Spain: Even with a constitutional reform, a rapid de-escalation is not expected - ING
The Catalan Parliament voted in favour of independence. Steven Trypsteen , economist at ING, points out that a constitutional reform might help to undo the crisis, but a rapid de-escalation is not to be expected.
Key Quotes:
“The Spanish Senate has now formally activated Article 155. They dismissed the Catalan President Puigdemont and his government. This was done after a half empty Catalan parliament voted in favour for a unilateral declaration of independence.”
“Later today, there should be an announcement of the central government, communicating the actual steps in the suspension of the home rule in Catalonia.”
“The ultimate plan of the central government is to call regional elections in Catalonia within six months. But it is questionable if new elections are a solution to the problem. On the one hand, pro-independence parties might keep around 50% of the seats. According to a poll held between 16 and 19 October (GESOP; El Periodico), new elections would not change much in the allocation of power in the Catalan parliament. But of course, the situation is quite volatile and so the outcome might change quickly. On the other hand, the separatist front could be less strong as before. Puigdemont delayed the actual declaration of independence and was criticised for that by the CUP, an anti-capitalist pro-independent party that supported the Puigdemont minority government.”
“This whole crisis might eventually lead to constitutional reform in Spain. A few weeks ago the opposition Socialist leader Pedro Sanchez agreed with Rajoy to start a process to reform the constitution that could change the governance of Spain’s autonomous regions, including Catalonia. This process might be a step to dismantle the complicated crisis with Catalonia but a rapid de-escalation is not to be expected. As markets remain convinced that the current crisis will not threaten the Spanish sate, the negative reaction on the bond market should remain contained.“