Salvador Illa Aims to Mend the Economic Failure of the Procés

Although he hasn't explicitly stated it in a belligerent manner, President Illa has built his legislature in opposition to the pro-independence decade. In some of his early parliamentary interventions, for example, he hinted that his Govern would follow the "principle of reality." This was a direct jab at the pro-independence rhetoric of recent years; a different matter is whether the pro-independence supporters took the hint.

In reality, it is not a big surprise that he has opted for this strategy. The PSC knows they are in Palau due to abstentionism, which is a direct result of pro-independence disillusionment. Similarly, the socialists are aware that ERC and Comuns have very little room to maneuver to exert pressure.

In this context, Illa has donned the mantle of a promoter of Catalonia, which has seen Madrid outplay it in recent years. Ultimately, returning leadership to Catalonia translates into regaining Spain's economic leadership, which the pro-independence movement squandered. The clearest example was the exodus of companies. In this regard, Illa has already claimed the success of bringing La Fundació La Caixa back to Catalonia.

A Pharaonic Plan

Beyond these maneuvers with the high elites, President Illa has already announced his economic plan to reinvigorate Catalonia over a ten-year period. This plan consists of a massive deployment of funding across various sectors, in harmony with public-private collaboration. It involves nothing less than launching 18.5 billion euros in all areas: digital, automotive, water resources, renewable energies, tourism, etc.

Ultimately, this economic plan aims to increase the holy grail of the economy: productivity. Besides all the above, there are 38 action plans in knowledge and innovation, which are the prelude to productivity increases. It is worth noting, for example, that the Generalitat will set up a venture capital fund - a financial institution to invest in unlisted companies - to participate in innovative projects.

To further the ambition, Illa's plan also includes 34 actions in administrative areas. That is, to improve the Catalan administration, which is manifestly slow and inefficient. For some time now, Catalan business associations and employers' organizations have repeatedly stated that excessive bureaucracy is an increasingly burdensome obstacle.

The PSC, therefore, has come with the intention of reforming Catalonia from top to bottom to take advantage of the gap left by the pro-independence shipwreck. However, the challenges are many and deep, starting with the fact that GDP per capita is stagnant. The question is not so much whether the plan will succeed, but whether it will be given time to do so given the climate of discontent accumulating in Catalonia.

The Big Question: GDP Per Capita

This plan is typically political, meaning on paper, it is miraculous and proposes a complete renewal of the productive fabric. But its implementation is more complex. Its major obstacle lies in not enhancing the current economic dynamics of Catalonia and Spain. We mean that the macroeconomic data are good (extraordinary, in fact), but the microeconomic data are getting worse. That is, it is not contradictory to have economic improvement and a worsening of living conditions.

Last week, for example, INSOCAT reported that nearly 1.4 million people live at risk of poverty or social exclusion in Catalonia. The report highlighted that this progressive increase in poverty has been indifferent to the good employment data. Despite there being 11% less unemployment than 10 years ago, Catalans are losing purchasing power.

The main culprit of this situation is inflation, which has been eroding citizens' purchasing power for years. For all these reasons, Catalonia, in line with the rest of Spain, achieves an AROPE rate of 24%, which is much higher than that of other European countries. Such high figures in the AROPE rate are the downside of an unproductive economic model that requires a large volume of unskilled immigration.

In the particular case of Catalonia, everything depends on i) housing not acting as a black hole of wealth, and ii) positive migration balances not diluting GDP per capita.