Catalonia became a part of Spain in the 15th century, due to the marriage of King Ferdinand of Aragon and Queen Isabella of Castile, and is currently still a part of Spain. However, in recent years, Catalonia has expressed a desire to secede from Spain, which has evolved into a political movement for Catalan independence. The reason for this push for independence is that the Catalan people feel that they are paying high taxes and austerity for the benefit of Spain; a country with which Catalonia has few cultural similarities, not to mention the fact that Catalonia did not voluntarily become a part of Spain.

There are many economic effects of Catalonia’s possible secession from Spain, both positive and negative. However, if Catalonia were to secede, it would greatly benefit the Catalan economy with few reprecussions; as opposed to the plethora of negative economic consequences that would impact Spain following the secession.

There are 17 regions within Spain, and Catalonia accounts for a mere 6.3% of Spain’s territory, with a population of 7.45 million people. Yet the Catalonia region is the industrial center of Spain, previously known for the textile trade, and more recently, for advanced technology companies and finance services. Catalonia is ranked number one in terms of production, producing 25% of the country’s exports. However, as 35.5% of Catalan exports are to the Spanish market, Catalonia’s secession would result in a 25-30% decrease in the Catalan economy, and the unemployment rate could double. Catalonia’s annual exports to other countries are 75.5 billion dollars, which is double that of any other Spanish region.

The Catalan economy is thriving, more so now than any other time in it’s history as a part of Spain. Catalonia accounts for 19% of Spain’s GDP (gross domestic product), which is equal to that of Madrid, even though Madrid’s population is smaller by roughly four million people. Catalonia’s secession would cost Spain 19% of its economic output, leaving Catalonia with a GDP of 314 billion dollars, making Catalonia the 34th largest economy in the world, ranking higher than Spain’s economy. If Catalonia secedes from Spain, Catalonia’s GDP would increase by eight cents, as well as retain 18.6 billion dollars per year since the Catalan government would no longer be paying taxes to the Spanish government, which would result in a 2% decrease to the Spanish GDP.

Catalonia currently thrives in the social economic aspects as well as the purely monetary ones. The unemployment rate in Catalonia is 13.2%, which is 4% lower than that of Spain, and Catalonia tends to have less income gender gaps than the rest of Spain, which is an example of Catalonia’s progressive reform regarding employment.

While the direct economic benefits of Catalonia’s possible secession from Spain are evident, one of the major downfalls could have massive and lasting effects on Catalonia. If Catalonia secedes from Spain, Catalonia would have to independently apply for membership in the European Union (EU), and convince all of the bloc’s current members, including Spain, to support Catalonia’s membership. The chances of Catalonia being accepted into the European Union are slim, but if Catalonia chose to drop out of the bloc altogether via secession from Spain, that would most likely increase the cost of exporting products made in Catalonia to other countries in the European Union. In addition, Catalonia’s lack of membership in the EU would place it in the exclusive group of countries not involved in the World Trade Organization, which could result in Catalonia facing massive trade barriers.

One of Spain’s more prominent concerns is that if Catalonia secedes, it could refuse to pay its share of national debt since Catalonia would no longer be a part of the Spanish economy or government. In 2016, Spain’s national debt was 1.18 trillion dollars, and Catalonia’s share of national debt was 86.9 billion dollars, approximately 16.35% of Spain’s national debt.

The possibility of Catalonia’s secession would have incredible economic benefits to Catalonia’s economy, but could potentially lead to an economic devastation of Spain, as well as a civil war. However, long term economic benefits for Catalonia would be tremendous, and outweigh the few trading dilemmas that stand in the way.