The tension between Catalonia and Spain rose further yesterday as the Catalan government (Generalitat) defied PM Rajoy’s warnings and held the independence referendum
Tension between Catalonia and the Spanish government rises further as Generalitat to proceed with unilateral declaration of independence after referendum
Highlights:
- Tension between Catalonia and the Spanish government has risen further after hundreds were injured yesterday as a result of Spanish police’s operation to obstacle the independence referendum.
- While the legitimacy of voting procedures looks questionable, The Catalan government (Generalitat) announced that the pro-independence front prevailed with around 90% of the votes. The turnout was 42%.
- We see little room for a de-escalation in the short term. The Generalitat will likely declare the unilateral independence as soon as this week. Should this occur, PM Rajoy may well activate Article 155 of the Spanish Constitution, suspending the autonomy of Catalonia.
- We expect the threat to be pulled out of the EU to eventually force the Generalitat to resume negotiations, though a long-last solution to the Catalan issue will take months (if not years).
- Spanish assets underperformed, but the extent of the losses is quite limited. The 10-year Spanish government bond spread over Bunds is widening by 5 bps to 119 bps, with limited negative spillovers also to Italian BTPs.
Download the full publication below
Related Insights
A modest reporting season is expected. Estimates for 2019 remain too high versus our own
25/01/2019
The Q4 reporting season has started (15% of US firms reported, only 4% in the EU). Earnings growth in the US vs previous quarter looks lower (yoy), remaining solid in absolute terms, while it is weaker in Japan (10% reported).
Read MoreECB acknowledges shift of risks to the downside but is still in ‘assessment mode’
24/01/2019
At today’s meeting, the ECB did not adjust its commitment to leave key rates at the present level for at least through the summer of 2019. In light of the latest disappointing macroeconomic news flow, the Governing Council now unanimously sees risks tilted to the downside but differs on whether the growth slowdown is persistent.
Read More