Sánchez's Subtle Synergy-Based Solution to Catalonia

The Spanish PM is running different models in parallel in order to coax Catalonia away from its populist leaders

"27.11.2022 Pedro Sánchez clausura el XXVI Congreso de la Internacional Socialista" by Partido Socialista is licensed under CC BY-NC-ND 2.0.

I have been covering mergers and acquisitions (M&A) as a financial journalist full time for more than two decades now. Synergies - the idea that two companies will be worth more than the sum of their parts after a merger - is one of the key concepts if you want to understand this world.

When there are synergies, one plus one can equal three instead of two. Maybe both companies can combine their administration after a deal and then streamline it to improve margins (cost synergies). Or maybe both serve different customers and can make some extra money by cross-selling each other’s products to a new set of users (revenue synergies).

The concept of synergies deserves to be much better known by the general public, not least because cost synergies can help us understand some of the extreme offshoring we saw during the last wave of globalisation. I strongly believe the concept can also help us understand what Spanish Prime Minister (PM) Pedro Sánchez has been doing in Catalonia.

Many commentators (including me) have criticised aspects of Sánchez’s approach in the autonomous community in the northeast of Spain, but if you move the focus out to the big picture, the situation becomes much more subtle than it might otherwise appear. He is a fox not a hedgehog. He is happier than most running different models in parallel and is unafraid of contradiction, as we discussed here. In order to understand his approach, we need to understand that he is running at least four different models simultaneously to deal with the Catalan crisis.

Model One - Article 155

In October 2017, the international media mostly focussed on the unconstitutional and wildly irregular independence referendum, particularly on heavy-handed police tactics to stop it. The media mostly failed to report on the way that the referendum was the centre-piece of a self-coup by a populist coalition, which had drawn a line through the Catalan population, declaring that the true Catalan nation sat on one side, while the majority of the population were allegedly contaminating the territory by insisting on speaking the wrong language.

Sánchez was leader of the opposition at the time of the coup. To his credit, he fully supported the application of Article 155 of the Constitution by the government of Mariano Rajoy in order to trigger early elections in Catalonia. This article of the constitution is designed to over-ride the devolved powers of an autonomous community in an emergency.

The decision caused outrage among Catalan nationalists, whose analysis got off on the wrong foot by beginning with conspiracy theories about Spanish democracy being inherently fascistic. In fact, Article 155 was copied almost word for word from Article 37 of the Basic Law of the Federal Republic of Germany. The Basic Law was drafted in 1949 to make West Germany a full liberal democracy; and Article 37 was designed to prevent self-coups by populists, fascists or authoritarians in any of its regional governments. The accusations of “fascism” badly miss the mark.

Model Two - Interlocking Deals

Sánchez began to apply his second model in May/June 2018, when he organised a vote of no confidence in Rajoy, his predecessor as PM, following an outrageous corruption scandal on the other side of the aisle. Rajoy had been leading a minority government before this; and Sánchez realised he could organise lots of smaller parties under Socialist leadership against the centre-right Popular Party (PP), which is widely hated by peripheral nationalists in territories like Catalonia and the Basque Country. Critics called the result of his backroom deals a “Frankenstein alliance” and the name has stuck in Spain, although it is rarely used by the international media.

Republican Left of Catalonia (ERC) - a Catalan separatist party - has been one of the key pieces of the jigsaw puzzle. Despite its leaders’ anger over Article 155, they decided to work with Sánchez and the Socialists. ERC is a strange party. It is nominally left wing, as its name implies, despite having a fascist wing in the 1930s. In the 21st century, its nationalism still can often look very right-wing and the party is perfectly comfortable working with extremely right-wing separatists from Together (Junts). It claims to support social democracy and progressive causes… at least when it isn’t busy smashing liberal democracy or the actually existing combination of a market-based economy combined with a welfare state.

In order to make his fragile alliance work, Sánchez realised that he could never criticise ERC’s claims to be left-wing. The same is true of Bildu, a party so nationalistic that it defends ethnic murderers in the Basque Country. Sánchez is also careful not to criticise the sacred cows of Catalan nationalism, like immersion in the Catalan language in schools - a policy that has led to one of the highest high-school dropout rates in the whole of Europe. He has now played down his criticism of Catalan ethno-nationalists from Junts. He accused its leaders of being far right way back in May 2018, as previously mentioned.

The key to this model is to make the deals interlocking. So, just as ERC sits outside Sánchez’s coalition, but supports his government, the Socialists have supported ERC’s minority government in Catalonia since last year when Junts left a fragile coalition. The big advantage of this model is that it makes it much harder for Catalan nationalists to engage in shrill narratives about the Socialists being “fascists” because of the party’s support for Article 155. This improves the mood in Catalonia - something that is much needed after all the hysteria and paranoia of 2014 to 2018.

Model Three - Pork-Barrel Politics

Sánchez’s third model looks very bad if you focus on it. If you focus out, it still looks terrible, but it also makes some sense as one moving part in a wider system. Quite frankly, it is based on what the Americans call pork-barrel politics - swapping infrastructure funding and other concessions for votes. The PM - a man who has never won a majority in a general election - is a grand-master at these kind of backroom deals, which hold together his Frankenstein alliance.

Critics of the Spanish leader often lose their minds about these seedy deals. To Sánchez’s credit, though, he has never sold out the first model for the third model… at least at the time of writing. Written constitutions have a clear difference between basic laws, which need a super-majority, and ordinary laws, which need a simple majority. All Sánchez’s concessions have been at the level of budgets, ordinary laws and pardons. He has never promised to change Articles 1, 2 or 92 of the Spanish Constitution… at least yet.

In 2021, Sánchez pardoned those Catalan nationalists who organised the coup attempt and didn’t run away afterwards (including ERC leader Oriol Junqueras). He is now likely to pardon those who did run away (many of them from Junts, including its leader Carles Puigdemont) as part of a complex deal following the inconclusive elections in July, which yielded a hung parliament.

Sadly, some of Sánchez’s concessions involve a certain amount of democratic backsliding. This includes removing sedition (criminal acts, not criminal speech) from the law code and reducing the penalties for embezzlement for political projects instead of personal enrichment. Sánchez probably sees this as the price he has to pay to make this model work. The risk is that if there is another separatist rebellion, the tools that successfully stopped it last time will be weaker than before.

More recently, Sánchez tempted Junts to vote for a new speaker of the Spanish parliament with a mishmash of policies, including sensible ones (letting deputies address the floor of Spain’s parliament in Catalan), strange ones (formal commissions to investigate various conspiracy theories that are popular in Catalan nationalist circles) and ones that aren’t his to give (asking the European Union to make Catalan one of the bloc’s official languages).

Expect more of the same as Sánchez seeks a fresh term as PM in the weeks ahead. Junts and ERC will demand a referendum on Catalan independence and Sánchez will come back with smaller counter-offers. These will probably focus on reducing sentences for nationalist politicians and activists who rather stupidly believed the hype about Spanish law no longer being valid in Catalonia during the height of the coup attempt.

As the talks progress, Junts will try its luck and see if it can include Laura Borràs, one of its leaders who is embroiled in a corruption scandal, in any deal. In the end game of the talks, Sánchez will roll up his sleeves and commit to deals that look seedy to ordinary voters outside Catalonia, but which mostly fly below the radar outside Spain.

Model Four - Turn Catalonia into a Socialist Stronghold

The fourth part of Sánchez’s system is just as good as the first. During his time at the helm of the Socialist party, he has helped it become the leading party in Catalonia. Disappointed Catalan nationalist voters have realised that being strong in Barcelona but weak in Madrid is a recipe for disaster and are flocking to the Socialists in droves.

In July, Sánchez’s Socialists won a commendable victory in Catalonia in the general election. The party got 19 seats out of 48 seats in the autonomous community, with 1.2m votes (34%). It won in all four provinces, including the heartland of independence in Girona province. The three main separatist parties were on a combined 27% - a disastrous result for people who only a few years ago were telling us that independence was “inevitable.”

Barcelona, the capital of Catalonia, was also one of the few highlights for the Socialists after the municipal elections in May. Socialist candidate Jaume Collboni came second but found a way of becoming mayor. Funnily enough, one of his first acts was to hire the politician from Junts who had hidden a report that said that independence would crash the Catalan economy by 20% (Santi Vila).

Salvador Illa, the leader of the Catalan Socialists*, must be counting the days to the next regional election, which is due by March 2025. If the results were similar to those of the recent general election, the Socialists would be able to choose an ally to govern, with the support of either ERC or the communist-led hard left enough to get it over the line. He might even do a deal with the PP in theory, although in practice it would be wise to bet against this scenario.

Synergies

Sánchez’s system unlocks synergies between the different models, as we mentioned at the beginning of this week’s essay. The whole is greater than the parts, many of which are truly questionable. Under Sánchez’s leadership, the mood in Catalonia has changed as the conditions that made populism look attractive have receded.

However, the subtlety of the system is also potentially an issue. Sánchez can’t explain his system because to do so would be to weaken it. He needs his Catalan nationalist allies to stay focussed on the pork barrel and the concessions. He can never tell the public exactly how he is manipulating his allies or turning his declared enemies into potential allies.

Many critics of Sánchez (including myself at times) have been guilty of focussing on one part of his system while losing sight of the whole. His pork-barrel politics and his mild democratic backsliding that accompanies it can both leave a nasty taste in the mouth to critics of nationalism. However, the models make much more sense when you realise that Sánchez has always defended the Constitution (up to now, at least) and has undercut support for the separatists in Barcelona and surrounding areas.

For me, there are three big unanswered questions. What will happen if the Socialists win in Catalonia in 2025? Does the interlocking web of deals mean that the Catalan Socialists will be too weak to make much-needed reforms of the education system if/when they earn the right to form a regional government? What is the point of an eventual Socialist victory if the party can’t make schooling fairer for working-class kids who speak Spanish at home and tend to crash out of school much too early?

Finally, it is worth mentioning that pork-barrel politics are not necessarily left-wing. Many of Spain’s poorest regions lack parties that can play Sánchez’s game. They will lose out on essential infrastructure as a result, while rich areas like Catalonia will get richer. The comments are closed, for reasons that regular readers will know too well. See you next week!

Further Reading

Russian support for Catalan independence

*The Catalan Socialist party is formally a different entity from the Spanish Socialist Party. Both have a complex relationship, which is much too involved to discuss in any detail here. Suffice to say, the Catalan Socialists seek to merge mainstream social democratic views with allegedly moderate Catalan nationalism while stopping short of full independence. Some vague platitudes about federalism do much of the heavy lifting for this worldview. The party’s leadership tends to come from middle-class Catalan speakers from posh areas of Barcelona, rather than from working-class Spanish speakers from the outskirts, although there are exceptions.

Although he is not a member of the Catalan party, Sánchez’s deals with nationalists are much more typical of the way it has always operated than the way Spain’s main Socialist Party worked in the years up to his leadership. It is worth mentioning that the Catalan Socialists governed the region from 2003 to 2010 in a three-way alliance with ERC and the hard left. This laid the scene for the contemporary independence movement, with an ill-judged reform of the regional statutes and resurgent nationalist narratives in the public media and the education system. That, however, is a story for another day.

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