Catalonia Declares Independence From Spain

October 27, 2017, 2:16 PM UTC

Catalonia’s regional parliament declared independence from Spain on Friday in a disputed vote that is now likely to be declared illegal by Spain’s constitutional court and not recognised by any other European state.

The independence motion was passed in the 135-strong assembly with 70 votes in favour, 10 against and 2 blank ballots, the assembly’s speaker said. Lawmakers from three mainstream national parties—the People’s Party (PP) of Spanish Prime Minister Mariano Rajoy, the Socialist Party, and the centrist Ciudadanos party—had left the chamber before the vote in protest.

The vote comes as the central government in Madrid completes the formalities of imposing direct rule on Catalonia in response to what it sees as an illegal secession. Catalonia has enjoyed widespread autonomy under the 1978 constitution which restored democratic rule after the death of right-wing dictator Francisco Franco. Spain’s Senate voted to impose central control over Catalan institutions, such as its police force and tax collectors, within minutes of the vote in Barcelona.

Read: Hostage to Catalonia? No Way, Says the EU

Friday’s developments create an unprecedented situation in the European Union, which has never before had to deal with the breakup of a member state. Catalans have said they want to stay in the EU, but the EU treaty has no provision for giving membership to breakaway regions, and many member states have no desire to encourage separatism in their now countries by recognizing a new Catalan state.

EU Council President Donald Tusk said via Twitter that “For EU nothing changes. Spain remains our only interlocutor. I hope the Spanish government favours force of argument, not argument of force.” The State Department, meanwhile, also issued a statement that it continued to view Catalonia as an integral part of Spain.

The crisis has taken nearly a month to come to a head since Catalonia staged a referendum on independence on Oct. 1, with neither side wishing to be seen as plunging the kingdom into a full-blown constitutional crisis. The referendum was not legal under Spanish law, and was boycotted by the majority of Catalonia’s population who—according to opinion polls throughout the year—were against independence.

Read: Hundreds Injured During Catalonia’s Vote for Independence

The news has hit Spain’s financial markets, which had hoped until the last for some kind of face-saving compromise. Regional leader Carles Puigdemont had only appeared to give up on finding such a compromise Thursday, after threats from the more extreme members of his own coalition to leave the government if he failed to press on.

The benchmark IBEX 35 stock index fell 1.8% in a matter of minutes after the vote. The yield on Spain’s benchmark 10-year bond, a rough proxy for the country’s political risk, rose by 0.07 percent to 1.62%. While that’s a sharp movement, it pales in comparison to 2012, when markets feared that debt problems in Spain and Italy would blow the Eurozone up completely. In the foreign exchange markets, the euro fell below $1.16 for the first time since July, although the bigger factor behind the euro’s decline this week has been the European Central Bank’s decision to extend its quantitative easing program to at least September next year.

Angel Talavera, an analyst with London-based Oxford Economics, noted that the market reaction had been “extremely calm, given the gravity of the political situation.” Bond yields are a benchmark for the cost of credit across the economy, and Talavera said that the lack of a more violent response should keep the economic impact limited. He is cutting his forecast for Spanish growth next year by only 0.2 percent to 2.5%.

UPDATE: This article has been updated to include reaction from the EU and analyst comment.