Pro-independence party in Catalonia won an absolute majority in regional elections
Catalonia will be radical enough to push for independence?
The trauma in Spain is leading the Spanish markets lower
Another blow for the Spanish Prime Minister, as the pro-independence party in Catalonia, won an absolute majority in regional elections. The three separatist parties won 70 seats collectively and this would help them to form a government as the threshold was 68. This would only escalate the tensions between Madrid and Barcelona whilst creating a major headache for investors as they will start to rekindle their thoughts in order to tackle this threat. Madrid without Barcelona only spells disaster, and nothing less. This is not something which you would like to digest as the first event in 2018, the hopes around making any reasonable compromises are completely shattered.
Heading in to 2018, investors are going to look at only aspect which is the threat of independence. The focus will be if the new government in Catalonia will be radical enough to push for independence. The recent failed attempt of independence in October clearly shows an example for the new upcoming government in what to avoid. It also provides them with a guidance where they have to make any changes in order to achieve a more favourable outcome.
The trauma in Spain is leading the Spanish markets lower this morning and it is also pushing other European markets lower too. The Euro is feeling some pain but nothing too dramatic because investors debate over the possibility of a fresh turmoil in Spain. The snap election in Spain hasn’t triggered the kind of outcome which Mr Rajoy was not hoping for. Perhaps, he would have to adopt a different approach given that he has suffered two failures. Spanish banking sector is where we are seeing the most blood and investors are hitting hard on the likes of Banco de Sabadell and CaixaBank SA.