Spain warns Catalonia faces brutal impoverishment if it leaves

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Catalonia would suffer "brutal" impoverishment if it splits from Spain, with a deep plunge in its economic output, Spain's economy minister warned Monday ahead of a disputed independence referendum in the region.

"The general impoverishment of the society would be brutal. GDP could fall between 25 and 30 percent and unemployment double," Economy Minister Luis de Guindos said in an interview with radio Cope.

An independent Catalonia would find itself outside of the eurozone so 75 percent of its products would be slapped with tariffs, banks would have to relocate, and the region would have to set up its own currency, he added.

"The independence of Catalonia would be absolutely irrational from an economic point of view," the minister said.

Catalonia's pro-secession regional government argues that an independent Catalonia would be able to decide its own fiscal policy and investments, which would boost its GDP. It says Catalonia currently pays billions more in taxes to Madrid each year than it gets back in investments and services but this would end if the region split from Spain. The Catalan government estimates it pays 16 billion euros ($19 billion) more to Madrid than it gets back, or about 8.0 percent of it the region's GDP. Spain's central government, which uses a different calculation, puts the figure at around 10 billion euros, or 5.0 percent of Catalonia's economic output.

The Catalonia region centered on Barcelona generates a fifth of Spain's gross domestic product. It self-governs in several important areas, such as police, health and education. But key areas such as taxes, foreign affairs and most infrastructures are in the hands of the Spanish government. Both Catalan and Spanish are spoken in the region of 7.5 million people, and many Catalans feel strongly about their cultural heritage and traditions.

The country's top prosecutor, Jose Manuel Maza, ordered provincial prosecutors to investigate 712 mayors who have already offered municipal facilities for the Oct. 1 vote and the regional Catalan police to arrest them if they don't show up for testimony.

Hostility between Madrid and Barcelona has ramped up since Spain's Constitutional Court suspended the referendum, planned for Oct. 1, following a legal challenge by Prime Minister Mariano Rajoy. The Madrid government says the referendum contravenes the constitution, which states that Spain is indivisible.

Under Article 155 of Spain's constitution, Madrid has the power to intervene directly in the running of Catalonia's regional government, forcing it to drop the vote. This could involve sending in the police or suspending the regional government's authority to rule.

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