Article
Written by Zahra Saeed
Posted on 30/09/2015

Catalonia’s potential Eurozone exit: how will it affect your supply chain?

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After a turbulent election last Sunday, the new Catalan parliament is expected to take practical steps toward creating a sovereign state by 2017. But two of Spain’s leading banking associations have warned that they would need to reconsider their presence in Catalonia if it does indeed secede from Spain and find itself outside the Eurozone.  What are the implications to businesses using Catalan supply partners of such a potential banking exodus?

The banks’ view

On Friday 18 September, the Spanish Banking Association and the Spanish Confederation of Savings Banks issued a joint statement stating that all banks in Catalonia would “face serious problems of legal uncertainty” if it decided to separate from Spain.

“These difficulties would force banks to reconsider their strategy of establishment, with the corresponding risk of a reduction in services, and along with that, financial exclusion, a rise in the cost of credit and a credit crunch,” the statement continued.

In a nutshell, there would be a reduction in banking supply that could cause major financial and economic risks to this (currently) Spanish region.

Jumping off the fence

The document was not only signed by all the top Madrid-based banks including BBVA and Santander, but also by the two biggest financial players in Catalonia itself – Caixabank and Banco Sabadell.

It’s a significant sign that Spanish businesses and banks are finally eschewing their longstanding position on the fence when it comes to Catalan independence.

Supply chain woes

Catalonia is a highly industrialised region in northeastern Spain and home to 7.5 million people. For businesses relying on supply chain partners in the area, the repercussions of a potential Catalan exit from the Eurozone following secession is worrying. And more so following the Spanish banks’ uncertainty that they’ll stay put in Catalonia.

Were a banking exodus to happen, companies would need to think about how this could affect the creditworthiness of its Catalan suppliers.   Without banks offering their services, how can business owners be certain that a supplier would be able to keep cash flowing? How can they guarantee that it could fulfil its obligations without going under following what would essentially be a Catalan credit crunch?

Just scaremongering?

But are we just worrying for nothing? For pro-independence activists, all this talk from banks is simply a lot of hot air. They argue that even if Catalonia gained independence, it would continue to be part of the EU. This would mean there would be no concerns about Catalan banks having access to the European Central Bank and other Eurozone organisations.

Having said that, European leaders have unswervingly confirmed that an independent Catalonia would find itself outside both the EU and the Eurozone, at least temporarily.

To avoid all doubt, now is the time to start putting processes into place with any Catalan suppliers to ensure that risk is minimised within your supply chain.