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THE EURO ZONE

Corporate concerns

In a speech on last Wednesday, Javier Faus, president of Catalonia's Economic Circle, expressed support for the pardons granted to leading Catalan separatists this week, adding "it's the moment to get to work... We have been paralysed for ten years".

Perhaps now, as a new phase of relations between Madrid and Barcelona begins, Catalan secessionists ought to listen to their region's business world, and contemplate the impact that large-scale capital flight would have on an independent Catalonia.

Top Catalan banks have long been nervous about secession. Two weeks after the illegal independence referendum of October 1 2017 (1-O), El País reported that, before an identical vote in November 2014, Sabadell president Josep Oliu spoke in private with Catalonia's then-president, Artur Mas. Oliu warned Mas that if his pro-independence government pursued secession, Sabadell would leave Catalonia. The paper's source claimed that Mas didn't take the warning seriously, partly because he was convinced a Catalan Republic wouldn't be ejected from the EU.

The story's revealing for two reasons. First, it shows that political instability is anathema to banks and that, for Catalan financial institutions, stability is dependent on operating within the Spanish and European markets. Oliu was the first banker to speak out in public immediately after 1-O, assuring his customers that Sabadell would do everything possible to keep operating "within the framework of the EU and ECB Banking Supervision".

Three years later and under a different Catalan president, Oliu followed through on his warning to Mas. On October 5 2017, four days after the referendum, Sabadell transferred its registered office from Barcelona to Alicante. The next day, Spain's second largest bank, La Caixa, moved to Valencia and Gas Natural relocated to Madrid. They sparked an exodus: throughout the remainder of 2017, over 3,000 corporate refugees left Catalonia, registering bases in less fraught environments.

The other telling aspect of Oliu's 2014 warning to Mas was the latter's refusal to take it seriously, or as indicative of a wider corporate nervousness. As such, it's a perfect example of the independence movement's arrogant myopia: we WILL achieve independence, no matter what it costs or what damage Catalonia sustains in the process. As long as there is no answer to the question of how a newly created republic would remain in the EU, though, the biggest Catalan companies will remain poised to relocate, if they haven't already moved their registered offices.

The prisoners left jail this week with a banner reading 'freedom for Catalonia' - no doubt inspirational for their supporters, but unsettling for a business world hoping that the pardons will foster harmony between Madrid and Barcelona, not further discord. If Pere Aragonès, the region's new pro-independence president, takes Catalonia's corporate ambassadors seriously, he'll already be doing better than his predecessors.