You're a Spain in My Neck/JCPOh No You Didn't (Pt. 2)

It’s been a hell of a week, folks. Catalonia is hurtling towards a devastating divorce with Spain, and the President of the United States wants to decertify the Iran deal, because a conflict with one nuclear power at a time is apparently not enough excitement for one ‘moron’ (more on that, too).

Let’s talk independence first. Catalonia, Spain’s northernmost province, held a referendum last Sunday on whether they should secede from Spain. Catalonia has been a legally autonomous community in Spain since a constitutional statute in 1978 that was confirmed by a referendum in 1979 with 88% of voters in favor. On Sunday, 90% of voters declared a desire for true independence – while Catalonia has it’s own regional parliament, it is still in part beholden to the Spanish national parliament – particularly financially. However, that referendum was declared unconstitutional by the Spanish government, and in an overwhelmingly not-cool move, they sent in military police to remove ballot boxes and stop the referendum by force. Despite that, there was 43% turnout – not high, but significant considering the circumstances.

So, Catalonia’s parliament has called a session for Monday to vote on an official declaration of independence. The Spanish government has again said that it is unconstitutional and may again try to stop it by force, which again, would be a bad move. The heavy-handed approach only drives more folks to support independence, and a unilateral declaration would be devastating. Catalonia is 20% of Spain’s GDP, and contributes disproportionately compared to other regions, especially in the south. If the breakup is messy, they won’t be taking a proportionate amount of debt with them, sending Spain’s debt-to-GDP ratio skyrocketing from 100% to 120%. On the other hand, Catalonia would be expelled from the EU and would need to begin negotiations to reenter on their own terms, which would be pretty bad for literally anyone doing business there – both BancoSabadel and CaixaBank have declared that they will be moving their legal headquarters out of Catalan for fear of capital flight – no one wants their money in a bank in a country that’s on bad terms with literally all of Europe.

So here’s my take – very few people actually want outright independence. Some Catalonian leaders are already looking to walk back this game of brinkmanship. To me, this looks a lot like Greece in the summer of 2015, where a legally-dubious referendum was held, showing the people’s desire to be free of a government that overburdened them with debt (then, the EU; now, Spain) in order to gain leverage in negotiations for a sort of middle-ground, or third way. Catalan doesn’t want to be kicked from the EU and lose half its business, and Spain doesn’t want to lose a highly productive region and look bad in front of their European friends.

We’ll see on Monday what each decides to do – hopefully, the Spanish government will realize that force is not the way to go and Catalonia will abandon maximalism, but these days, I don’t have a whole lot of faith.

Back to your regularly scheduled Iranian nuclear deal.

Trump said he's going to decertify. As I said last week, this is a bad idea. The JCPOA has extended Iran's "breakout time" (the time necessary to enrich enough uranium to make a nuke) from like 3-4 months to a year. All decertification does is allow congress to consider reimposing sanctions. Even if they manage to impose ALL the sanctions they had in place pre-2015, every OTHER country that was involved in those sanctions (ie most of Europe) is like "uh hey no this is still a good deal, we're not gonna walk away from it", something French President Emmanuel Macron has vigorously supported, AS HAS TRUMP'S SECRETARY OF DEFENSE. So by walking away now, we get like 25% of the leverage we had in 2015 and we isolate ourselves. Genius.

Iran could, as a result, totally walk away in which case this becomes a race to the bomb for them. So the literal best case is for Congress to ignore the president and not reimpose sanctions, and even in that case we look indecisive and lose credibility. Second best is congress reimposed sanctions but no one else does and Iran stays in the JCPOA and the US gets isolated. Better plan? Impose additional, separate sanctions related to Iran's support for terrorist groups or to its conventional weapons programs. But that wouldn't be a giant middle finger to Obama's legacy, so there's that. It'll be up to Congress to decide.

The most ironic part of this is that forcing Congress to enter deliberations on Iran right now just means less time to dedicate to tax reform, which is already in danger of going nowhere fast. So while some have suggested that maybe Trump is just playing the role of madman to force Iran and North Korea's hands, the chances that he's actually just incompetent rise with every day.

What do you think? #fpf