MADRID (Reuters) - The secessionist drive in Catalonia is a political headache for Spanish Prime Minister Mariano Rajoy but it is unlikely to derail his austerity measures as the central government’s cash lifeline for the region will force it to comply.
While Catalan parties that back a referendum for independence control two thirds of the region’s parliament after Sunday’s elections, the ruling Convergence and Union party, or CiU, lost ground and will depend on deals with other parties to pass budgets and legislation.
CiU leader Artur Mas had called early elections and campaigned on a pledge to push for a referendum on independence from Spain. He wants to negotiate a new system for sharing tax revenues nationally because he says current rules drain Catalonia of funds it could invest in its own economy.
The second biggest party in the Catalan parliament, the separatist Republican Left, or ERC, could try to block Mas’s plans for spending cuts to tackle a large deficit. But that will be difficult because Rajoy’s government has bailed out Catalonia twice this year.
First, the region received billions of euros in credit to get up-to-date on arrears in wages and payments to suppliers. Then Mas asked Rajoy’s government for a 5 billion euros ($6.48 billion) bailout to meet debt payments.
“Catalonia is taking money from the central government, and while that continues to be the case the margin for a complete renegotiation of its fiscal position is small,” said Silvio Peruzzo at Nomura.
Catalonia, a major exporter, accounts for a fifth of Spain’s economy. But it is the most indebted of Spain’s 17 regions and is shut out of capital markets.
It was also the first to begin austerity measures to try and regain access to funding, and hopes to gain more control over its finances from Madrid.
Peruzzo said independence fervor was unlikely to disappear completely, but the failure of Mas’ CiU party to gain an absolute majority would slow things down and postpone any calls for a referendum on independence.
Negotiations over a possible coalition government in Catalonia will provide some concern in coming weeks even if analysts do not see the CiU’s austerity policies veering wildly off course.
Full independence in any case would take years, and the region might not be included in the European Union if it did become a separate state.
That would be unthinkable for Catalonia, Catalans, and their businesses. While a majority have backed independence at polls, the number drops sharply if that meant the region falling out of the EU.
Some expected the separatist debate to take second place to concerns about Spain’s finances and when it would need to apply for an international bailout.
“For financial markets the result is not that bad as the question of independence will soon be off the table and the focus will be once again on fiscal consolidation measures and whether Spain will request a bailout,” said Philippe Gudin, economist at Barclays.
On Monday Spain’s Ibex index of leading shares was down around 0.7 percent, in line with losses on other European bourses, while the country’s key 10-year debt yields were around 5.6 percent, little changed from Friday’s levels.
Spain has delayed requesting a bailout after the announcement alone of a backstop for struggling euro zone states’ debt by the European Central Bank helped to bring debt costs sharply down.
But they still remain at high levels. With potentially around 250 billion euros to raise next year in financing, including funds for the regions, analysts say a request for help from Spain is a matter of time. Gudin at Barclays said it could come before the end of the year.
A market maker for Spanish debt also dismissed concern over Catalonia, and did not think it would have an impact on the international investors who have begun to tentatively invest in the country’s bonds again.
“The Catalan elections are gone and I don’t see international investors looking at this any more. Spain’s financing needs for next year are the big thing to look at, and heading into 2013 if a bailout comes as is expected,” he said.
Catalonia faces debt redemptions next year of around 6 billion euros, meaning it will likely turn to the central government again to help cover its financing needs.
($1 = 0.7717 euros)
Editing by Fiona Ortiz and Giles Elgood