Catalan crisis: What's the status? Plot thickens with Article 155

Spain's cabinet is set to proceed with article 155 of the constitution on Saturday after Catalan leader's letter failed to meet demands to the main question asked by the Spanish executive on the status of the Catalan Independence. 

Despite the Catalan president admitted that the declaration of independence was not voted in Parliament and remains suspended, his explicit threat that the Parliament will declare independence should no dialogue exist, appears to have been the straw that broke the camel's back.

Puigdemont said, "if repression persists and dialogue fails, the parliament may proceed, if it deems it appropriate, to vote the formal declaration of independence that did not vote Oct 10th."

The Spanish government, via his spokesman Méndez de Vigo, confirmed the implementation of the article 155, noting that "in the absence of a response in the terms demanded, the Government understands that the request has not been answered and will continue with the procedures established to implement Article 155." Next Saturday, there will be an extraordinary council of ministers where it will be approved to go ahead with the procedures.

Spanish PM Rajoy is in Brussels at a summit of European union presidents on Thursday and Friday. It is expected that the Senate will approve the application of the article 155 by the end of next week.

What is Article 155? 

Article 155 of the Spanish Constitution has to do with the options the State Government can control the activity of the Autonomous Communities. It contemplates the exceptional mechanisms that must be implemented by the State via the establishment of subsidiary control mechanisms, of exceptional or extreme nature, in such a way as to force the region (Catalonia in this case) to "enforce" its duties. According to the wording of the article, two occasions are established in which the Government could apply it. Either if the community does not comply with "the obligations imposed by the Constitution or other laws" or in the case in which it acts "in a way that seriously undermines the general interest of Spain."

Uncharted territory 

No Spanish government has ever applied the article 155 before. This means that its consequences are unknown and can only be foreseen to a certain extent. It is worth noting that the Article 155 does not provide for the direct suspension of the Catalan autonomy, but opens a wide range of possible measures, including the replacement of Carles Puigdemont, President of the Generalitat, as the head of the Catalan government, as well as the assumption of powers in matters of public order. The application of this constitutional provision could even, according to some sources, facilitate criminal proceedings against the Catalan Leader. 

Market reaction: Euro longs may feel the pain

The Euro, and in the bigger picture, risk appetite conditions, could be damaged by the fluid political situation currently underway in Catalonia. While the chain of events to follow are yet unknown, it is precisely that type of uncertainty and the potential revolts by the Catalan society, taking their anger to the streets in response to their growing frustration, that could be a negative factor weighing on the Euro in coming weeks. Traders and investors alike should not take for granted the ramifications of invoking the Article 155, as the scope of actions to bring order back to the Spanish society could be met with unprecedented levels of resistance and potential 'unintended' violence, as seen in the illegal Catalan referendum day on Oct 1st. 

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