: Standoff in Spain intensifies, as government gears up to strip autonomy from Catalonia

Tensions between Spain and its wealthy northeastern region deepened Thursday as the central government took steps to impose direct rule on Catalonia, after the Catalan leader failed to meet a deadline to renounce a push for independence.

What’s happening?

The Spanish government demanded that the Catalan region, led by President Carles Puigdemont, drop its bid for independence by 10 a.m. local time Thursday. But the deadline passed without that demand being met; Puigdemont instead threatened Madrid that it would push forward with making a formal declaration of independence if the government refused to negotiate.

In response, the central government said it would hold an extraordinary meeting on Saturday to invoke Article 155 of the country’s constitution, which will set the wheels in motion to strip the region of some of its powers. It would be the first time a Spanish government has tried to suspend home rule for one of its regions.

These are the latest moves in a standoff between Catalonia and Spain after leaders in the region held a referendum on Oct. 1, which showed overwhelming support for separation from Spain, though on low voter turnout. Spanish courts have said the vote and the push for secession are illegal under the country’s constitution.

What happens now?

There’s now a wait to see how Catalan leaders respond and to see whether the news prompts mass protests in the region. All eyes will be on Puigdemont to see if he will formally declare independence.

Pro-independence unrest in Catalonia has been answered by large-scale pro-unity demonstrations since the crisis began, though the Spanish government has been criticized for its heavy-handed response to the situation. On Tuesday, Catalans protested in Barcelona after the authorities detained two separatist leaders.

The central government would likely start its removal of home rule by taking control of the police forces in Catalonia, reported The Wall Street Journal, citing sources.

What’s been the reaction?

Spanish stocks

SXXP, -0.88%

 continued to fall throughout the morning, last down 0.9%. The rest of European markets were also under pressure, while the euro

EURUSD, +0.4157%

 turned higher against the dollar, after initially losing ground.

As well, U.S. stock futures pulled back, with some saying Spain tensions had offered up an excuse for selling stocks which have persistently been at record highs.