be funded by taxes levied and collected by these governments and not by grants afforded by the central government, 2) changed equalization schemes that rectify horizontal and vertical fiscal imbalances by matching expenditure needs with potential tax resources, and 3) increased regional input in statewide decision making (Castells 2014). A for Catalonia ‘special deal’ would likely have the same demands without calling for nationwide reform. It would be a deal similar to that already achieved by the Basque Country and Navarre. Secession, while eliminating the negative fiscal flows problem and granting full fiscal and political autonomy, has the consequences of a potential decline of sales to the Spanish market, allocation of a share of Spanish debt, and a potential exit from the EU and/or Eurozone (Castells 2014). The Spanish market is the main customer for Catalan exports, and the border effect resulting from independence can significantly dampen trade. However, Ghemawat, Llana, and Requena (2010) found that while Catalonia trades much more with the rest of Spain than the rest of the world, there also has been a slow but steady increase in its openness ratio to foreign markets. The comparative importance of international trade has increased since the mid-1990s, and that of interregional trade has lessened. Catalonia exports much more to the rest of Spain than it imports: it is the international import hub for the rest of Spain. Relative to other Spanish regions, Catalonia leads in both international and interregional trade volumes. The border effect caused by seceding is suggested to be a substantial 9% in Catalan GDP (Bell 2014), but, relative to the rest of Spain, Catalonia is in a much better position to transition into an independent nation based on trade flows. On the other hand, EU and EZ membership is a deciding factor for secession; costs of abandoning the Euro and exiting the simplified trade flows within the EU would be astronomical and, probably, conclusive in deciding the vote.
be funded by taxes levied and collected by these governments and not by grants afforded by the central government, 2) changed equalization schemes that rectify horizontal and vertical fiscal imbalances by matching expenditure needs with potential tax resources, and 3) increased regional input in statewide decision making (Castells 2014). A ‘special deal’ for Catalonia would likely have the same demands without calling for nationwide reform. It would be a deal similar to that already achieved by the Basque Country and Navarre. Secession, while eliminating the negative fiscal flows problem and granting full fiscal and political autonomy, has the consequences of a potential decline of sales to the Spanish market, allocation of a share of Spanish debt, and a potential exit from the EU and/or Eurozone (Castells 2014). The Spanish market is the main customer for Catalan exports, and the border effect resulting from independence can significantly dampen trade. However, Ghemawat, Llana, and Requena (2010) found that while Catalonia trades much more with the rest of Spain than the rest of the world, there also has been a slow but steady increase in its openness ratio to foreign markets. The comparative importance of international trade has increased since the mid-1990s, and that of interregional trade has lessened. Catalonia exports much more to the rest of Spain than it imports: it is the international import hub for the rest of Spain. Relative to other Spanish regions, Catalonia leads in both international and interregional trade volumes. The border effect caused by seceding is suggested to be a substantial 9% in Catalan GDP (Bell 2014), but, relative to the rest of Spain, Catalonia is in a much better position to transition into an independent nation based on trade flows. On the other hand, EU and EZ membership is a deciding factor for secession; costs of abandoning the Euro and exiting the simplified trade flows within the EU would be astronomical and, probably, conclusive in deciding the vote.