Spain’s central government said on Thursday it would suspend Catalonia’s autonomy and impose direct rule after the region’s leader threatened to go ahead with a formal declaration of independence if Madrid refused to hold talks.
In a move unprecedented since Spain returned to democracy in the late 1970s, Prime Minister Mariano Rajoy said he would hold a special cabinet meeting on Saturday that could trigger the move. The Socialist opposition said they backed the government but suggested the measures should be limited in scope and time.
Catalan president Carles Puigdemont, ignoring a 10 a.m. deadline to drop his secession campaign, threatened Rajoy with a formal declaration of independence in the Catalan parliament.
The two statements increased uncertainty over a one-month political crisis that has raised fears of social unrest, led the euro zone’s fourth-largest economy to cut its growth forecasts and rattled the euro.
Spanish government bond yields rose and stocks sold off after the deadline passed, while the euro dipped into negative territory.
“If the government continues to impede dialogue and continues with the repression, the Catalan parliament could proceed, if it is considered opportune, to vote on a formal declaration of independence,” Puigdemont said in a letter to Rajoy.
It is not yet clear how and when a Catalan declaration of independence would take place and whether it would be endorsed by the regional assembly, though many pro-independence lawmakers have openly said they wanted to hold a vote in the Catalan parliament to lend it a more solemn character.
If Rajoy invokes Article 155 of the 1978 constitution, which allows him to take control of a region if it breaks the law, it would not be fully effective until at least early next week. It needs parliamentary approval, offering some last minute leeway for secessionists to split unilaterally.