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Spain: Catalonia is jumping in the unknown – ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 17, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Geoffrey Minne, Economist at ING, notes that last week, the Catalonian parliament voted a motion to take concrete steps towards independence and in response to that, the national government took legal actions against the Catalonian leaders.

    Key Quotes

    “Last week the pro-independence parties passed a resolution calling for taking the leap of independence. According to the resolution, the parliament has one month to pass laws that would build up an independent tax authority and social security system. Understandably, the central government did not stand by.”

    “The leaders of the proindependence movement were referred to the Constitutional Court (even the terms of criminal charges and prison were evoked) and the resolution voted by the Catalonian parliament was suspended. The central government can still go further and take drastic actions such as cutting funding and controlling police forces.”

    “One should, however, keep in mind that the pro independence parties “only” had 47.8% of the votes in September and that there is still no agreement between those parties to form a regional government.”

    “The Catalonian scenario is full of uncertainty in the context of undecided national elections.”

    “The direct consequence of the recent political turmoil is that the Catalonian government has been downgraded by Fitch to 'BB' from 'BBB-' and according to the rating agency the economic outlook is negative. Catalan regional debt was already considered as a junk bond for S&P.”

    “Moreover, it is difficult to imagine a strong support from European or international institutions. The recent events put the regional public finance in a difficult situation and it will constitute an important lever for the central government.”
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