A self-declared ‘Catalan Republic’, subjected to direct rule by Spain. A president in exile, sacked by the Spanish government and threatened with 30 years behind bars. Clashes in the street between jubilant separatists and pro-unity protestors, determined to keep Spain’s regions in one country.

One month after its illegal referendum on self-determination, and a week after the region’s parliament declared independence, Catalonia’s constitutional crisis shows no signs of abating.

Both sides have reason to be angry. The referendum on 1 October was a clear breach of Spain’s constitution, contravening the wishes of the country’s parliament and most of its residents. Even within Catalonia, 56 per cent of eligible voters declined to take part. Separatist claims of legitimacy are frankly absurd.

At the same time, Madrid’s reaction has been excessive. The violence exercised against ordinary Catalans during the referendum; the jailing of Catalan politicians, and arrest warrants for the region’s ousted leader Carles Puigdemont and four other ministers; the imposition of Article 155 of Spain’s constitution, bringing direct rule from Spain – draconian measures such as these are unbefitting of an EU member state that claims to cherish democracy.

The one-upmanship practised by politicians on both sides will do nothing to solve the crisis. It will only increase tensions between ordinary Catalans who either support or oppose the separatists. But independence isn’t a solution either. A breakaway Catalonia would alienate the significant proportion of Catalans who want to remain Spanish, and could cause a domino effect that would splinter the European Union.

Rather, what’s needed is a kind of ‘smart federalism’, whereby all of Spain’s regions are handed significantly greater powers, including over taxation.

What’s wrong with independence?

Spain’s transition in 1978 from a dictatorship under General Franco to a democratic state governed by the rule of law represented a huge achievement for the country and civilisation as a whole.

Moves by Catalan separatists to create an independent republic through an illegal referendum threatened to upend these achievements. Until Spain’s Prime Minister Mariano Rajoy fired the Catalan government on 27 October, dissolved its parliament and ordered regional elections for 21 December, Catalonia enjoyed a great deal of autonomy. The way the referendum was carried out – and Spain’s response – will do little to persuade other European regions to declare their independence, whatever the continent’s separatists may claim.

By the same token, in a democracy it would be wrong to ignore pleas for change. In 2010, Spain’s Constitutional Court issued a landmark ruling striking down 14 of 233 articles in the 2006 Statute of Autonomy of Catalonia, and curtailing a further 27 – much to the delight of the centre-right Partido Popular (PP) which now governs the country. This included blocking attempts to elevate the local Catalan language above Spanish in the autonomous region; denying regional powers over courts and judges; and rendering legally void any references in the statute to Catalonia as a ‘nation’.

Indeed, since 2011, the conservative central government in Madrid has refused to enter into dialogue with Catalonians, who are frustrated over how much tax they pay directly to the central treasury.

Compounding these contemporary issues are a well of reactionary sentiment (some Catalonians still bear a grudge about their defeat at the hands of Castile in 1714) and memories of the repression the region experienced during Franco’s dictatorship.

Denied a legitimate referendum, parties in favour of independence cannot legally show they have a solid majority behind them. The last figures with any real value come from the 2015 regional elections, where separatist parties took 48 per cent of the vote.

Juncker’s nightmare

There’s also a real danger that an independent Catalonia could embolden other separatist movements across the EU. As European Commission president Jean-Claude Juncker put it: ‘I wouldn’t like a European Union in 15 years that consists of some 98 states.’

He’s right to be concerned. France’s Catalans are unhappy with the amalgamation of various administrative areas into the entity of Occitania; Transylvania sees itself as an island of prosperity within a poverty-stricken Romania; Flemish nationalists would love nothing more than to unshackle themselves from their ‘poor Walloon cousins’. In Northern Ireland, Sinn Fein has caught the scent of a reunification with the South they had almost given up on. And then there is Scotland, whose Scottish National Party is likely to take June’s general election, in which the ruling Conservatives lost their parliamentary majority, as encouragement to push for a second independence post Brexit.

No more tit-for-tat

As wrong as Barcelona’s referendum was, Madrid’s severe response was no less misplaced. By using the full force of the law (and the brute force of Spanish police officers) to quash Catalonia’s separatist aspirations, Prime Minister Mariano Rajoy hoped to underscore his conservative credentials with party hardliners and impress ordinary Spanish voters with his willingness to act. The PP is so disliked in Catalonia, he no doubt figured there was no political gain there in playing nice. But by calling for Puigdemont’s arrest, he inadvertently made him a martyr among Catalans, and turned the referendum’s lack of legitimacy into a secondary issue.

On 27 October, the Spanish government hammered the nail in the coffin, invoking Article 155 of the Spanish Constitution. The article grants Madrid the power to ‘give orders’ to ‘all authorities’ of a regional government if that government ‘doesn't comply with the obligations of the Constitution or other laws it imposes, or acts in a way that seriously undermines the interests of Spain’. The Spanish government subsequently removed Puigdemont from power, dissolved the regional parliament, replaced the police chief and scheduled fresh Catalan elections for 21 December.

The upheavals of the last month, and the threat of being cut out of the EU, have prompted some 1,600 companies to move out of Catalonia. Six of the region’s seven corporates listed on the Spanish IBEX 35 have switched their official headquarters to other parts of the country. By threatening the region’s prosperity, this development is hitting Catalonia where it hurts.

Why federalism is the only answer

As we have seen, the extreme reactions of both separatists and the Spanish government threaten to undermine the massive democratic strides Spain has made over the last 40 years. A continued crisis could even precipitate the break-up of the EU. The most sensible solution is to create a smarter federal structure for Spain’s regions, which should remain within the Spanish nation state. This would allow Spain’s democracy to integrate even problematic regions, with their own language and culture, as ‘constituent nations within a nation’.

For this to work, all relevant political forces need to talk to each other. One sensible suggestion comes from the Spanish social democrats – the PSOE. They propose convening a parliamentary commission, which would use the next month to fix the procedure for changing the country’s constitution. Within a year, Spain could have a new federal settlement. Spain’s two major parties – the PP and the PSOE – have already shown themselves capable of working together. Following the financial crisis, they enacted a German-style constitutional borrowing limit in an overnight reform.

A new federal system would also mean devising a way of distributing tax yields more transparently and equitably between the country’s autonomous regions. Under this model, the Spanish Senate, the second chamber of parliament, would be tasked with representing the regions, with constitutional privileges as yet to be defined.

Finally, genuinely inclusive discussions must include the Catalan opposition. This would mean finding a mediator acceptable to all sides who could make the first steps in what is currently a total impasse. This person does not seem to exist in Spain – and the EU has, thus far, refused to get involved. So before it has even got started, the barriers to a real discourse about the future of Catalonia and a possible federal Spain remain high indeed. Let’s hope Oscar Wilde was right when he quipped, ‘Everything is going to be fine in the end. If it’s not fine, it’s not the end.’