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Spanish prime minister Mariano Rajoy urged Catalonia's leader on Wednesday to "act sensibly" and renounce an independence bid to head off a threat by Madrid to impose direct rule.
Mr Rajoy issued his appeal in the national parliament, where he sought to win more political support for taking direct control of Catalonia on Thursday if the rebel regional government sticks to a plan to break away.
The move would need only a vote in Spain’s upper house, where Mr Rajoy’s People’s Party holds an absolute majority. It would be the first time in Spain’s four decades of democracy that direct rule has been imposed.
A constitutional provision allows the central government to impose the law by giving orders to all branches of the regional authorities. Precisely how that would work in practical matters such as commanding the police force is untested.
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Authoritative Catalan newspaper La Vanguardia reported that Madrid plans to appoint its own delegates to run regional government departments. Catalan president Carles Puigdemont would remain nominally in his role but stripped of all powers.
Many Spaniards fear the unprecedented step could lead to social unrest. The crisis has prompted hundreds of Catalan firms to move their headquarters, led Madrid to cut economic growth forecasts and weighed on the euro.
In the latest grim prediction, Spain’s independent budget watchdog warned on Wednesday that continued uncertainty could wipe as much as €12 billion off the economy next year, reducing expected growth by between 0.4 and 1.2 per centage points.
Mr Puigdemont has already defied Madrid once this week, reiterating on Monday an ambiguous independence declaration he made last week and immediately suspended.
“I ask Puigdemont to act sensibly, in a balanced way, to put the interests of all citizens first,” Mr Rajoy said on Wednesday, mentioning both residents of the autonomous region, which produces a fifth of Spain’s wealth and has its own language and culture, and the rest of the country.
Political crisis
Thursday’s deadline is seen as Mr Puigdemont’s last chance to abandon an independence declaration which Madrid has rejected as illegal, and defuse Spain’s biggest political crisis since a failed military coup in 1981.
“It’s not that difficult to reply to the question: has Catalonia declared independence? Because if it has, the government is obliged to act in one way, and if it has not we can talk here,” Mr Rajoy said in parliament.
The row has rattled financial markets and sent companies scurrying to relocate on safer ground. Banco Sabadell, Spain's fifth-biggest bank, was considering moving its top management to Madrid.
Almost 700 companies pulled out of the northeastern region between October 2nd – the day after a referendum on independence which Madrid branded illegal – and October 16th, according to Spain’s companies registry.
Tourism, a vital part of the Catalan economy centred on its capital Barcelona, has also taken a hit, with activity falling 15 percent so far this month, industry association Exceltur said on Tuesday.
The region’s tourism industry could make €1.8 billion less than usual in the fourth quarter “if the volatility and confrontation get worse in the coming months”, Exceltur said in a statement.
Foreign minister Alfonso Dastis said last week that exactly what direct rule would look like is not clear, adding the government would work on it.
La Vanguardia said Mr Puigdemont, a 54-year-old former journalist, was mulling declaring independence and calling so-called constituent elections for the newly-declared republic. But Catalan foreign affairs chief Raul Romeva told a news conference in Brussels: "Elections are not on the table now."
Protesters
As the threat of direct rule neared, the Catalan government took a combative tone. "Giving in forms no part of this government's scenarios," spokesman Jordi Turull said on Tuesday. "On Thursday, we won't give anything different than what we gave on Monday."
Tempers have flared since the jailing on Monday of two separatist leaders pending an investigation for alleged sedition.
Tens of thousands of protesters gathered along Barcelona’s Diagonal Avenue on Tuesday to call for their release, whistling and shouting “freedom” and “out with the occupying forces”.
Mr Puigdemont said: "Sadly, we have political prisoners again," referring to the military dictatorship of Francisco Franco, who suppressed Catalan culture and language until his death in 1975.
Reuters