Investors Fret as Catalonia’s Independence Turmoil Seethes

The closer the referendum, the more draconian Spain’s response. 

After years of simmering tensions, the biggest showdown yet between Barcelona and Madrid appears to be just weeks away. On Oct 1, the regional government of Catalonia plans to hold a referendum on national independence, in complete defiance of Spain’s central government in Madrid. As a last show of strength, an estimated one million separatists filled the streets of Barcelona, a city of just one and a half million people, for Catalonia’s national holiday, La Diada, on Monday.

Companies and investors are somewhat less enthused by the prospect of a head-on clash between Madrid and Catalonia, Spain’s richest and fastest-growing regional economy. An increasing number of financial firms, analysts and rating agencies are finally warning that what began as a largely political (and perfectly avoidable) crisis has the potential to spiral into a financial maelstrom that could spread far beyond the borders of both Catalonia and Spain.

Spain’s highly politicized Supreme Court, at the urging of the governing People’s Party, just suspended Catalonia’s latest legislative move to allow a referendum on national independence. This time, however, Catalonia’s regional government is refusing to back down despite the ominous threats emanating from Madrid of criminal proceedings. Depending on which side of the fence you’re on, it is either a criminal act of treason or a heroic act of rebellion

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