Madrid/ Barcelona - Spanish Prime Minister
Mariano Rajoy on Wednesday gave the Catalan government eight
days to drop an independence bid, failing which he would suspend
Catalonia's political autonomy and rule the region directly.
His move could deepen the confrontation between Madrid and
the northeastern region but also signals a way out of Spain's
biggest political crisis since a failed military coup in 1981.
Rajoy would probably call a snap regional election after
activating Article 155 of the constitution that would allow him
to sack the Catalan regional government.
Catalan leader Carles Puigdemont issued a symbolic
declaration of independence from Spain on Tuesday night but then
immediately suspended it and called for negotiations with the
Madrid government.
"The cabinet has agreed this morning to formally request the
Catalan government to confirm whether it has declared the
independence of Catalonia, regardless of the deliberate
confusion created over its implementation," Rajoy said in a
televised address after a cabinet meeting called to consider the
government's response.
He later told Spain's parliament the Catalan government had
until Monday, Oct. 16 at 0800 GMT to answer. If Puigdemont was
to confirm he did declare independence, he would be given an
additional three days to rectify it, until Thursday, Oct. 19 at
0800 GMT. Failing this, Article 155 would be triggered.
It is not yet clear if the Catalan government will answer
the requirement but it now faces a conundrum, analysts say.
If Puigdemont says he did proclaim independence, the central
government will step in. If he says he did not declare it, then
far-left party CUP would probably withdraw its support for his
minority government.
"Rajoy has two objectives: if Puigdemont remains ambiguous,
the pro-independence movement will get more fragmented; if
Puigdemont insists on defending independence then Rajoy will be
able to apply Article 155," said Antonio Barroso, deputy
director of the London-based research firm Teneo Intelligence.
"Either way, Rajoy's aim would be to first restore the rule
of law in Catalonia and this could at some point lead to early
elections in the region."
The stakes are high - losing Catalonia, which has its own
language and culture, would deprive Spain of a fifth of its
economic output and more than a quarter of exports.
CALL FOR DIALOGUE DISMISSED
Puigdemont had been widely expected to unilaterally declare
Catalonia's independence on Tuesday after the Catalan government
said 90% of Catalans had voted for a breakaway in an Oct.
1 referendum. Central authorities in Madrid had declared the
referendum illegal and most opponents of independence boycotted
it, reducing turnout to around 43%.
Madrid responded angrily to Puigdemont's speech to
Catalonia's parliament, saying his government could not act on
the results of the referendum.
"Neither Mr. Puigdemont nor anyone else can claim, without
returning to legality and democracy, to impose mediation...
Dialogue between democrats takes place within the law," Deputy
Prime Minister Soraya Saenz de Santamaria said.
Invoking Article 155 to ease Spain's worst political crisis
in four decades would make prospects of a negotiated solution
even more remote.
A spokesman for the Catalan government in Barcelona said
earlier on Wednesday that if Madrid went down this road, it
would press ahead with steps towards statehood.
"We have given up absolutely nothing...We have taken a time
out...which doesn't mean a step backwards, or a renunciation or
anything like that," Catalan government spokesman Jordi Turull
told Catalunya Radio.
Spanish Socialist opposition leader Pedro Sanchez said he
would back Rajoy if he had to activate Article 155 and that he
agreed with the premier to launch constitutional reform within
six months to address how Catalonia could fit better in Spain.
It was not clear how the Catalan government would respond to
that offer.
MARKET RELIEF
Puigdemont's speech also disappointed supporters of
independence, thousands of whom watched proceedings on giant
screens outside parliament before sadly leaving for home.
Financial markets, however, were encouraged that an
immediate declaration of independence had been avoided.
After Puigdemont's speech, Spain's benchmark IBEX share
index rose as much as 1.6 percent, outperforming the
pan-European STOXX 600 index. The rally propelled the main world
stocks index, the MSCI's 47-country 'All-World' index, to a
record high.
Spain's 10-year government bond yield - which moves
inversely to the price - dropped 5 basis points to 1.65%
in early trade, according to Tradeweb data.
At European Union headquarters in Brussels, there was relief
that Spain, the euro zone's fourth-largest economy, now had at
least bought some time to deal with a crisis that was still far
from over.
One EU official said Puigdemont "seems to have listened to
advice not to do something irreversible". The EU has been cool
to Puigdemont's calls for European mediation.
The Catalan crisis has deeply divided the region itself as
well as the Spanish nation. Opinion polls conducted before the
vote suggested a minority of about 40 percent of residents in
Catalonia backed independence.
Some of Catalonia's largest companies have moved their head
offices out of the region and others were set to follow if
Puigdemont had declared independence.