Analysis: Madrid Highly Unlikely to Negotiate with Catalonia, Leading to Increased Political Uncertainty
Category: Instability
Severity: 3 (Moderate)
Source: Drum Cussac
10/11/2017 (Spain) - On Tuesday, 10 October Carles Puigdemont, President of the Catalan government, officially announced the results of the independence referendum. He stated that the polls provided Catalonia with the right to declare independence. In his speech, Puigdemont declared that Catalonia will be an independent and sovereign republic. As President Puigdemont and other local officials signed the declaration of independence, he also asserted that the process of independence is suspended to facilitate negotiations with the central government and other international organisations. Madrid formally rejected the call for negotiations.
Catalonia held an independence referendum on 1 October. The poll saw about 2.2 million people (42 percent of registered voters) cast their votes. The referendum saw a landslide victory for the separatist camp with more than 90 percent of the votes. The plebiscite was marred by violent unrest as police intervened after the Catalan autonomous police (Mossos d'Esquadra) refused to close polling stations. Clashes between referendum supporters and police left at least 890 civilians and 39 police officers injured. The central government continues to view the referendum illegal. Nevertheless, the poll marked a major success for the Catalan separatists even though Madrid will almost certainly continue to view their actions as anti-constitutional.
Since September, the central government has implemented sanctions to pressure separatists. Dozens of mayors and separatist officials are under investigation and Madrid warned that members of the Catalan government, including President Puigdemont, may be detained. Since 1 October, the Mossos d'Esquadra has been under Madrid's control and more than 4,000 additional police officers have been deployed in Catalonia. The central government also warned that it may revoke Catalonia's autonomy by invoking Article 155 of the Spanish Constitution. This would mark a major setback for local separatists as it would put all Catalonia's institutions directly under Madrid's control and substantially hinder the potential for a politically negotiated move toward independence.
In addition to political sanctions, it is highly likely that Catalonia will be subject to economic sanctions. On 6 October, the Spanish government made it easier for companies to relocate their legal headquarters from Catalonia to somewhere else in Spain. The procedure now does not necessitate the prior approval of all shareholders. Major financial institutions such as the CaixaBank and the Sabadell bank have already decided to relocate their legal headquarters. These relocations are likely to be followed by similar measures taken by Spanish and international companies in Catalonia. While the region accounts for more than 20 percent of Spanish GDP, the growing political uncertainty will probably result in less investor confidence and trigger an economic slowdown in the coming six months.
The Catalan crisis increases the risk of political instability. Both the central and Catalan government rely on parliamentary coalitions which are likely to be weakened. Madrid is ruling via a minority coalition and Prime Minister's Mariano Rajoy handling of the independence referendum in Catalonia has been criticised. The Catalan government relies on a parliamentary coalition built around President Puigdemont's separatist push. However, President Puigdemont calls for negotiations with Madrid are likely to create tensions with hardline separatists within the coalition. There is a realistic possibility that both camps' positions will weaken to a point where governance is paralysed, making it probable that early elections will be called in 12-month outlook.
Given current indicators, it is almost certain that Spain will continue to refuse negotiations with Catalonia. President Puigdemont will continue to try to appeal to international actors, including the EU and UN, for mediation but it is likely that the separatist authorities will see increasing political and economic isolation. The situation generates an elevated risk of political unrest with both camps staging demonstrations. Pro-independence protests and strikes will almost certainly continue to mainly occur in Catalonia, while counter-rallies are likely to take place in Madrid as well as in Barcelona. Such events generate a localised risk of scuffles as participants can clash with police as well as with members of the rival camp.
Copyright © 2024 Drum Cussac
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