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Spanish PM faces crisis after violent secession vote in Catalonia

[October 02, 2017] By Angus Berwick

SANT PERE DE TORELLO, Spain (Reuters) - Prime Minister Mariano Rajoy faces Spain's biggest constitutional crisis in decades after Sunday's violence-marred independence referendum in Catalonia opened the door for its wealthiest region to move for secession as early as this week.

The streets of Barcelona, the Catalan capital, were quiet on Monday, but newspaper editorials said the referendum, in which Catalan officials said 90 percent of voters had chosen to leave Spain, had set the stage for a decisive clash between Madrid and the region.

"It could all get worse," the moderate Catalan newspaper La Vanguardia said in an editorial after Spanish police used batons and rubber bullets to disrupt the vote, which had been declared illegal by Madrid. Catalan officials said 840 people had been injured.

"We're entering a phase of strikes and street protests ... and with more movement, more repression."

Catalonia is a center of industry and tourism accounting for a fifth of Spain's economy, a production base for major multi-nationals from Volkswagen to Nestle, and home to Europe's fastest-growing sea port. Although it already has extensive autonomy, its tax revenues are crucial to Spain's state budget.

Catalonia's regional leader, Carles Puigdemont, declared on Sunday that voters had earned the right to independence and said he would present the results to the region's parliament, which then had the power to move a motion of independence.

The referendum has no legal status; it has been blocked by the Madrid government and Constitutional Court for being at odds with the 1978 constitution, which states that Spain cannot be broken up, and there is little sign of support for Catalan independence in any other part of Spain.

Puigdemont called an emergency meeting of the Catalan regional government. In Madrid, Rajoy planned to coordinate next steps in a meeting with Pedro Sanchez, leader of the opposition Socialists.

CHALLENGE TO MADRID

Puigdemont's comments threw down a challenge to Rajoy, who has the constitutional power to sack the regional government and put Catalonia under central control pending fresh elections.

That would raise tensions further in the region of 7.5 million people, a former principality with its own language and culture, and potentially hurt the resurgent Spanish economy.

The euro lost a third of a U.S. cent after the vote, though it later recovered ground. By 0800 GMT(4.00 a.m. ET), Spain's IBEX <.IBEX> stock index was down 0.6 percent, easing back from steeper losses at the opening; the main losers included the Catalan banks Sabadell <SABE.MC> and Caixabank <CBNK.MC>.

Yields on Spain's 10-year benchmark rose initially but also fell back through the morning.

Major investment banks expect the crisis eventually to be resolved with an offer from Rajoy of more autonomy.

"We believe the risk of larger confrontations in the near-term is rising, involving at the extreme wide disruptions with potential severe economic costs," Citibank said in a note on Monday, It did not, though, see this as the most likely outcome.

Catalan trade unions have called a general strike for Tuesday.

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Catalan President Carles Puigdemont and other regional government members stand with people in Plaza Sant Jaume as they join a protest called by pro-independence groups for citizens to gather at noon in front of city halls throughout Catalonia, in Barcelona, Spain October 2, 2017. REUTERS/Susana Vera

Rajoy offered to call all-party political talks on Sunday to "reflect on the future" of Catalonia, but maintained his outright rejection of independence as an option.

The Madrid government's attempts to prevent Sunday's referendum through the use of police force brought criticism from fellow members of the European Union, including Britain and Belgium. But there has been silence from the EU itself.

At home, the crisis does not appear to have endangered support for Rajoy's minority national government, with mainstream parties largely backing his opposition to Catalan independence.

TUMULTUOUS SCENES

There was, however, criticism of his handling of the issue.

The anti-independence newspaper El Pais wrote in an editorial of Rajoy's "absolute inability to manage the crisis since the very beginning".

Ordinary Spaniards tried to digest the tumultuous scenes that had played out across cities in Catalonia on Sunday and were splashed across front pages of newspapers.

"What happened yesterday was pathetic. When Rajoy stepped up, it was surreal. Nothing has changed and I've no idea how things can be fixed now," said Elvira Ramisa, 58, talking in her kitchen in the small town of Sant Pere de Torello while the latest news blared on the radio.

The Catalan government said 2.26 million people had cast ballots on Sunday, a turnout of about 42 percent, despite the crackdown. The results were not a surprise, given that unionists were mostly expected to stay home. Opinion polls had shown around 40 percent support for independence.

Puigdemont called on Europe on Sunday to step in to make sure fundamental rights were fully respected.

"On this day of hope and suffering, Catalonia's citizens have earned the right to have an independent state in the form of a republic," Puigdemont said in a televised address.

"My government, in the next few days will send the results of today's vote to the Catalan parliament, where the sovereignty of our people lies, so that it can act in accordance with the law of the referendum," he said.

Rajoy offered political discussions, but said any dialogue must be held "within the law".

"I propose that all political parties with parliamentary representation meet and, together, reflect on the future we all face," Rajoy said in his own televised address.

(Additional reporting by Angus Berwick in Sant Pere de Torello, and Adrian Croft, Sonya Dowsett, Paul Day and Julien Toyer in Madrid; Writing by Mark Bendeich; Editing by Kevin Liffey)

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