Spain』s prime minister Mariano Rajoy has opened the way for Madrid to suspend the autonomy of Catalonia by demanding that the regional government makes clear whether it considers itself independent.
Following an emergency cabinet meeting on Wednesday Mr Rajoy said he needed Carles Puigdemont, Catalan president, to clarify Tuesday』s suspended declaration of independence.
That would dictate the next steps in the crisis, Mr Rajoy said.
Madrid is considering whether to apply a 「nuclear option」 in the Spanish constitution — Article 155 — to intervene, suspend all Catalan autonomy and call new elections.
Mr Rajoy said that his formal request for clarity was 「necessary when activating Article 155 of the Constitution」.
He added that 「in this way we want to offer certainties to the citizens」.
Doing so would deepen the constitutional crisis that has engulfed Spain since Catalonia held a contested referendum on independence on October 1. Spain』s government says Catalonia』s independence drive is unconstitutional.
The Catalan leader on Tuesday night stepped back from making a full declaration of the region』s immediate independence, calling for more dialogue with Spain to peacefully resolve the situation.
But the speech was ambiguous. At one point Mr Puigdemont appeared to make a declaration of independence, saying he now assumed the 「mandate for Catalonia to become an independent state in the form of a republic」.
This was followed by a proposed suspension of independence for 「a few weeks」. Spain』s financial markets had earlier reacted with optimism to Mr Puigdemont』s message of suspended independence pending mediation. Madrid』s main stock index made the best gain of the morning in early European trade, rising 1.5 per cent to its highest level since September 20.
Financial stocks led the rally, with Catalan-based banks making notable gains. Shares in Banco de Sabadell rose 2 per cent and CaixaBank rose 1.9 per cent. Both banks have decided to move their legal headquarters out of Catalonia since the crisis erupted, fearing disruption to their businesses.
Shares in other Spanish banks also rose more than 2 per cent in early trading while investors showed more appetite for Spain』s government debt, easing the yield on its 10-year paper by 3 basis points to 1.685 per cent.
The spread between Spanish debt and German Bunds — a measure of the premium investors demand to hold Spanish debt compared with the safer German debt — fell to its lowest level since the end of last month.