What's going on?

A resurgent independence movement in Spain is causing concern in financial markets, as Spanish stocks and bonds sell off sharply. European politics continues to stay relevant for global investors…

What does this mean?

Catalonia, a region that accounts for a fifth of Spain�s economy, has pushed for more autonomy for decades. The Catalan government held a referendum on independence on Sunday, and preliminary polls show 90% voted in favor, with a 42% turnout. However, the Spanish government and courts called the referendum illegal before the vote, and Spanish authorities have been cracking down on the movement. The Catalan pro-independence leader has said the region will declare independence within a matter of days.

Why should I care?

The bigger picture: Independence could create economic uncertainty for both Spain and Catalonia.


Potential consequences include greater difficulty for the Spanish government in legislating policy, a slow-down of the Catalan economy in the face of rising tensions and uncertainty, and Catalonia leaving the European Union (which could harm its trade). Even if full independence doesn�t happen, the tensions between the region and the government (who may impose sanctions on it) could create enough uncertainty to slow the Catalan economy and cause investors to withdraw their money.

For markets: Anti-establishment politics in Europe could pose risks for investors.

While Spanish stocks have fallen to their lowest level in six months and Spanish government bonds are weaker, the hardest-hit investments were those more closely linked to Catalonia (stocks of Catalan banks Sabadell and CaixaBank were among the worst performers, for instance). More widely, this is another political crisis for Europe. The recent rise in nationalism and anti-EU sentiment (e.g. Brexit and Italy�s Five Star Movement) could increase the risk that European politics makes economic growth more difficult (as explained above).