Catalonia’s vote on independence — which was not recognised by the Spanish government and marred by over 800 people being injured in clashes with police — is casting a shadow over the future of Spain’s political stability.
Analysts from Dutch bank ING fear that the impact on Europe’s economy from a so-called “Catalexit” could have a more significant impact than Brexit.
The vote returned an overwhelming result in favour of independence but turnout was low. In a client note, strategists from Citi have set out a neat guide to what happens next.
The developed markets team, led by Antonio Montilla, explain:
The Catalan Parliament will hold a referendum-focused session on Tuesday. According to the ‘referendum law’ passed in the Catalan Parliament, a YES vote (no participation threshold) is enough for passing a declaration of independence and kick-start a gradual process to exit Spain (including drafting a constitution and build the new institutions). The law, however, calls for a period of negotiations with Madrid and the international community, implying that a move to declare independence would not have immediate effects in the legal relationship between the region and the rest of Spain.
The intervention by Spanish authorities and the clashes between voters and police have destabilised the political environment in Catalonia (a region in northeastern Spain which encompasses Barcelona). The Citi analysts write:
We expect the regional government to try to capitalize on recent events and call snap regional elections. As in the 2015 regional election, the next ballot is likely to be framed as a plebiscite vote over independence, with the ruling ‘Together For Yes’ coalition likely to stick together. Recent polls suggest ‘Together For Yes’ will probably fail to reach a majority and may need support from either the far-left CUP or the leftwing Podemos to remain in power. We expect a proindependence government to eventually be formed with a secessionist agenda. Attempts to hold a new referendum are likely to follow.
An alternative scenario would feature the Catalan government pressing ahead by declaring independence in coming days. The move would be challenged immediately at the Constitutional Court, which almost certainly would rule against it. If the Catalan government ignores the ruling, we expect Madrid to trigger article 155 of the Constitution to strip out Catalonia’s autonomy and to call for regional elections.
Expect plenty of others — including Brussels — to have their say on this in the days ahead.
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