What if Corsica becomes independent? This heavy economic price she’ll have to pay

Autonomy or independence: many proposals are circulating about the possible status of Corsica. But apart from political positions, what would be the economic situation on an independent island?

  • GDP per capita is below the national average

The Gross Domestic Product (GDP) of Corsica at current prices – 8.824 billion euros in 2020 – is 0.38% of that of France. It is €25,500 per capita and much lower than the national average of €34,000. With the exception of Picardy, Limousin and Franche-Comté, all metropolitan regions have a GDP per capita higher than Corsica. In particular, the department of Haute Corse lowers this figure: wealth per inhabitant in 2020 was only 22,700 euros, compared to 28,600 euros in Corse du Sud. In ten years, from 2009 to 2019, Corsica became one of the regions in France with the lowest per capita GDP growth.

  • Independent Corsica will find it difficult to finance its public services

The sectoral distribution of the production of goods and services in Corsica differs significantly from the French average. There is very little manufacturing industry there, as well as specialized, often high-tech services. Small-scale artisanal agriculture in Corsica brings little added value, unlike the large farms of the continental part of the country. Services related to information and communications, including computing and all new technologies, are much less represented than on the continent.

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On the other hand, the share of trade and catering – services with low added value – in Corsica is higher than the national average. The level of construction there is also higher. First of all, the share of public services such as health care and education is much higher than the national average. Such a large share of these non-market public services in total value added can only be financed through national solidarity. An independent Corsica would have had great difficulty maintaining such a volume of public services and would have been forced to cut back on supply.

  • Independent Corsica will lag behind the EU

If Corsica were to become the 28th member state of the European Union and maintain the same production figures, it would rank 12th in terms of GDP per capita in euros. Of course, the price level varies from country to country, which means that the euro represents a different amount of goods and services. To neutralize this effect, it is customary to express GDP in terms of purchasing power standards. Then Corsica would have taken 19th place.

But this ranking depends on the unrealistic assumption that, once independent, the island can initially maintain the same level of GDP per capita. In fact, it will decrease. It is indeed unrealistic to assume that Corsica will continue to benefit from the same income stream from abroad. It is also unclear what the status of Corsica will be in terms of international trade. Indeed, the official doctrine of the EU is that if the territory of a member state gains independence, it automatically finds itself outside the Union and necessarily outside the eurozone.

The production structure of Corsica is also very different from that of smaller independent countries with similar GDP per capita. In Malta, for example, the sectoral distribution of industrial activity is much better balanced: the share of public services (defense, health and social activities) reaches 16.8% against 30.5% in Corsica. The latter would hardly be able to support such a weight of public services if he had to finance them himself.

It will also be difficult for an independent Corsica to maintain the level of old-age pensions and social benefits that it currently enjoys. The same would apply to the minimum wage if Corsica were competitive and balanced its trade with such a special production structure. All of these incomes must be adjusted downward to approximate what is observed in countries with similar GDP per capita. The gross monthly minimum wage, which is 1,603.12 euros in metropolitan France, is reduced to, for example, 792.26 euros in Malta or 822.5 euros in Portugal.

  • An independent Corsica will run a large trade deficit

After recalculating trade flows, we can estimate that Corsica has an annual trade deficit of 1.5 to 2 billion euros in goods and services with the outside world (including France). Given the weakness of the island’s industrial structure, it will be very difficult to fill it.

  • Independent Corsica will experience a collapse in purchasing power

Corsica will be outside the EU, and therefore outside the euro. He could issue a new national currency: it would be necessary to create a new Corsican central bank and establish a national monetary law. Monetary policy will be hampered by the absence of a significant banking and financial system in the territory. First of all, what would be the credibility of this currency with a trade deficit of about $1.5-2 billion in goods and services, which is likely to get worse? This new currency will depreciate against the euro and the dollar, causing a sharp rise in prices in Corsica, where most consumer goods are imported, with a drop in purchasing power.

Corsica could try to “Europeanize itself”, that is, to use the euro anyway, without being able to participate in its issuance, as Montenegro does. This is to make the euro legal tender and therefore use it officially without being a member of a monetary union. Since Corsica’s central bank will not be able to issue euros, it is absolutely necessary to have sufficient foreign exchange inflows or very large foreign direct investment in Corsica for this to work. The consequence of this would also be the subordination of an increasing part of the manufacturing sector to foreign interests, which would be contrary to the aspirations of the local population.

  • An independent Corsica would be in debt

Usually, when a part of a country is separatist, it repays part of the national public debt. The distribution key can be the share of the population or the share of the Corsican GDP in the national GDP. Thus, Corsica will be born with a public debt of between 115% and 155% of GDP. The problem is that this debt is denominated in euros: but the possible depreciation of the Corsican currency would mechanically increase the weight of the burden.

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* Eric Dor is Director of Economic Research at IESEG, the Institute for Scientific Economics and Management.


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