'The fact is that human societies have discovered no better way to keep the value of money roughly constant than by relying on central banks,' writes Professor Robert Skidelsky. Photo: Reuters / Kacper Pempel

Catalan independence doesn’t threaten the euro, strategists tell Bloomberg:

“The violence that accompanied Sunday’s unconstitutional referendum in the Spanish region has increased investor concern about rising euro-area political risks and could put further pressure on Spanish debt, according to strategists, even as most of them don’t see a long-lasting impact on the common currency.

The euro slid against all of its major peers barring the pound on Monday after Catalan secessionist leaders in Barcelona signaled they may unilaterally declare independence within days. The spread between 10-year Spanish and German bond yields reached the widest since June.

‘Spain is potentially facing a constitutional crisis, but it’s not something that threatens the degree of integration for the euro zone, Vasileios Gkionakis, co-head of strategy research at UniCredit Bank SpA, said in an interview with Bloomberg Television. The political risk ‘is nowhere near as steep or troublesome as it was a couple of years ago,’ he said.”

That seems exactly correct to Asia Unhedged. The Catalans, we observed, assembled a grass-roots revolutionary movement and stood down the Spanish state. That is a crisis for Spain, which may lose the tax revenue from its most productive province. But there is no obvious knock-on effect outside of Spain. Italy’s erstwhile separatists, the Lega Lombarda, just want to keep more of their tax revenues. They are in no mood for a fight and a bit frightened by the ferocity of the Catalans.

The common theme in all the European countries isn’t ethnic separatism but lifeboat economics: The Germans don’t want to bail out their feckless neighbors and voted for Euroskeptic small parties, the Lombards don’t want to bail out the Sicilians, the British don’t want to make a net contribution to the European budget, and so forth. Part of the German bailout has been to acquiesce to the European Central Bank’s negative interest rates, which amount to a transfer from German savers to southern European debtors.  The Germans will insist on pushing rates back into positive territory, and that will strengthen the euro.