Madrid gives Catalan leaders until Thursday to drop independence push

The Spanish government has given Catalan leaders until Thursday to drop their push for independence, signaling to could act to strip the Catalonia region of its autonomy if they do not comply.

The move came after Catalan President Carles Puigdemont ignored an ultimatum from Madrid to provide a clear answer on whether the region has declared independence.

That lack of response, seen as an act of defiance, has opened the door for the central government to take over control of the region and promises to prolong the country’s political crisis.

What’s the latest? Puigdemont failed to give a straight answer Monday on whether he had declared independence when he spoke before the regional parliament last week.

In a four-page letter to the Spanish prime minister, Mariano Rajoy, Puigdemont instead called for the next two months to be spent on talks about Catalonia’s future, after a local referendum held Oct. 1 backed a split for the region. He also asked for a meeting as soon as possible with the Spanish leader, to avoid the situation’s further deterioration.

The letter was sent just hours before a deadline set by Rajoy for the secessionist leader to clarify the situation. The Spanish side said it had not cleared up the ambiguity over a declaration of independence, which it sees as illegal under the federal constitution.

The Catalan government now has another three days to drop any plans to secede from Spain, the country’s deputy prime minister, Soraya Saénz de Santamaría, said in a press conference Monday. The new deadline is 10 a.m. local time Thursday.

Rajoy, in a letter responding to Puigdemont, said he would set in motion a constitutional process toward removing Catalonia’s autonomy if its leaders did not drop the push for independence.

What’s next? If Puigdemont doesn’t meet the new deadline to set the record straight on a prospective separation from Spain, the government can ask the upper house to approve the suspension of some of Catalonia’s powers.

Rajoy has already made moves toward triggering Article 155 of the constitution, which would allow the central government to effectively suspend Catalonia’s home rule. The article has never before been activated. It’s referred to by some as the “nuclear option.”

This option is back on the table after the exchange of letters Monday.

What are the analysts saying?

• “It seems that at this point the triggering of Article 155 is the baseline scenario unless Puigdemont backtracks before Thursday or calls for early elections. If Article 155 is enacted, the more radical supporters of independence are likely to take the confrontation to the streets with more demonstrations and the potential for further clashes.” — Barclays analysts

• “The uncertainty surrounding Catalonia may hold back the euro, although it will probably have more of an impact on the local markets, for example Spanish bank stocks which were down across the board this morning. As far as the euro is concerned, it too could fall in the unlikely event Catalonia is allowed to go independent, as this outcome is probably not priced in the markets. Otherwise, the single currency generally looks strong, owing to improvement in economic conditions across the eurozone, including Spain.” — Fawad Razaqzada, market analyst at Forex.com

How are markets reacting? Spain’s IBEX 35 index

IBEX, -0.53%

fell 0.6% to 10,192.40 in Monday’s trade, dropping for a third straight session.

The yield on 10-year Spanish government bonds

TMBMKES-10Y, +0.03%

was slightly lower at 1.577%.

Meanwhile, the euro

EURUSD, -0.1523%

fell to $1.1807, down from $1.1821 on Friday.

Sara Sjolin in London contributed to this report.