Markets are still complacent.
Even if you take into account the ECB’s binge buying of public debt in the Eurozone, the degree of complacency of market players over Catalonia’s worsening ties with the Spanish government — and any potential financial fallout — is surprising. Spain’s northeastern province can no longer issue its own debt, which is in deep junk territory, and depends on the central government’s national liquidity fund (FLA) for about 60% of its funding. Moody’s warned if Catalonia defaults, given the debts it owes Spain, markets would see it as a Spanish default.
Fitch Ratings warned in April that Catalonia has grave liquidity problems that will require “proactive management” and “close collaboration with the central state” — something that’s clearly not on the cards any time soon….
About 85% of residents of Catalonia want a referendum on independence, according to the latest poll by El Periodico, a Barcelona-based newspaper that doesn’t back independence. Many of the respondents to the survey do not want independence either; what they want is a say on the matter.
But that’s out of the question, says Madrid. It would be in direct breach of Spain’s constitution — a constitution that Spain’s governing Popular Party has itself breached a number of times in recent years…