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Exiting the Euro would be a good thing... if the debt were under local law. But Catalan debt to Spain is in large part under Spanish law, so it would remain denominated in Euros if Spain remained in the Euro. Similarly, all the EU bailouts and ECB liquidity are under EU law, not Spanish law, so Spanish Euro exit might help devalue the debt, but ever less with each passing month.

The Catalan government would probably argue that it has been a net fiscal contributor to Spain and so is owed. However, the Catalan government borrowed €10bn from the Spanish government last year to avoid insolvency, and it will borrow as much this year. In addition, Catalunya Caixa has received €10bn of Spanish government aid (some of it from the EU bailout last year) and now cannot be auctioned because nobody wants to buy it. I joke that the Spanish government should sell Catalunya Caixa to the Catalan government for €1.

So Catalan independence looks to me to set up something not unlike the Ljubljanska Banka controversy: when Yugoslavia fell apart many banks failed, including Ljubljanska Banka. The newly independent slovenia argued that onle Slevenes were eligible for protection from the Slovenian state, and that others had recourse to the Yugoslav deposit guarantee. 20 years later, Slovenia is delaying retification of Croatia's EU accession because there are still lawsuits by private Croatian citizens on their lost savings in Ljubljanska Banka, and Slovenia and Croatia are negotiating some sort of settlement. 20 years later.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Thu Mar 7th, 2013 at 04:13:28 AM EST
[ Parent ]
Exiting the Euro would be a good thing... if the debt were under local law.

The debt is under whatever law the debtor is under. What it says on the lien doesn't really matter to that.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 7th, 2013 at 04:22:36 AM EST
[ Parent ]
Assuming the debtor doesn't need to travel or trade internationally.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Thu Mar 7th, 2013 at 04:25:49 AM EST
[ Parent ]
No, that just means he's under a wider set of laws than if he doesn't.

Some of which may be incompatible.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 7th, 2013 at 04:35:01 AM EST
[ Parent ]

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