Three possible scenarios
We see three scenarios from here:
* The first is that the Catalan government back-tracks on its pledge to proceed towards unilateral
independence, and decides to sit down with the Spanish government to negotiate a new financing
system for the region, and possibly more autonomy on other aspects. Last week Mr Montoro made an
opening bid to the Catalan government, saying the central government was willing to make
concessions if Catalonia back-tracked on independence, even if that might put more pressure on the
central budget and increase the risk of fiscal slippage. Following a Catalan government meeting on 2
October, Mr Puigdemont said that "this moment warrants reflexion" (El País, 2 October). However,
Catalan leaders have already made it clear they are past negotiating, and their stated intention to move
forward with the independence bid suggests such a scenario is unlikely.
* The second scenario is that the government ignores the independence threat, and limits itself to
referring the matter to the Spanish constitutional court. This could lead to legal and financial penalties
against some of the pro-independence Catalan leaders, but no major escalation of tensions between
Barcelona and Madrid. Such a scenario, however, would only be possible in our view if the Catalan
government does not follow up on the independence declaration with more concrete steps towards
independence, such as the ones mentioned above.
* The third scenario is a further escalation of political tensions which eventually leads to triggering
Article 155. Unless the PSOE decides to support this, we doubt that this could happen before the
Catalan government makes a concrete move towards independence, but at some point it might be
inevitable. This would eventually lead to early elections in Catalonia. A recent poll suggested the proindependence
parties might then lose such elections (NC Report, 25 September), although the
situation might be different after the events at the weekend. Furthermore, there is a risk that
opposition parties might use this opportunity to cause a fall of the PP government. Podemos and
PSOE would have the numbers to vote down Mr Rajoy's government, but not to elect another Prime
Minister (unless Ciudadanos were to abstain) which is a requirement in Spain, which means a noconfidence
vote is unlikely to succeed (Chart 2). However, at some point, if he is unable to govern,
Mr Rajoy might have to call a snap election himself.