Catalunya independence bid plunges Spain into crisis

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The Catalan parliament’s declaration of independence from Spain is set to wreak political turmoil in the country and is sure to have far-reaching repercussions for Europe.

In response, Madrid passed measures to take direct control over the region and called for regional elections for December 21, but these measures will be tested as it’s unclear whether politicians and civil servants of the region will accept direct rule being imposed on them.

On Sunday Spain’s prime minister, Mariano Rajoy, sacked Catalan president, Carles Puigdemont, who now faces up to 30 years in jail for his role in the regional parliament’s declaration of independence.

The result was greeted with joy by pro-independence supporters gathered outside the parliament in Barcelona under the slogan “Let’s make the Republic”, hoping to put pressure on the parliament to act.

The Catalan parliament vote came after Spanish prime minister, Mariano Rajoy, asked the senate to approve the government’s request for measures to impose direct rule on Catalunya.

Over the weekend hundreds of thousands of people took to the streets of Barcelona to call for unity.

Almost as soon as news of the declaration broke on Friday the markets reacted to send the Euro plunging. According to Reuters, the Euro held near three-month lows versus the dollar. The single currency was down 0.5 percent at $1.1590, putting it on track for its steepest weekly decline against the greenback in 11 months.

Madrid’s blue-chip index the Ibex 35 was down 1.9 per cent in afternoon trading, with all but two of its constituents falling.

Banks based in Catalunya were among the biggest losers, with Banco de Sabadell down 6% and CaixaBank down 4.6%. IAG, the parent company of British Airways and Iberia, the UK and Spanish flag carriers, was the biggest single faller in Madrid, down by over 6%.

Investors also sold Spain’s government bonds, sending the yields on benchmark 10-year debt up by 5 basis points to 1.603%.

The European Commission has been under pressure to mediate in the row given its destabilising effect on EU unity. But, so far, have only offered support for the Spanish government and ruling out the possibility that an independent Catalunya could become part of the EU.

The EU is in a phase where unity and economic viability is a priority, but this is under threat given the crisis over Catalunya and the possibility of a domino effect rippling throughout Europe.

 

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