Spanish Crisis Returns: Separatists Win Catalan Election In Huge Blow To Rajoy

Despite growing expectations that Catalan separatist fervor had abated in the aftermath of the post-independence fiasco, consensus was once again set for disappointment and on Thursday night, Spain was thrown back into chaos after the three Catalan separatist parties, Junts per Catalunya, Republican Catalan Left and the CUP, held on to a small but critical majority in the Catalan regional parliamentary election, dealing a stunning rebuke to Prime Minister Mariano Rajoy and his attempt to bury the Catalan independence movement.

With virtually all of the vote counted, the separatists held on to 70 seats, down from 72 in the 2015 election and 1 less than the initial exit polls predicted, just weeks after PM Mariano Rajoy fired the former first minister, Carles Puigdement and his entire government after the held what Madrid dubbed an "illegal referendum" and declared independence on October 27. Yet while the separatists won as a group, the biggest individual winner was the Ciudadanos party, which gained 300,000 more votes and 12 more seats compared to its 2015 position. It was also the single biggest party to emerge from today's election with a total of 37 seats. Meanwhile for Rajoy's People's Party, the result was a disaster as it finished in last place among the mainstream parties with just three seats.

Source: The Spain Report

But even more importantly, it was a personal victory for Carles Puigdemont, the ousted Catalan president who campaigned in self-imposed exile from Brussels. His Junts per Catalunya emerged as the most-popular separatist party, handing him a mandate to lead the secession campaign, after Junts per Catalunya beat Oriol Junqueras and Republican Catalan Left to lead the separatist block. As The Spain Report noted, Junts per Catalunya obtained slightly more than 900,000 votes and 34 seats. Esquerra won slightly fewer than 900,000 votes but only 32 seats. The radical-left, pro-independence CUP lost six of its ten seats and about half of its votes.

The Catalan Socialist Party (PSC, Miquel Iceta) gained 50,000 votes and one seat.

The Popular Party in Catalonia, led by Xavier García Albiol, lost eight of its eleven seats, dropping to just three, and, like the CUP, approximately half of its votes. As

Catalunya en Comú Podem, the Podemos brand for these regional elections, lost three seats compared to its previous brand result in 2015, falling to eight seats.

Both blocks obtained more votes than in 2015 due to a turnout that rose six points to 82% compared to 2015.

And while the Ciudadanos ascent was remarkable, the take home of the night is that in this implicit referendum, the Catalan separatist sentiment once again prevailed as Carles Puigdement observed.

Speaking in a press conference in Brussels, the deposed Catalan president said that "the people of Catalonia have given a lesson to the world: the Catalan republic has beaten the monarchy of the 155." He was referring to the Constitutional Article 155 which the Spanish government used to take control of Catalan government. "The Spanish state has been defeated" Puigdement said and added that "Election results mean reparation, rectification and restitution are needed."

The deposed leader also said that "the legitimate government must return immediately power in Catalonia", envisioning of course, himself.

He concluded by claiming that "things are even better for secessionists today than they were two years ago, as the group has gained parliamentary power" and threatened that "if PM Rajoy continues to apply the same recipes he will continue to get the same results."

Meanwhile, baffling many traders, the EURUSD has yet to respond to today's election, having traded in a tight 10 pip range since the unexpected exit polls first came out.  Indeed, as Citi reminds us, "Remember,  Spanish PM Rajoy called this election hoping for this faction to loose momentum."  Considering the separatists preserve their majority, that hardly what happened.

Also observing the inert Euro, Bloomberg cautions that other Spanish assets may well move tomorrow, perhaps violently.

Polls had been pointing to a divided parliament and a confusing mess of options, and some bulls had even been buying Spanish assets as a bet on a good night for the constitutionalists. So the solid win for the separatists should mean Spanish stocks and bonds decline tomorrow.


It's pretty clear that there will be more disruption than markets were pricing in. I would expect Ibex futures to fall on the open. After the referendum in October, the index fell 5.4% in three days before recovering. This selloff should be considerably less dramatic and equally short-lived.


Interestingly, Spain's dollar bonds have been selling off for the last couple of days, while the euro debt has outperformed, suggesting there were different perceptions of the poll among different investor bases.

In summarizing today's event, Bloomberg asked rhetorically "has there been a shift in Catalan politics" and answered:

After all the drama, the balance of power looks almost the same as two years ago, when the secessionists bloc won 72 seats compared to 70 now. The left-wing radicals of the CUP party saw their support shrivel but Puigdemont will again need their four seats for a majority

So what happens now? Well, the secessionists will seek to overcome their differences to form a government. Rajoy has made his own position clear. He will not tolerate an illegal challenge to the rule of Spanish law and reserves the right to invoke constitutional powers again to ensure it is respected. The bottom line: "nothing was really solved in Catalan politics tonight and the secession crisis continues."