The Basque: Spain's Effective but Expensive Antidote to Secession

A man walks past a banner during a march organized by pro-Basque independence organization Gure Esku Dago (In Our Hands) in favor of Catalonia’s independence referendum. (Reuters)
A man walks past a banner during a march organized by pro-Basque independence organization Gure Esku Dago (In Our Hands) in favor of Catalonia’s independence referendum. (Reuters)
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The Basque: Spain's Effective but Expensive Antidote to Secession

A man walks past a banner during a march organized by pro-Basque independence organization Gure Esku Dago (In Our Hands) in favor of Catalonia’s independence referendum. (Reuters)
A man walks past a banner during a march organized by pro-Basque independence organization Gure Esku Dago (In Our Hands) in favor of Catalonia’s independence referendum. (Reuters)

As Spain and Catalonia head towards a constitutional collision over the region’s claim to independence, lawmakers on both sides of the crisis are pointing to a way out: north, to Basque Country.

Among the verdant mountains of Basque Country, which borders France, a once-violent campaign for independence has petered out, with generous fiscal autonomy from Madrid helping to keep popular agitation for independence in check, reported Reuters on Tuesday.

“We don’t have that economic resentment,” Aitor Esteban, organizer for the Basque National Party in Spain’s parliament, told Reuters in an interview at party headquarters in Bilbao.

“People don’t feel that need to act upon a grievance about money; that makes a big difference.”

The Catalan government is not calling for a Basque-style deal, insisting instead on independence after declaring overwhelming support for secession in an October 1 referendum banned by Madrid.

But the most moderate lawmakers in the region’s ruling coalition privately say they could drop independence claims if they were given the tax autonomy that Basque Country enjoys.

In Madrid, some socialists have suggested it could serve as a model for a compromise that would defuse Spain’s biggest political crisis since a failed coup in 1981, although the cost to the central government would be significant.

Basque staged modest protests over Madrid’s violent crackdown on Catalonia’s referendum, but the crisis has failed to rekindle secessionist fervor on the streets of Bilbao, the Basque capital nestled on the banks of the Nervion.

Catalan flags hang from balconies alongside the Basque flag in a sign of solidarity, but Bilbao is prosperous and peaceful. Where once unionist politicians needed bodyguards and car bombings were a constant fear, tourists now crowd the taverns of the old town and the world-famous Guggenheim museum.

Just 17 percent of Basques want independence and less than half would like to hold a referendum on the issue, according to a poll carried out by the university of Deusto.

Basque militant group ETA, which killed more than 850 people in a decades-long campaign to carve out a separate state, effectively ended its armed resistance this year when it surrendered its weapons.

The region now has one of the highest economic outputs per capita and one of the lowest unemployment rates in Spain.

“The independence debate is on standby in Basque Country because of great fatigue after years of violence and uncertainty after the economic crisis,” said Xabier Barandiaran, professor of sociology at Deusto University.

Basque’s fiscal autonomy is among the most generous of any region in Europe, dating back to the 19th century and enshrined in Spain’s 1978 constitution.

If it were to be extended to Catalonia, an economically more powerful region accounting for a fifth of national production, the Spanish state would lose about 16 billion euros, according to a 2014 study by research house CSIC.

That would equal about 13 percent of next year’s budget and affect Spain’s deficit and borrowing costs.

For that reason, Spanish Prime Minister Mariano Rajoy has ruled out such generous treatment for Catalonia.

Under Basque’s accord with Madrid, the region collects nearly all its own taxes, which are forecast to total 13 billion euros ($15 billion) this year.

It is due to return 800 million euros to Madrid in what is known as an annual quota to cover the costs of national expenses such as defense or infrastructure, said Reuters.

Rajoy has sweetened that arrangement since he regained power at the head of a minority government last year, as the price of securing Basque National Party support for his 2017 budget.

It has proved unpopular with other regions who would almost certainly oppose any similar deal for Catalonia, as it would mean cutting their share of state revenue.

Typically, regions pass taxes to Madrid which redistributes money back to them according to a formula that favors the poorer regions.

Former Catalan leader Artur Mas tried to hold talks with Rajoy in 2012 about granting Catalonia powers to raise and spend its own taxes, but the prospect of negotiations in the current climate look bleak.

Catalonia has long said it pays a disproportionate level of taxes to Madrid in relation to the central funding it receives.

A study backed by the Budget Ministry says Catalonia pays to the state 9.9 billion euros more than it receives. The Catalan economy ministry says this is even higher.

Economists say an overhaul of the fiscal relationship between Madrid and the regions is overdue because the current system has led to intense tax competition between regions. Some autonomous communities have become under-financed, resulting in cuts in public services.

“Now the situation is so critical, there might just be the political momentum needed to tackle it,” said Antonio Garcia Pascual of Barclays Capital.



Russia and Ukraine to Hold First Peace Talks in Seven Weeks 

A security personnel stands guard in front of the Ciragan Palace before the third meeting between Russian and Ukrainian delegations for peace talks in Istanbul, Türkiye, 23 July 2025. (EPA)
A security personnel stands guard in front of the Ciragan Palace before the third meeting between Russian and Ukrainian delegations for peace talks in Istanbul, Türkiye, 23 July 2025. (EPA)
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Russia and Ukraine to Hold First Peace Talks in Seven Weeks 

A security personnel stands guard in front of the Ciragan Palace before the third meeting between Russian and Ukrainian delegations for peace talks in Istanbul, Türkiye, 23 July 2025. (EPA)
A security personnel stands guard in front of the Ciragan Palace before the third meeting between Russian and Ukrainian delegations for peace talks in Istanbul, Türkiye, 23 July 2025. (EPA)

Russian negotiators flew to Türkiye to hold peace talks with Ukraine on Wednesday, the Kremlin said, before what will be the first direct discussions between the warring sides in more than seven weeks. 

Russia played down expectations of any breakthrough at the meeting, which Ukrainian President Volodymyr Zelenskiy said this week should focus in part on preparing a summit between himself and President Vladimir Putin. 

"Naturally, no one expects an easy road. Naturally, this will be a very difficult conversation. The projects (of the two sides) are diametrically opposed," Kremlin spokesman Dmitry Peskov told reporters. 

Previous talks in Istanbul on May 16 and June 2 led to the exchange of thousands of prisoners of war and the remains of dead soldiers. But those meetings lasted less than three hours in total and made no breakthrough towards a ceasefire or a settlement to end almost three and a half years of war. 

US President Donald Trump last week threatened heavy new sanctions on Russia and countries that buy its exports unless a peace deal was reached within 50 days. 

But three sources close to the Kremlin told Reuters that Putin, unfazed by Trump's ultimatum, would keep on fighting in Ukraine until the West engaged on his terms for peace, and that his territorial demands may widen as Russian forces advance. 

On Wednesday, Russia said its forces had captured the settlement of Varachyne in Ukraine's Sumy region, where Putin has ordered his troops to create a buffer zone after Ukraine mounted a shock incursion into Russia last year and held onto a chunk of its territory for months. Reuters could not independently confirm the battlefield report. 

In recent weeks, Russian forces have launched some of their heaviest air attacks of the war, focusing especially on the Ukrainian capital Kyiv. 

Ukraine has hit back with attacks of its own, and last month inflicted serious damage on Russia's nuclear-capable strategic bomber fleet by smuggling drones close to air bases deep inside the country. 

CONFLICTING DEMANDS 

Zelenskiy said earlier this week that the agenda for talks was clear: the return of prisoners of war and of children abducted by Russia, and the preparation of a meeting between himself and Putin. 

Putin turned down a previous challenge from Zelenskiy to meet him in person and has said he does not see him as a legitimate leader because Ukraine, which is under martial law, did not hold new elections when Zelenskiy's five-year mandate expired last year. Russia also denies abducting children. 

The Kremlin said this week it was unrealistic to expect "miracles" from the talks. 

At the last meeting on June 2, Russia handed Ukraine a memorandum setting out its key demands, including: full withdrawal of Ukrainian forces from four regions of the country that Russia has claimed as its own; limits on the size of Ukraine's military; enhanced rights for Russian-speakers in Ukraine; and acceptance by Kyiv of neutral status, outside NATO or any other alliance. 

Ukraine sees those terms as tantamount to surrender, and Zelenskiy described the Russian stance as an ultimatum. 

Ukraine wants an immediate ceasefire, reparations, international security guarantees and no restrictions on its military strength.