The sovereign debt crisis and national centripetal vs. regional centrifugal forces in political economy: empirical lessons from Spain

Abstract

Existing analytical frameworks are unable to establish what should be the right balance between national centripetal and regional centrifugal economic and political forces that allow for the creation of a stable and prosperous nation so this paper contributes to the body of scholarly works in political economy by concentrating on reviewing empirical evidences that the Spanish highly decentralised political system is failing to strike the right balance, especially during difficult economic times, since the regional centrifugal economic and political forces are overpowering the national centripetal ones and may signal a dangerous disassembling of the nation with the emergence of regional autarkical independence. The political balance of these forces will inevitably have a reflection on the economic variables, thus a causal relationship can be inferred by analysing the evolution of the variables sovereign debt at national and regional levels and the behaviour of the variables risk premium and the public securities credit rating.