FXStreet (Delhi) – Research Team at BBH, suggest that Catalonia is holding elections on September 27 and even though efforts to hold a referendum on independence was stymied by Madrid, many partisans are claiming the weekend election is precisely such a referendum.
Key Quotes
“Even if this is not legally true, a victory by a coalition of those seeking independence would intensify the confrontation with the federal government, ahead of the national elections that will be held later this year. The leading independent coalition (Junta pel Si--Together for Yes) has promised a Catalan state within 18 months of the election. Although this seems far-fetched, it illustrates likely pressures that will mount.”
“However, despite what the protagonists are saying, only about a fifth of Catalonians identify independence as the most important issue. While the risk that Catalonia secedes is rather modest, the impact could be quite serious. Without it, Spain's macro condition deteriorates sharply. It could embolden other parts of Spain to leave as well.”
“Spain holds national elections in November or December. The political uncertainty may also encourage investors to look closer at Spain's economic recovery.”
“Spain has under-performed Italy all year, but it has especially been pronounced over the past three months. The political cloud that hangs over Spain will likely last the remainder of the year, at least. Its asset markets are likely to under-perform Italy, regardless of the precise electoral outcome.”
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