The Ball is in Madrid’s Court Now
Declared illegal by the Spanish government, Catalonia, one of Spain’s 17 autonomous communities, held a referendum on Oct 1 for independence from Spain. Of the 2.3 million votes cast, 2 million backed independence, per government spokesman Jordi Turull (read: How Catalonia Dispute May Impact Spain ETFs).
After Catalan leader Puigdemont invited strong criticism for his actions that could potentially destabilize the region, he suspended the results of the vote for a few weeks. “We propose the suspension of the effects of the declaration of independence for a few weeks, to open a period of dialogue” Puigdemont said.
Although he stated that he still intends to secure independence for his region by a common dialogue with Madrid, the Spanish government seems to have the upper hand now.
In response, prime minister Mariano Rajoy stated that he will not engage in dialogue regarding Catalan’s separation but was open to talks of constitutional reform.
Rajoy asked the Catalan government to issue a formal statement stating if it has declared independence or not. “This request, before any of the measures that the government can implement under Article 155 of our constitution, aims to offer our citizens the clarity and security that an issue of such importance requires” Rajoy said. This would allow the Spanish government to potentially suspend Catalonia’s home rule.
How is Europe Reacting?
Catalonia does not hold the right to automatic membership of the EU. Potential talks of a separation led companies to prepare contingency plans in order to leave the region. Moreover, the EU has rejected Catalonia’s independence claim and stated that it will not be a part of the EU outside Spain.
French President Emmanuel Macron and German Chancellor Angela Merkel supported Rajoy’s approach in handling this situation. The euro rallied after Puigdemont’s speech.