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Currency, United States Finance

What next for Catalonia after 'independence vote'

Relations between Catalonia’s separatist government and Madrid have hit their lowest point in years following an outlawed referendum vote Sunday, deepening a constitutional crisis in Spain.

Political analysts and economists are now questioning what could happen next following the vote in Catalonia, which saw Spanish riot police clash with pro-independence voters, leaving hundreds injured.

Catalan regional government spokesman Jordi Turull told reporters early Monday that 2.26 million people had cast their votes on Sunday with 90 percent of those voting in favor of Catalonia, a wealthy region in north-east Spain, to gain independence. Voter turnout was low, however, at around 42 percent.

The vote had been outlawed by the Spanish government and the Constitutional Court but went ahead anyway despite chaotic and violent scenes of riot police trying to prevent voting from taking place, with reports of rubber bullets being used against crowds and footage showing the police wielding batons against voters. Some Catalans responded by barricading polling stations to prevent the police seizing ballot boxes.

On Monday, the European Commission called for all parties to “now move very swiftly from confrontation to dialogue.” In a statement on its website, the Commission added that: “Violence can never be an instrument in politics” but also warned that if Catalonia left Spain, “it would find itself outside of the European Union.”

Around midday on Monday, the head of the Catalan government Carles Puigdemont said legal action would be brought against those “responsible for violence” during the referendum and he sought the removal of all Spanish police from Catalonia, according to Reuters.

Throwing down the gauntlet to his counterparts in Madrid, he said the referendum result was “binding”. He added that he had had no contact with Spain’s central government since the vote and asked for international mediation in the region.

A general strike has been called by pro-separatists and unions in Catalonia for Tuesday in protest at what they see as a violation of their rights following the police crackdown.

If Catalonia was to go further and declare itself independent that could push the Spanish government to try to seize control of the Catalan government, according to one political analyst.

“Catalan First Minister Carles Puigdemont has suggested that the regional parliament will declare the independence of Catalonia this week,” Wolfango Piccoli, co-president of risk consultancy Teneo Intelligence said in a note Monday.

“This will probably lead Prime Minister Mariano Rajoy to activate article 155 of the constitution to temporarily take control of the Catalan government. Aside from the risks associated with sustained protests in the region, the biggest impact of the Catalan issue is still its potential spill over into national politics,” he said.

Puigdemont’s comments on Monday follow a televised address he made on Sunday evening in which he condemned the Spanish government and police for trying to prevent the vote, saying in a televised address Sunday evening that “on this day of hope and suffering, Catalonia’s citizens have earned the right to have an independent state in the form of a republic.”

He added that, in the coming days, the results of the vote will be passed to the regional parliament to decide Catalonia’s next steps, although he stopped short of a unilateral declaration of independence.

Spanish Prime Minister Mariano Rajoy denied the validity of the vote in a statement Sunday evening, saying: “At this hour I can tell you in the strongest terms what you already know and what we have seen throughout this day. There has not been a referendum on self-determination in Catalonia today.” He also called for unity and cited the fact that the turnout was low.

Rajoy is now expected to meet with other political parties to reflect on the vote and how to proceed, according to a Reuters report.

Rajoy and other political party leaders in Spain and Catalonia have called for negotiations to take place to break the impasse and heightened tensions between the governments in Catalonia and Madrid.

Federico Steinberg, senior analyst at Elcano Royal Institute, agreed that dialogue was needed, telling CNBC that Sunday had been a “sad day for Spain.”

“Now we’re heading for a very delicate situation, firstly we need to see how the Catalan government reacts to what they call a referendum, which is clearly not within the Spanish constitution and the rule of law… but we have to see if there’s a unilateral declaration of independence or not,” he said.

“If that happens, we’ll have to see what the response is from central government and it could be within the constitution to suspend the powers of the region of Catalonia. Maybe they will call for elections there to have a way to measure what support there is for independence and see what actual support for independence and then perhaps to see if we can go back to the negotiating table and fix this which is what most people want,” Steinberg said.

Aside from the political ramifications of the non-binding referendum vote, Catalonia is vitally important to Spain’s wider economy — accounting for around 19 percent of Spain’s GDP, according to 2016 data from the Catalan government — meaning that any secession bids could hit Spain’s economy hard.

On Monday, European markets looked relatively unmoved by the events in Catalonia, opening broadly higher. Spain’s IBEX opened 1.3 percent lower with Spanish banks taking a hit and borrowing costs rose — with the yield on benchmark 10-year Spanish bonds rising to 1.67 percent — as uncertainty over Catalonia’s future weighed on investor sentiment.

Giles Keating, managing director at Werthstein, told CNBC on Monday that there was a risk that the crisis could deepen and rattle markets further. “As so often in markets, up ’til now investors have just shut their eyes virtually to this whole issue but as we go forward, so much can go either way. If this really becomes a real constitutional crisis then you could see a reversal of that.”

“I think there’s a danger that you could have some of the Catalan leaders arrested and that could begin to rattle investors,” he added.

Source: cnbc
What next for Catalonia after 'independence vote'

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