Relations between Catalonia's separatist government and Madrid have hit their lowest point in years following an outlawed referendum vote Sunday, deepening a constitutional crisis in Spain.
Political analysts and economists are now questioning what could happen next following the vote in Catalonia, which saw Spanish riot police clash with pro-independence voters, leaving hundreds injured.
If Catalonia was to go further and declare itself independent that could push the Spanish government to try to seize control of the Catalan government, according to one political analyst.
"Catalan First Minister Carles Puigdemont has suggested that the regional parliament will declare the independence of Catalonia this week," Wolfango Piccoli, co-president of risk consultancy Teneo Intelligence said in a note Monday.
"This will probably lead Prime Minister Mariano Rajoy to activate article 155 of the constitution to temporarily take control of the Catalan government. Aside from the risks associated with sustained protests in the region, the biggest impact of the Catalan issue is still its potential spill over into national politics," he said.
Economic hit
Aside from the political ramifications of the non-binding referendum vote, Catalonia is vitally important to Spain's wider economy — accounting for around 19 percent of Spain's GDP, according to 2016 data from the Catalan government — meaning that any secession bids could hit Spain's economy hard.
On Monday, European markets looked relatively unmoved by the events in Catalonia, opening broadly higher. Spain's IBEX opened1.3 percent lower with Spanish banks taking a hit and borrowing costs rose — with the yield on benchmark 10-year Spanish bonds rising to 1.67 percent — as uncertainty over Catalonia's future weighed on investor sentiment.
Giles Keating, managing director at Werthstein, told CNBC on Monday that there was a risk that the crisis could deepen and rattle markets further. "As so often in markets, up 'til now investors have just shut their eyes virtually to this whole issue but as we go forward, so much can go either way. If this really becomes a real constitutional crisis then you could see a reversal of that."
"I think there's a danger that you could have some of the Catalan leaders arrested and that could begin to rattle investors," he added.
Reference:CNBC
Read More: https://www.cnbc.com/
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