Catalan secessionists held an independence referendum on Sunday, October 1st in defiance of the Spanish government, which had ruled such a vote illegal.
Ninety percent of voters chose independence, but voter turnout was less than 50%.
Catalan separatists had promised to use their own laws to declare the referendum results binding and thus declare independence. Such a move was blocked by Spanish courts, which suspended a session of Catalonia’s Parliament scheduled for Monday.
The ultimate decision will rest on the shoulders of separatist leader Carles Puigdemont, who has the power to declare unilateral independence. Puigdemont has agreed to appear before lawmakers on Tuesday, where he will answer questions about the political situation. He says he is ready to “suspend everything” if Madrid shows a willingness to negotiate, but Spanish Prime Minister Mariano Rajoy is refusing to do so.
Rajoy also refused to grant Puigdemont’s request for international mediation (after which the Foreign Ministry of Switzerland offered to do so).
“The referendum and its aftermath have plunged Spain into its worst constitutional crisis in decades, and are a political test for Prime Minister Mariano Rajoy, a conservative who has taken a hardline stance on the issue,” reports Reuters.
If the separatists declare independence unilaterally, Rajoy could use emergency powers to take full control of Catalonia – including the replacement of Catalan law enforcement with Spanish cops.
Spanish police are already facing serious criticism following their actions on voting day when Madrid unleashed thousands of cops to prevent the Catalans from voting in the referendum. Hundreds of people were injured after police used rubber bullets and batons on civilians.
An investigation has been launched to determine whether police used inappropriate force to keep people away from ballot boxes. Catalonia’s police chief has also been questioned following complaints that his officers failed to protect Spanish police during pro-independence demonstrations.
Another tool the Spanish government has at its disposal is article 155 of the Constitution, which allows Madrid to force a dissenting region into compliance.
There is one factor that could force Madrid to negotiate with the separatists. As I wrote in a previous article, Catalonia is a wealthy region that accounts for 19% of Spain’s GDP. Possible effects of the crisis include the flight of capital, a rise in the country’s risk premium, or a fall in the stock market.
“The constitutional crisis has begun to sow significant jitters among companies,” reports The New York Times. “Some are adjusting their operations, while significantly raising the risk premium demanded by investors for holding Spanish and Catalan debt. Spain’s borrowing costs rose this week to their highest level since March.”
On Friday, the Spanish government adopted a decree that helps facilitate the relocation of companies outside Catalonia. At least two major financial institutions have already moved their headquarters out of the region. For banks, relocating would guarantee funding and would allow them to remain under EU jurisdiction even if Catalonia goes through with secession.
“People are starting to get scared, and that’s bad news,” says José Luis Bonet, president of a company that has already decided to relocate. “If we’re really heading for a unilateral declaration of independence, there will be an important departure of companies…which would cause very serious damage to Catalonia.”
Economists agree that Catalonia would be economically viable on its own, but worry about the impact on jobs, barriers to trade, and the spending needs of a newly independent country.
University of Edinburgh Professor Sevi Rodríguez Mora says added barriers to trade would result in a 10% drop in Catalonia’s GDP. Many separatists insist that added tax revenue would make up for the drop in trade, even if Catalonia was forced to stay out of the EU.
Other tough issues include allocating Spain's debt and deciding whether Catalonia would remain in NATO and the EU.