The chaos in Catalonia should act as a wake-up call for global investors, according to Nigel Green, founder and chief executive of deVere Group.
Green’s comments follow on from reaction to the president of the Catalan government, Carles Puigdemont’s, highly-anticipated speech on Tuesday evening, in which he said Catalans had “won their right to become an independent country” from Spain following the disputed referendum on 1 October.
The Catalonian premier added that he will first seek to open a dialogue with Madrid, but despite an apparent partial climb down Green, pictured left, believes that the aftermath of geopolitical events of this magnitude have the potential to significantly influence capital markets.
Up until now the “chaos in Catalonia” had been largely dismissed by global investors as a regional issue, he pointed.
“Now that Mr Puigdemont is effectively saying that Catalonia will become independent come what may, a considerably heightened game of cat and mouse between Barcelona and Madrid has been started – and this could have far-reaching economic consequences in the short and longer term,” said Green
“In the short term there will be ongoing and increasing uncertainty which is likely to create turbulence in the domestic and regional financial markets. In the longer term, if Catalonia splits, Spain’s economy – Europe’s fourth largest – could lose 20 per cent of its revenue. Plus the process could adversely affect investment into both Spain and Catalonia.”
Green argues that Catalonia independence crisis could push Spain’s recent economic progress back and, as a result, would inevitably weaken the wider eurozone’s economic stability by pushing the Euro bloc into “another era of grinding uncertainty”.
He believes that this issues is “especially concerning” as we have recently had the German election, with Angela Merkel returning but with a lower majority, and here is also an Austrian election forthcoming, with the Italian one next year.
“And this is all against a backdrop of British PM, Theresa May, being urged to walk away from Brexit negotiations in Brussels if they fail to make progress this month,” he deVere CEO added.
“The chaos in Catalonia is a wake-up call for global investors to ensure that they are properly diversified across asset classes, sectors and regions, in order to mitigate the risks of the fall out of this and other key geopolitical events and also – crucially – to take advantage of significant opportunities that they simultaneously present.”