(BBG) Spain Turns Screws on Catalans With Threat of Direct Control

(BBG) Spanish Prime Minister Mariano Rajoy stepped up pressure on Catalonia to halt its drive for independence, taking the first step in a process that could strip the region’s separatist government of its limited autonomy and impose direct control from Madrid.

Rajoy convened an emergency session of cabinet on Wednesday, at which ministers agreed to issue a formal request to the Catalan government for confirmation of whether it had declared independence. Rajoy cited “deliberate confusion” sown by the regional administration in Barcelona the previous day.

Catalan President Carles Puigdemont’s response to the request will determine what happens next, Rajoy said. “If Mr. Puigdemont makes clear his wish to respect the law and return institutions to normality, he would end a period of uncertainty, tension and rupture.”

Rajoy’s request is a preamble to triggering Article 155 of the Spanish Constitution, a move that would enable him to suspend Catalonia’s devolved government and take over control of its affairs in what would represent an ultimate defeat of the Catalan leadership.

Spain’s Nuclear Option on Catalonia Is No Quick-Fix for Rajoy

Spanish assets rallied on the prospect of an end to the immediate threat of Spain’s breakup. The chances of the secession of Catalonia, the country’s largest economic region, retreated on Tuesday at the conclusion of a day of tension as Puigdemont announced his government’s response to an Oct. 1 referendum on independence held in breach of Spanish law.

While Puigdemont claimed the ballot’s result gave him a mandate to push for independence, he said that he would hold off for a “few weeks” to pursue talks with Madrid on Catalonia’s constitutional future. Catalan coalition lawmakers later signed what they called a declaration of independence and some, though not all, then signed a document suspending it.

“Puigdemont will have nowhere to hide now — he won’t be able to hide behind the charade we saw last night,” Angel Talavera, an analyst at Oxford Economics in London, said in an interview. “If he does clarify it’s independence, then Rajoy applies Article 155, and if he doesn’t his coalition may break up and that could lead to elections.”

Spain’s benchmark stock index closed up 1.4 percent, while yields on 10-year bonds dropped 6 basis points to 1.63 percent.

Catalans Wait

Jordi Turull, spokesman for the Catalan government, said that triggering Article 155 would make dialogue impossible. In that case, he said in an interview with regional broadcaster TV3, “we have to honor our promise, we’ll have to proclaim a republic.”

The Catalan chief for territory and sustainability, Josep Rull, said the separatist government was waiting to see if Rajoy accepted its offer for dialogue. He added that this wasn’t the time to ask questions, but to give responses, Europa Press cited him as saying in Barcelona.

In a speech to Congress later on Wednesday, Rajoy excoriated Catalan officials for using their position to launch a “disloyal attack” on Spain’s institutions. “The illegal referendum to blow open the Constitution, the unity of Spain and their own Catalan statutes has failed spectacularly,” he said.

Rajoy, who runs a minority administration, received backing from the opposition, with Socialist leader, Pedro Sanchez, saying that his party shared the government’s view on the need for Puigdemont to clarify his position. Sanchez said that Rajoy had agreed to put in place a commitee on regional powers that may lead to constitutional reform, though not to enable a referendum on independence.

The Basque Country’s ruling party is acting as an interlocutor between the central government and the Catalan regional executive in a bid to reduce tensions, according to three people familiar with the matter. Senior officials from the Basque Nationalist Party, known as the PNV, have been trying to find common ground, albeit in an unofficial capacity as Madrid doesn’t accept that the dispute merits mediation, the people said.

Regardless of the crackdown and the responses from Catalonia, the turmoil has proven too much for several dozen of the region’s largest companies, which said they’re relocating.

“This struggle does not necessarily follow an economic logic, but a logic based in culture, history and nationalism,” said Monica Duffy Toft, director of the Center for Strategic Studies at the Fletcher School of Law and Diplomacy in Massachusetts. “We tend to forget in the 21st century that nationalism is still alive and well.”