvini’s successful result in the 2018 general election. Migration, although pivotal to that discontent, isn’t alone in making Italians increasingly critical of Brussels.

Italy has faced a long period of stagnation since the beginning of the century, with real GDP per capita having decreased 3% since 2000, leaving Italy behind relatively to its European peers. The role of the single currency in this stagnation is debatable, but this period of low growth coincides with the introduction of the euro in 1999. Many Italians blame it for their stagnant economy and Salvini has often used this anti-euro sentiment to his benefit. His slogan for the 2014 European elections was ‘Basta Euro’ (‘No More Euro), also campaigning against Brussel’s fiscal rules in 2018.

Italy has also faced en masse immigration, with a total of 656,040 migrants arriving to its shores since 2014. Simultaneously, anti-immigrant propaganda and fake news have swept the continent, fuelling hatred and mistrust towards foreigners. During the referendum campaign, Brexiteer Nigel Farage presented an anti-immigration billboard bearing a striking resemblance to a Nazi propaganda movie which described immigrants as ‘parasites undermining their host countries’ (Image1). In 2018, Orbán’s government sponsored a European-wide video, unfairly correlating refugees with the terrorist attacks across Europe. Even today, Ursula von der Leyen’s controversial choice to name the migration portfolio ‘Protecting our European way of life’ isn’t helping in preventing Europeans from regarding migrants as a threat.


Image 1: Nigel Farage presenting his anti-immigration billboard (left) and Nazi propaganda movie (right)

Image 1: Nigel Farage presenting his anti-immigration billboard (left) and Nazi propaganda movie (right)

The impact of this xenophobic rhetoric is difficult to measure. Coincidentally or not, however, the regions with a higher percentage of immigrant population were the ones where Salvini gained most support in 2018.


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The European Union, nonetheless, isn’t without blame in turning Italians against immigrants. Its current legislation on migration and asylum, the Dublin Regulation, defines that the first Member-State to which an asylum seeker arrives is solely responsible for their asylum application, giving all other Member-States the right to deport a refugee back to their EU country of arrival. Consequently, this places an unfair burden on border countries such as Italy, even though countries such as Germany receive more asylum applications. This has caused 24,000 deportations back to Italy from other EU countries between 2013 and 2018. Despite the EU recognising this as a major flaw, the reform of Dublin has been stuck in the Council since the crisis started, where the Visegrád Group (Hungary, Poland, Czech Republic and Slovakia) are blocking any reform which involves mandatory relocation quotas, refusing to host any refugees. The lack of a common European stance on migration left Italy with the full burden of dealing with this issue.

This sent Italians a clear message: if they were the ones responsible for all refugees arriving at their shores, they would no longer allow refugees to land. The path was open for someone with a hard stance on migration to step in.

Salvini Takes Action


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Salvini took office as Deputy Prime Minister and Interior Minister in June 2018 and his impact on Italy’s migration policy was highly noticeable. He quickly announced the closure of Italian ports to migrant vessels. 44,260 asylum requests were rejected. He shut an asylum centre in Sicily, one of the largest in Europe. He announced fines reaching €50,000 to rescue ships entering Italian waters. In September 2018, the Italian government approved the ‘Salvini Decree’ which, among other measures, removed the possibility of asylum applications being granted for ‘humanitarian protection’, which has been in recent years the most granted asylum type. This would greatly increase the number of rejected asylum applications and an estimated 670,000 immigrants would be living irregularly in Italy, essentially giving the Italian government the right to repatriate them.

Dismistifying Immigrants


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But are Italians and other Europeans right to fear the ‘invasion’ of immigrants? Public perception of immigrants often doesn’t correspond to reality. For instance, despite the sharp fall of 80% of immigrant arrivals by sea to Italy between 2017 and 2018 (partially due to Salvini’s measures), studies show that 51% of Italians still think this number is not decreasing. Moreover, an average Italian thinks that 26% of the country’s population is foreign, while the true figure is 9.5%.

It is also vital to distinguish between a regular immigrant and a refugee. A refugee is fleeing rather than voluntarily moving. These words are often used interchangeably but, in 2016, only 34% immigrants arrived to Italy due to humanitarian crises, while the others deslocated to Italy either for family reunification (45.1% of cases) or to look for better life conditions and employment.

Immigrants common desire for social mobility might explain their higher rate of entrepreneurship when compared to national residents in many European countries (although no data is available for Italy, the Global Entrepreneurship Monitor estimates this rate to be 12.5% for immigrants and 8.6% for national residents in the UK, 2017).

However, this is not the only way in which immigrants contribute towards their host country’s economy. An aging Europe desperately craves for rejuvenated workforce to sustain its social welfare systems, which are being stretched to their limits. Due to their younger age, in Italy, in 2008, 73.3% of immigrants belonged to the working-age population, compared to only 62.3% of Italians. Consequently, despite in the short-run receiving more in social benefits than they contribute with taxes, in the long-run their net contributions are positive, since they have a long working life ahead of them. In 2014, taxes paid by immigrant workers bore the cost of 600,000 pensions.

Studies also show that immigrants ultimately benefit the economy, decreasing unemployment and raising GDP per capita. While this verified in Italy since mass immigration began, it’s hard to quantify their contribution towards this, since it coincides with a period of overall economic recovery in Europe.


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On the other hand, less than 15% of non-EU immigrants in Italy have tertiary education. This results in more than 70% of them being employed as low-wage manual workers, which can cause salary degradation and competition with underqualified national workers, which often causes social tensions and feelings of resentment against immigrants.

Another preconceived idea is that refugees don’t make an effort to adapt to local culture and language. However, a 2014 study shows that 60% of refugees living in Italy had an advanced knowledge of Italian.

Second Chance

The ousting of Salvini presents a chance for Europe to show Italians it can smoothly integrate, absorb and redistribute immigrants in a better fashion than displayed so far.

A quick reform of the ineffective Dublin Regulation is desperately needed. This, however, will be difficult as the Visegrád group remains reluctant in accepting mandatory relocation quotas. A temporary solution is being discussed. Germany and France would each automatically accept 25% of arriving immigrants, with Italy only keeping 10% to compensate for recent years. Other EU countries, including Portugal, are also available to join this scheme. In return, Italian premier Conte has agreed to reopen the ports.

Many EU politicians have also called for EU-funded asylum centres in North Africa and Middle East. This would reduce the number of war-fleeing refugees risking the life-threatening Mediterranean crossing and the migrant pressure on southern European countries. A reinforcement of FRONTEX, the European Border and Coast Guard, which is severely understaffed, is of paramount urgency to combat illegal human trafficking and reduce the number of drownings.

There’s also too much media depicting refugees as dangerous criminals which must be countered, namely by raising public awareness and sensitivity towards their desperate situation. This has proven effective in the past, as is the case of the photograph of the dead Syrian infant found on the shore of western Turkey. When Aylan Kurdi’s picture became viral four years ago, the Swedish Red Cross saw a ten-fold increase in recurring monthly donations to their fund for Syrian refugees.

Despite overcoming the peak of the immigration crisis, Europe still needs to find a way to deal with this issue properly. Only a strong demonstration of solidarity and cooperation will prove to Italy that there’s no need for them to elect an ultra-nationalist again. Europe has been given a second chance to show it can do better. There might not be a third.

Deconstructing the perks of tourism, Portugal’s trendiest economic sector

It has become extremely rare to walk around in Portuguese streets without the constant presence of foreign languages. The country has become more busy and overcrowded, all due to a growing phenomenon in Portugal’s economic landscape – tourism. Wide-spread tourism is a relatively recent phenomena, which sprung to existence when the newly founded middle-class began displacing itself to places other than those where they lived, for less than one year. As previously stressed, this activity has suffered a huge expansion in the last decades, not only in the world, but also in Portugal. In 2017, tourism constituted 13,7% of the Portuguese GDP.

Although presenting many opportunities for economic expansion, this sector has a very strong seasonal component in many countries and regions. Thus, the aim of this article is to evaluate the dependence of this European nation on tourism, in other words, to quantify how much of the production comes from tourism-related activities, and to assess the effects of its instability on the economy.

 

Factors: what plays into this complex equation?

There are several factors that have a positive impact on tourism. While some countries receive millions of tourists per year, you may have realized that some go unnoticed, welcoming a very reduced number of visitors. Afterall, what characteristics are tourists looking for?

One of the things that they find crucial is the safety of the country of destination. Regarding this, Portugal is very appealing because it is considered the world’s third safest country according to the Global Peace Index. The tourist’s decision is also highly affected by weather conditions, attribute which is frequently mentioned as a key-element by those who come to Portugal. The fact that a country with these characteristics sits right in Europe’s backyard makes tourism from other EU countries extremely frequent. Moreover, a country that is culturally and historically rich is preferred to another one that has no noteworthy or perhaps well-known background. Certainly, a big part of a countries’ touristic appeal stems from its monuments, museums, and overall cultural offer, which Portugal has been working hard to both restore and improve. Gastronomy also plays an important role in the tourism sector, and it is perhaps the one in which the highest impact has been felt. For example, ten years ago, there were 7 Michelin-star restaurants in Portugal. This number has more than tripled since 2009 — today, there are 26 Michelin-star restaurants spread across the country. This shows that the effect of tourism goes both ways: on the one hand, better quality restaurants were born out of the increasing affluence of consumers with higher purchasing power, and on the other, they continued to grow in number since they also had the power of attracting generously- spending, food-driven visitors. Lastly, and probably one of the most important characteristics taken into account by tourists, is the cost of living in the country they plan to visit. It is natural that countries with lower accommodation prices, for example, attract more visitors. In Europe, the countries with a lower cost of living are located in the east (Poland, Romania, etc.) and in the Iberian Peninsula. Among the countries with the highest costs of living, we can find Switzerland and Norway, which have a harder time in receiving tourists with lower purchasing power. 

In contrast, there are some factors that negatively affect tourism as well. Being a very volatile sector, it is heavily influenced by external factors. Thus, if the economic cycle is at a low point, the affluence of tourism will inevitably be harmed. If the economy is experiencing a recession or reaching a trough, the decrease in the demand for trips and tourist services will inevitably harm a receiving country’s economy. Now, suppose that this happens in Portugal, where there is an increasing threat of a great dependence on tourism: a bad economic period leads to a decrease in one of the most significant sectors of production. Since this sector contributes to such a large part of the country’s GDP, the economy will suffer disproportionately more, creating a “snowball” effect.

Also, the political environment can affect tourism. For instance, the ongoing political impasse regarding Brexit (with the possibility of a no-deal exit) may create uncertainty among British consumers/travellers, and even create barriers to entry to the country in the long-run. This is a very applicable concern in Portugal, because most visitors come from the United Kingdom (representing 20,9% of total nights from non-residents). Also, due to Brexit, the pound sterling is depreciating against the euro, which makes travelling to Portugal more expensive in comparative terms. 

In addition, natural catastrophes as well as terrorist attacks are exogenous factors that, although they can be predicted to some extent, can’t always be controlled. Recall the terrorist attack in July of 2016 (Nice, France) when a truck was deliberately driven into crowds of people, if you may. Back then, France was the world’s most-visited country and tourism accounted for 7-8% of the french economy, so as you might expect the impact on business was quite large. While in 2015 the number of international tourists was 91,6 millions, in 2017 it was 82,9 millions, so the country faced a reduction of 9,5% in this variable.

In short, tourism’s reliability on external, uncertain factors makes it a very unsteady pilar for an economy to lean on.

 

Impact: the highs and the lows

Indeed, tourism has a huge impact on the economy and in society. Economically speaking, this sector creates jobs; for instance, in Portugal, 30,000 to 40,000 jobs were created between 2013 and 2018, leading to an overall of 328,500 jobs in the sector. The number of people in tourist accommodations has also been increasing, as well as the investment in local accommodations, rehabilitation of buildings and public expenditure on street cleaning. In Lisbon, urban rehabilitation reached a record-breaking value of 6000 million euros last year. Also, local accommodation in Portugal has been experiencing an exponential growth since 2013. Besides experiencing its own growth, tourism is positively impacting other businesses. The supply of private transportation (Uber, Taxis, etc) has been increasing to meet the rising demand, requiring these companies to provide better services. Restaurants, pastry shops and other local stores are benefiting from this boom. New ideas, new stores keep spreading across the cities (new trendy areas, such as Príncipe Real in Lisbon, present us with new concepts and stores). Moreover, with tourism, consumption has been rising, Government revenues have been growing (mainly through VAT and the housing market), foreign investment on the real estate market has been arising and the confidence by the Portuguese people in the economy is thriving (which explains the highest level of consumption since 1960). In short, the growing relevance of tourism in the Portuguese Economy (particularly in Lisbon and Porto) over the past 6 years is undeniable.

However, we must also analyse the pitfalls of this ongoing growth. Even though tourism is positively impacting our economy and leading it to growth, it may also harm us in the long-run. 

A very well-known situation is the inflation in the housing market. Indeed, this market has experienced significant rises in prices: in Lisbon, rents have been increasing at a rate of 8% per year, which might be prejudicial to the families with a tighter budget constraint. Algarve, one of the main tourist areas during summer, comes next, being the second most expensive place to buy a house. This was caused by the “plague” of local accommodation, which had a mere 1000 houses in 2013, growing almost to 3600 in 2018. This continuous growth in prices is becoming unbearable to the average Portuguese worker (whose average wage is 943€), leading to a decrease in the standards of living (for instance, salaries are not growing at the same pace as real estate prices, resulting in a decrease in real wages). 

Also, cities are becoming overcrowded, which is increasing petty-crimes, such as pickpocketing. To fight this, some cities are already imposing an overstaying tax. However, this doesn’t stop the general local discontent, as life conditions are significantly depreciating. For instance, in Barcelona, far-left organized groups have attacked hotels, restaurants and tourist areas to show their resentment regarding tourism and it’s somewhat uncontrolled growth.

What’s more, seasonality contributes to the instability of the sector: nearly one in four trips of EU residents were made in July and August; Europeans spent one third of their tourism nights in July or August. Also, since 2010, Algarve (southern region in Portugal) is the 11th region (considering 263 regions from all 28 member states) with the highest employment in the least number of sectors (mainly tourism). Adding to this, the region presents a very low employment in industrial sectors. Hence, reliance on tourism is a reality and this dependency might be harmful, when the economy is recessing. This comes to show the possibly harmful effects on excessive reliance on the sector.

 

What can we do about it?

All in all, Portugal is quite susceptible to a fall in this sector, mainly due to its unpredictability. For this reason, Portugal should make use of the current positive economic environment in order to be prepared for an eventual reduction in tourism revenues. How could it be? Could the Government be an active part on that? The answer is yes, the economy is influenced by fiscal, social and economic measures set by the politicians. One possible measure would be to use these revenues to invest in clean energy from wind and solar sources which are certainly abundant resources. This would reduce imports of energy from foreign countries and at the same time it would lower the energy prices for portuguese consumers. Additionally, the resulting amount of this policy could be saved, so that in a period with high rates of unemployment, the savings could be used to pay unemployment subsidies, for example.

Another plausible measure would be to use tourism revenues to reduce the tax burden on private companies, enabling other economic sectors to grow and gain prominence. In turn, this would allow the Portuguese firms to invest in new technologies, innovate their products and processes and train their employees, reaching a higher level of competitiveness.

To conclude, the more the different sectors that contribute to GDP, the lower is the risk of a country being undermined by a reduction in tourism. Like all of what is good in life, tourism can have excellent benefits – in moderation.