Hence, Catalan leader Artur Mas asked Spanish Prime Minister Mariano Rajoy for permission to establish a Catalan tax agency, which would move the region to a Basque-style revenue collection system. But Rajoy flatly denied the request on Sept. 20, calling it "incompatible with the Spanish constitution."
Now, Mas is upping the ante: He's called a snap regional election for Nov. 25, calling it a referendum on self-determination.
If his Catalan nationalist party wins (which seems likely after hundreds of thousands marched for Catalan independence earlier this month), he plans to take his mandate back to Madrid, restate his demand for more tax autonomy and ask Rajoy to sanction a referendum on full Catalan independence.
All eyes are now on Nov. 25. If Mas wins the election, many fear the ensuing political battles with Madrid could stall Spain's economic reform push and increase the likelihood the nation needs a full bailout, perhaps re-upping fears of a messy eurozone collapse. But while the threat of Catalan secession compounds Spain's problems, there are some mitigating factors.First, Spain's constitution doesn't allow regional secession. Catalan leaders want to change this, arguing a document written in Franco's shadow may need to evolve after 30-plus years of democracy, but that process will take years. For now, it seems likely Mas is merely using the threat of secession more as leverage to win more tax autonomy in the near term, betting Rajoy will compromise to avoid a larger political headache. Second, the Catalan question shouldn't much impact Spain's economic reform push. Catalonian independence seems unlikely to be posed to Parliament any time soon, so Rajoy likely needn't worry about spending significant political capital to hold Spain together. This should clear the way to push forward with his latest reform agenda, which includes significant pension and regulatory overhauls -- reforms reportedly agreed to with Brussels as preconditions for a Spanish bailout, but which might also increase market confidence enough that Spain won't ultimately need additional assistance. After all, Spain likely only needs a full sovereign bailout if it can't continue financing its debt at affordable levels. If markets believe Spain is on the path to economic competitiveness, they'll likely reward progress with lower borrowing costs, making Spain's refinancing burden easier to bear.