Even though Catalonia’s bid for independence may be Spain’s worst political crisis in decades, it has been no Grexit, Brexit or even Frexit for foreign investors.
Overseas holders of Spanish stocks and bonds – and indeed owners of eurozone assets in general – have been quick to dismiss comparisons with a succession of rolling sovereign debt crises that hit the eurozone between 2010 and 2012.
Even though Spain’s wealthiest region has a bigger economy than Greece, Portugal and Finland, relatively unfazed Spanish and Catalonian assets to date shows markets are treating the crisis over Catalonia as a largely domestic issue with few if any systemic sovereign, banking or euro wide threats.
While Spain’s blue-chip IBEX equity index is about 7% off the year’s highs, it is still up more than 10% for 2017 as a whole.
The Spanish government’s 10-year borrowing costs as well as their risk premium over German equivalents are lower than where they started the year.
The euro exchange rate has barely budged.
On one level the scale of financial risk more than gross domestic output of the area is of a different order.
Catalonia’s debt level – at around 77bn euros – is around quarter that of Greece.
In addition, 52.5bn euros of that – just over two-thirds – is owed to Spain, a further 8.175bn euros to resident financial institutions, 6.018bn euros to the rest of the world and 10.035bn euros to others, according to the data from the Spanish central bank.
The international exposure is too small to create ripples across the eurozone even in the event of a Catalonian default, and the effect on Spain would also be limited.
Catalonia’s total debt to the centre represents just 4.75% of the Spain’s total debt as of the end of 2016.
Independence on its own would neither lead to a sovereign default nor to an exit of an existing eurozone member, which caused consternation earlier in the decade given fears of sovereign redenomination risk, related banking stress and legal precedents that seeped across the bloc.
Economic confidence and business risk for Spanish firms and households may be an issue at the margins for equity investors, but this is largely cushioned at the moment by a booming world economy and the fastest economic expansion in the eurozone in more than six years.
The chances of secession itself were always slim.
One of the leading investors in Catalonian bonds believes the region’s bid for independence was always legally doubtful.
“Greece was a very different story - the very existence of Greece as part of the monetary union was called into question. In Catalonia, independence was never constitutional, there was no legal basis,” said Mark Dowding, senior portfolio manager at BlueBay Asset Management, which has been a long term investor in Catalonian debt.
If ultimately Catalonia’s independence was always unlikely, the rest was just a “storm in a teacup” for financial markets, Dowding said.
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A compromise for Catalonia?