Shifting Industries from Catalonia to Spain

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People who say that there is no price that can be levied on freedom are right. However, they may have missed the point with the recent Spanish demonstrations where Catalonia wants independence. As a result, the Spanish market has been hit as investors are aware of the shortcomings that can befall the market. On their part, they are aware of the effects of the Catalonia independence referendum and what violent reactions from the Spanish government can add up to. These two issues have added up to two things. There is the likelihood of a social unrest and a potential constitutional crisis. As a result, a number of investors say that they have good things to invest in rather than to splash it on the Spanish government. All these chaos have resulted in the Spanish government paying higher premiums in an effort to convince investors to invest in the country’s debt. While this may seem like a small issue to the common person, its effects are far-reaching. High premiums mean trouble for Spanish banks as borrowing rates would be high. At the same time, it could mean less credit for businesses in Spain. To an economist, this is equivalent to taking away the fuel that is needed to propel the economy.

At the moment, the issue affecting borrowing costs seems to be contained in Spain. However, caution should be taken as the European Union is always at risk from these dangers. This could be France, Italy and even Portugal. Since the Catalonia referendum was announced weeks ago, banks in the area have seen their shares plunge. This is the reason why the banks are contemplating about relocating their headquarters to other parts of Spain. The fact that Catalonia could also declare independence from Spain would leave these banks in a difficult position as they enjoy subscription elsewhere in Spain. The board of a bank known as Banco Sabadell unanimously agreed to transfer the headquarters of the bank to a Mediterranean city called Alicante that is south of Barcelona and 330 miles away. However, this decision made the stock of the company to surge by 6 percent. The Spanish government also signed a decree that allowed firms to transfer their headquarters without necessarily having the approval of shareholders. This forced another bank known CaixaBank to convene its board which later voted to move the headquarters to Valencia from Barcelona. Other industries are also thinking about the same.

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