Spain’s constitutional crisis, triggered by Catalonia’s push for independence, is an alarm call for global investors who need to ensure 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.
It is likely to cause a significant destabilising effect on the Eurozone’s fourth largest economy – indeed, growth forecasts for Spain have already been cut for 2018.
Naturally, this can be expected to have an adverse knock-on effect on the economies of the wider Eurozone and put considerable pressure on the euro.
There are legitimate concerns that the Catalan separatists’ ongoing campaign would also likely trigger other areas to vote for independence from the EU, which will exacerbate the issues.
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.
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.
The Catalonia independence crisis could push Spain’s recent economic progress back. This would inevitably weaken the wider eurozone’s economic stability by pushing the bloc into another era of grinding uncertainty.
Nigel Green is founder and CEO of the deVere group.