Home > news > world > Catalonia independence bid risks economic meltdown: Spain

Madrid: Spain warned Catalonia that it risks economic chaos should the rebel region continue with its pursuit of independence, with the government in Madrid saying it stood ready to intervene and reassert control.

As the standoff heads into a critical few days, deputy prime minister Soraya Saenz de Santamaría said ministers were ready to stop Catalan president Carles Puigdemont. Spanish energy minister Alvaro Nadal said the push to break away is doing more damage to the Catalan economy than August’s terrorist attacks as companies decamp.

“If this man unilaterally declares independence, measures will have to be taken and the government will take measures," Sáenz told Spanish radio. She said action would be taken even if the government doesn’t win cross-party backing. “We will seek support, but the act will not be left without a response from the government."

After a weekend of mass demonstrations in favour of Spanish unity, the country was braced for an escalation in its biggest existential crisis in more than four decades and one that threatens the breakup of a European sovereign state.

Puigdemont has vowed to press ahead with his independence drive and is due to address the regional parliament Tuesday, while Prime Minister Mariano Rajoy pledged that “national unity will be maintained" by using all instruments available to him. That includes suspending the regional administration and sending in security forces.

Catalan overture

A senior member of the Catalan regional government called for dialogue with Spain, saying that all of Europe faces economic damage unless a resolution is found. Raul Romeva, foreign affairs chief for the separatist government in Barcelona, insisted that the door was open for talks if Rajoy was willing to engage.

“We need two to tango, we need the other side to be at the table," Romeva said in an interview in Barcelona on Sunday. “We’re always going to be at the negotiation table, but to start negotiations we need the other party to negotiate with."

The leaders of the Catalan National Assembly, a civic group that led a series of massive pro-independence demonstrations and works closely with the Puigdemont, vowed that Tuesday’s session will see the president declare independence in a video posted on Twitter Sunday. Marta Pascal, who heads Puigdemont’s party, told the BBC that there will be a symbolic recognition of the result of the illegal referendum held on 1 October, but no unilateral declaration of a new state.

“The risk of this getting a lot worse, with correspondingly bad market development for Spanish assets, is still too great for my risk appetite," said Erik Nielsen, chief economist at UniCredit SpA. He predicted at least another week of pressure on Spanish and Catalan debt and assets before “things will eventually normalize".

Economic fallout

Spanish 10-year bonds rose, with the spread over German bunds narrowing by six basis points at 11.38am in Madrid to 119 basis points. Spain’s benchmark stock index has lost about 1.2% since Catalans voted in defiance of the constitutional court, while Catalan companies including lender CaixaBank SA are moving their legal bases out of the region.

Nadal, the energy minister, suggested Catalonia would be jeopardizing electricity supplies and communications networks. Catalonia has little control over energy supplies and is reliant on the big Spanish companies that, in theory, could suspend services and turn the lights off.

“It so terrible a scenario the idea of independence, that everything won’t work from the single moment from which independence is declared," Nadal said in a Bloomberg Television interview. “There will be a problem in the energy sector, there will be a problem in the telecom sector, in the financial sector of course."

Viva Espana

Pressure is mounting for a resolution to the constitutional crisis rooted in grievances the Catalans trace back centuries. After Spanish police earned international criticism for beating Catalans trying to vote on 1 October, this Sunday saw demonstrations in the Catalan capital involving some 350,000 people protesting against independence and in favour of a united Spain.

People streamed down Barcelona’s famous Ramblas boulevard in the sun, the majority waving Spanish flags, wrapped in them, or dressed in the national colours of yellow and red. There were young and old, men and women, some shouting “Viva Espana!" and “I am Catalan and Spanish".

A delegation from Cercle d’Economia, a business forum, met with Puigdemont on Saturday to demand he withdraw his threat to declare a Catalan republic.

“We asked him to directly remove the shadow of a declaration by saying that it won’t happen," Jordi Alberich, the group’s director general, who was at the meeting, said by phone. “The situation is the most tremendous mess. Despite everything I believe that some solution will be found through sensible political negotiation." Bloomberg

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