Catalan leaders given five-day deadline to declare independence

11 October 2017 17:11

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Catalan leaders given five-day deadline to declare independence

Spain's stocks and government bonds were in demand on Wednesday after Catalonia's leader stopped short of making a formal declaration of independence, taking the edge off a political crisis in the euro zone's fourth biggest economy.

Carles Puigdemont instead made only a symbolic declaration late on Tuesday, claiming a mandate to launch secession but suspending formal steps to that end.

"There was a chance Puigdemont would have made a decisive declaration, so now yields are dropping because there is room for negotiation left," said DZ Bank strategist Christian Lenk.

Spanish Prime Minister Mariano Rajoy on Wednesday, however, took the first step towards activating article 155 of the Spanish constitution, a so-called nuclear option that would allow him to suspend Catalonia's political autonomy and take over the region.

The Spanish government has now given Catalan leader Carles Puigdemont five days to say whether he declared independence or not, Spanish news agency Efe said on Wednesday.

If Puigdemont was to confirm he did declare independence, he would be given an additional three days to rectify.

Failing this, Article 155 of the constitution, which allows the central government to suspend a region's political autonomy and rule it directly, would be triggered.

Spain's benchmark IBEX closed 1.3 percent higher, outperforming the pan-European STOXX 600 index, which was unchanged on the day.

Shares in Spanish banks Sabadell and CaixaBank , which have moved their legal bases from Catalonia to other parts of Spain since an Oct. 1 independence referendum, rose 1.2 percent and 0.3 percent respectively.

The rally in Spanish stocks pushed the main global stocks index, MSCI's 47-country All-Country World Index , to a fresh record high of 493.63 points.

Germany sold 2.395 billion euros of five-year bonds and the Netherlands was set to sell 5-7 billion euros of seven-year bonds.


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