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Spain in suspense, Catalans face a dilema

Rajoy (L) and Puigdemont. Regional leader told to clarify if he's declared independence.

By Todd White, Sharon R Smyth, and Thomas Gualtieri

Petroleumworld 10 12 2017

Prime Minister Mariano Rajoy gave his Catalan antagonist Carles Puigdemont five days to clarify whether he has declared independence from Spain or not as the country prepared for its national holiday on Thursday.

Rajoy is due to attend a military parade in the center of Madrid alongside King Felipe VI after leaving the Catalan president to mull over his next move with his options narrowing. Puigdemont has until 10 a.m. Monday to clear up his position. If he's found to be in violation of the law he'll be given another three days to back down. After that, Rajoy will trigger the legal procedures to force the Catalan administration from office.

While the army has remained firmly on the sidelines, the military is ready to help impose order in the region if the separatists try to resist the state's authority, according to a person familiar with the government's planning.

Rajoy also plans to remove the Catalan police chief, Josep Lluis Trapero, who was interrogated by a Madrid court as part of a sedition probe last week, the person said, asking not to be identified discussing private conversations. A spokeswoman for Rajoy said Trapero's situation is a matter for the courts.

The prime minister is looking to press home his advantage after Puigdemont failed to enlist international support for his campaign to break away from Spain and faced potentially fatal splits within his governing majority in Barcelona. The Catalan leader is trying to hold together a disparate coalition that includes both anarchists and conservatives with the threat of lengthy jail terms hanging over some leading activists.

Spanish assets rallied on Wednesday as the immediate threat of breakup receded. The benchmark stock index gained 1.3 percent while the spread between Spain's 10-year bonds and German bunds narrowed by 8 basis points.

“Puigdemont strikes me as playing primarily a tactical game -- like speed chess,” said Daniel Lansberg-Rodriguez, a Chicago-based constitutional scholar at Northwestern University's Kellogg School of Management. “It's not a game Catalonia can realistically win; the rules too strongly favor Madrid and it has too many strong pieces. This week the tide already seems to be turning.”

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

Rajoy convened an emergency cabinet session on Wednesday after Puigdemont appeared to claim independence for Catalonia but then suspended the process in a speech to the regional legislature the night before. Rajoy accused him of creating “deliberate confusion.”

“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 said.

Waiting for Weeks

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.

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.”

Socialist Support

Jordi Turull, spokesman for the Catalan government, said that triggering Article 155 would make dialogue impossible and force his administration to declare independence. Defense Minister Dolores de Cospedal last week said that any challenge to Spain's democratic regime would be treated as a threat.

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 committee 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.”

Story by Todd White, Sharon R Smyth, and Thomas Gualtieri; With assistance by Esteban Duarte, Maria Tadeo, and Angeline Benoit from Bloomberg.

bloomberg.com 10 11 2017

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