Catalonia's dilemma: Signs of disagreement start to emerge within the government - HSBC

The Catalan government faces a difficult dilemma on whether to make a unilateral independence declaration this week as moderates appear concerned about a lack of international support and likely negative economic consequences, explains Fabio Balboni, European economist at HSBC. There are many moving parts in the Catalan crisis, and we might not have seen the peak of Spain’s political tensions yet, he further adds.

Key Quotes

“The Catalan government could bring to its parliament a unilateral declaration of independence (UDI) on 10 October, although such a move now appears increasingly unlikely. Signs of disagreement are starting to emerge within the regional government, with more moderate members fearing the consequences of a further step towards independence, given the lack of support from the EU, and moves by some banks and firms to leave Catalonia.” 

“Even if the Catalan parliament does pass a UDI, it would not mean that the central government would immediately trigger Article 155 of the Spanish Constitution, which allows it to take direct control of the region. With the future of his own government possibly at stake, Spain’s prime minister Mariano Rajoy has reason to wait until concrete steps towards independence are taken first. This could create space for negotiation between Catalonia and the central government on a new financing system for the region.” 

“But if the Catalan government does progress to full independence, then triggering Article 155 and a further escalation of political tensions would seem inevitable.”