Spain: Catalonia has not yet declared independence – ING

Carles Puigdemont, prime minister of Catalonia, did not mention a unilateral declaration of independence in his speech last night and if Catalonia declares independence, the central government will probably react by taking back control of the region, suggests Steven Trypsteen Economist at ING.

Key Quotes

“In a speech last night, Puigdemont did not mention a unilateral declaration of independence. He did, however, say that the Catalan situation needs mediation and dialogue, though it is unclear who would have to mediate. The European Commission repeated that it is an internal matter. Last Tuesday, however, Puigdemont said in an interview with the BBC that Catalonia will declare independence 48 hours after all votes are counted. He said they probably will have all votes by the end of the week. This implies that they would declare independence over the weekend or early next week. Given these two different statements, it is very difficult to judge what the Catalan government will actually do.”

“If Catalonia does declare independence, it is likely that Mariano Rajoy, prime minister of Spain, will use Article 155 of Spain’s constitution and thereby taking back control over the autonomous region of Catalonia. To do this one needs an absolute majority in the Spanish Senate, which Rajoy’s party, the Partido Popular, has. Last Tuesday, the King of Spain called for a reestablishment of the constitutional order in Catalonia. He did not call for dialogue. The speech strengthens Rajoy’s position, even though the content of the speech had to be approved by Rajoy. Once Rajoy triggers Article 155, he could call for new regional elections in Catalonia.”

“It is, however, not clear how this could neutralise the crisis. In the last opinion poll done just before the referendum date the support for separatist parties in Catalonia was similar to that of the last 2015 Catalan elections. Recent events, however, have probably increased support for independence. A new election in Catalonia could mean that the separatist parties gain more seats in the Catalan parliament.”

“The Spanish 10Y bond yield rose further towards 1.78%, coming from around 1.60% before the referendum. It is likely that it will rise further if the crisis continues to intensify.”