German firms uneasy over Catalonia′s future | Business| Economy and finance news from a German perspective | DW | 09.10.2017
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German firms uneasy over Catalonia's future

Amid fears that Catalonia could announce it is breaking away from Spanish rule on Monday, German firms are anxious about their investments. Alone in 2015, Germany invested half a billion euros in the autonomous region.

As the world waits to see whether Spain's autonomous Catalonia region will declare its independence from Madrid early next week, German business leaders warned on Friday that the decision could leave their investments in a legal and economic limbo.

Catalonia's leaders have vowed to defy a ruling of the Spanish Constitutional Court, prohibiting the planned meeting of the regional parliament on Monday. The assembly plans to debate the results of last weekend's referendum result, where Catalans overwhelmingly voted to secede from Spanish sovereignty. A formal announcement declaring self-rule could even come on the same day.

"The situation in Spain leaves German companies nervous," the new president of the German Federation of Wholesale, Foreign Trade and Services (BGA), Holger Bingmann, told the Reuters news agency.

Wait and watch

A similar warning was made by Volker Treier, the foreign trade chief of the German Chambers of Industry and Commerce (DIHK).

"Political instability is a direct threat to economic development," Treier said. "Doubts as to whether Catalonia will continue to belong to Spain, and therefore to the European Union, is unsettling for German companies."

He warned that any move towards independence would leave sizeable legal uncertainties for businesses operating in the region.

Read more: Catalan separatist movement driven by more than just economics

The latest twist in the years-long independence movement in Catalonia comes as Spain recovers from a deep economic crisis that saw unemployment spike to record levels of 27 percent, property prices plummet and several banks require government bailouts. The Spanish government even requested a 100-billion-euro ($117 billion) rescue package from the European Union.

EU status in doubt

Catalonia is one of Spain's most prosperous regions and plays a major role in Spain's cross-border trade due to its location on the Mediterranean Sea and its proximity to the French border. Any declaration of independence could see it lose access to the European Union's internal market, at least temporarily, until it becomes a full EU member in its own right.

Read more: Catalan banks prepare for shifting headquarters after secession

"Many companies could leave this region," Spiegel Online cited Eckart Woertz, research coordinator for the think-tank Barcelona Center for International Affairs as saying, "especially if companies are concerned they are permanently exposed to an opaque legal situation."

"Things could unfold quickly," warned Albrecht Peters, the president of the Barcelona-based circle of German-speaking executives. He said Catalonia's economy had already suffered in the lead-up to last Sunday's referendum and that "we are now moving into unknown terrain."

A spokesman for Siemens said a possible independence move was "even more of a shock than Brexit” for his company "and even there we don't know what's happening.”

SEAT staying put

Volkswagen's subsidiary SEAT is headquartered barely 30 kilometers (19 miles) from Barcelona and employs over 14,500 people at three production sites in Catalonia. Of the 449,000 SEAT and Audi cars produced there annually, well over 80 percent of them are exported, to more than 80 countries. SEAT is one of the most important industrial giants in both Catalonia and Spain.

When asked by DW about its future, a SEAT spokesman insisted the company is deeply rooted in Barcelona, Catalonia and Spain, adding that: "We need a stable political environment in order to continue to invest in jobs and economic growth. SEAT said it would continue to closely watch how the crisis evolves.

Catalonia is Spain's most important economic region for Germany. According to the regional government, almost 1,000 German companies have a branch office in the northeastern region. As well as SEAT, the chemical giants Bayer and BASF as well as the supermarket chain Lidl have a strong presence there. Germany's total investment in the region was worth half a billion euros in 2015, almost a third of which was by food retailers.

Read more: Fitch joins S&P in Catalonia downgrade warning

More than 400 Catalan companies are represented in Germany, from Cava producer Freixenet to the hotel group Grupo Hotusa. Some 12 percent of Catalan exports go to Germany, which corresponds to a value of more than 7.5 billion euros. Only France imports more goods from the autonomous region.

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