Desires for national independence in Europe bound by economic realities

Viviane Reding, Vice-President of the European Commission in charge of Justice, Fundamental Rights and Citizenship, went to Barcelona where she participated in a debate about the future of Europe with 250 citizens. (EC Audiovisual services, 23/02/2014).

After the fall of communism in Europe, secession became the name of the game all over the Old Continent. It started with the ‘velvet divorce’ of Czechoslovakia on 1 January 1993, which produced the Czech Republic and Slovakia. Then followed the bloody dismembering of Yugoslavia, where a handful of new nations appeared. Now Scotland and Catalonia have taken the lead for independence, with strong internal momentum to secede from the UK and Spain. Under completely different circumstances, Ukraine during this past week became the next candidate for dissolution, when the Kiev Parliament ousted President Victor Yanukovych and appointed as interim President Oleksander Turchinov.

Unlike Czechoslovakia, national secessionist movements in the Balkans led to bloody conflicts and destruction. In Bosnia-Herzegovina, after the jingoist fire receded, the real problems started haunting peoples’ everyday lives. Today the new state proves to be a completely worthless construction, capable only to serve the chauvinist forces which waged the initial conflict. The political classes in power and the new makeshift administration soon degraded into criminal gangs exploiting the last available economic resources of the region.

Bloody confrontations

On the other hand though the dissolution of Yugoslavia produced three well-governed states, Slovenia, Croatia and Serbia. Invariably the qualities of a new state-nation produced after secession is determined by the ability of the society to organize itself. Also, of paramount importance is the existence or emergence of a well-structured political class. If it has direct references to the people and works honestly for the common good without personal strategies, it can avoid the road to corruption and economic destruction. The existence of natural resources is not a prerequisite for the success of a nation, and sometimes it may become a catastrophic factor. Compare the impact that the discovery of large hydrocarbon deposits had on different nations. Norway and Nigeria are the two ends of the spectrum in this discussion.

Coming back to the latest secessionist movements within the European Union, the cases of Scotland and Catalonia appear in the horizon. In both cases the EU membership and the currency of the aspirant new countries appear as the major points of discussion. Brussels is adamant that if the referendum turns out a positive result, then, immediately, the new countries will be automatically out of the Union. In the case of Catalonia the euro will no longer be the legal tender for internal transactions, while London has clarified that the same will be true for the GBP in Scotland.

In both cases, the new states may use the euro and the GBP in their internal transactions, but it will be under the same conditions as if they had chosen to use the US dollar. London and Brussels can do nothing to block the use of the GBP and the euro exactly in the same way as Washington can’t forbid the use of the dollar. However, Scotland and Catalonia must possess enough British pounds or euros in order to use them as means of internal transactions and as a store of wealth, because in both cases they won’t be able to print money. The printing machines will remain under the authority of London and Brussels. At this point it must be mentioned that in the case of the euro, no Eurozone member state has a free hand to print as many as it sees fit.

Money matters

The printing rights remain with the European Central Bank, which operates under a different mandate than the Bank of England or any other major central bank. All central banks in the developed world come under the authority of the government, while the Treaty of Maastricht, which institutionalized the euro, provides for a special independence regime for the ECB. No euro area government has direct authority over the ECB. Actually, the ECB’s right to buy government bonds issued by Eurozone member states is currently challenged in the Federal Constitutional Court of Germany, but the Germans handed this case over to the European Court of Luxembourg.

In any case, neither Scotland or Catalonia will be able to retain their moneys under the present status. They will be obliged to either issue their own monetary unit or use the GBP, the euro or even the dollar in the same way, as any other country in world which choses to do the same. The problem is that they must hold enough of those currencies because they won’t be able to print them. As a result they won’t be able to run fiscal or foreign account deficits, unless they find available credit from lenders.

In the case of Scotland, those issues plus the ownership of North Sea oil seem to play a crucial role for the outcome of the September referendum. In Catalonia though there is no referendum in sight. All in all, the drives for national autonomy within the EU seem to be powered by economic carburants rather than chauvinism.