Spain: Conflict between Catalonia and Spanish government escalates - ING

The reply by the Catalan government on the question whether they had declared independence was not clear enough for the Spanish government and the central government will now continue to enact Article 155, explains Steven Trypsteen, Economist at ING.

Key Quotes

“Catalan leader Puigdemont refused to retract his ambiguous declaration of independence and hinted at a possible vote at the Catalan parliament. The standoff between Catalonia and the central government is not good news for the economy in both Spain and the Catalan region. Many companies with their corporate address in Catalonia have already reacted by moving it out of Catalonia. Spain also downgraded its GDP growth forecast for 2018 from 2.6% to 2.3%.”

“This Saturday there is likely to be a cabinet meeting that could ask the Senate to approve specific measures for Catalonia, Article 155, allowing take over of control in Catalonia.”

“Many outcomes are still possible, such as the announcement of snap elections in Catalonia before Article 155 comes into force. In any case, we still seem to be far from a cooperative solution to the problem, which might put moderate upward pressure on Spanish spreads.”