Spanish Senate approves direct rule in Catalonia

The regional parliament of Catalonia declared independence from Spain on Friday, just minutes before Madrid officially imposed direct rule on the region.
The independence motion passed in the Catalan assembly with 70 votes in favor, 10 against and 2 blank ballots, according to Reuters. The parliament is typically 135 members strong but politicians from the Socialist Party, the People's Party (PP) and the Ciudadanos party abstained in protest.
Spain's IBEX was down 2 percent shortly after the news at 2:30 p.m. London time (9:30 a.m. EDT) with Spanish banks leading the losses. The euro dipped below the $1.16 handle and was about half a percent lower for the session.
In response, Spanish Prime Minister Mariano Rajoy took to Twitter: "I ask for calm from all Spaniards. The rule of law will restore legality in Catalonia."
Shortly afterward, the Spanish Senate granted Madrid the power to implement Article 155 of the constitution. The two paragraph-long clause allows Madrid to remove the Catalan government, install a technocratic government and call new regional elections. Rajoy said temporary control of Catalonia could last as long as six months.
On Saturday, the official publication of the decision will effectively trigger direct rule, but it's unclear how this could immediately manifest itself.
The immediate response from the European Union also came via Twitter. Donald Tusk, president of the European Council, said Brussels would only talk to Madrid.
Antonio Barroso, deputy director of research at Teneo Intelligence, said in a note Friday that the Rajoy administration will now move quickly to dismiss the separatist leader Carles Puigdemont from his post as Catalan president. Barroso added that he expected this move to increase tension and provoke fresh clashes between police and pro-independence demonstrators.
People react as they watch a sesion of the Catalonian regional parliament on a giant screen at a pro-independence rally in Barcelona, Spain, October 10, 2017.
Susana Vera | Reuters
People react as they watch a sesion of the Catalonian regional parliament on a giant screen at a pro-independence rally in Barcelona, Spain, October 10, 2017.

Rift between Madrid and Catalonia

Given that the region has a majority of pro-independence lawmakers it was very likely that the Catalan parliament would choose to split from the rest of Spain. Declaring independence unilaterally will likely increase the rift with Madrid but is unlikely to change anything in practical terms.
"It would be so illegal (to declare independence); they (Catalan lawmakers) even risk jail," a European official from Catalonia, who is close to the discussions but didn't want to be named due to the sensitivity of the issue, told CNBC via phone on Friday morning.
Speaking at the Senate, Rajoy said Friday morning: "In Catalonia there have been attempts to ignore the laws, abrogate them, to not follow them."
"What occurred on the 6 and 7 of September in the Catalan Parliament was the biggest joke to democracy, when two illegal laws were passed and a referendum was called," he added.
"It is not guaranteed that the central government will be able to immediately exercise full control of regional executive powers. Catalonia has a very high degree of self-government, comparable with some of the most decentralized regions in Europe and elsewhere," Barclays said in a note Friday morning.
Catalonia has full responsibility for civil law, police, education, health care, industry, trade and consumer affairs, environment, research, local government, tourism, transport, media and several other areas.

Crisis a long-time coming

A pro-unity rally marches through Barcelona, Spain, on October 8, 2017, in response to last Sunday's disputed referendum on Catalan independence.
Jeff J. Mitchell | Getty Images
A pro-unity rally marches through Barcelona, Spain, on October 8, 2017, in response to last Sunday's disputed referendum on Catalan independence.
The current political crisis facing Catalonia and Spain has been long-coming. There has been a strong sense of separatism and regional identity in Catalonia, a wealthy region in the northeast of Spain, for decades. There have also been several unrecognized and unofficial referenda on independence in recent years.
The latest vote took place October 1 — 90 percent of 2.26 million regional voters opted for independence. Turnout was low at around 43 percent, however, and thousands of Catalans also took to the streets to protest against independence.
Catalan leader Carles Puigdemont caused confusion following the vote by appearing to declare independence and then immediately suspend it, calling for dialogue with Spain, a request so far denied. His request for the European Union to mediate in the dispute has also fallen on deaf ears with the EU supporting the Rajoy government and saying it would not recognize an independent Catalonia.
On Thursday, Puidgemont decided not to call a snap election in the region.
Spanish Senate approves direct rule in Catalonia Spanish Senate approves direct rule in Catalonia Reviewed by Alexander Von Stern on 08:02:00 Rating: 5