The Euro weakened against the US Dollar and slipped for the first time in six days against the Japanese Yen after pro-independence parties won a majority in a regional vote, increasing the chance that a referendum on secession will be held.
The weekends vote saw voters hand two thirds of the 135- local parliamentary seats to four separate pro independence Catalan parties. This means that calls for a referendum over the issue of the wealthy region seceding from Spain can no longer be ignored.
Despite the victory for the pro-separatists voters chose to punish the ruling separatist group who had implemented deeply unpopular spending cuts and tax hikes. Catalan President Artur Mas had called on early elections to test the waters to see if there was enough demand for independence. The answer was a resounding yes but Mas may regret his haste to call the election. Mas’s Convergence and Union Alliance lost 12 seats from 62 to 50. The separatist Catalan Republican Left, known as the ERC, more than doubled its seats to 21 from 10. Two smaller parties that also back a plebiscite secured 16 seats. The elections outcome will however make it difficult for Mas to lead a push for a referendum in defiance of Madrid.
In a speech to supporters on Sunday, Mr Mas recognised that he had lost ground and though CiU is still the largest group in Catalan’s parliament, he said would need the support of another party to govern and to continue pushing through tough economic measures.
“We’ve fallen well short of the majority we had. We’ve been ruling for two years under very tough circumstances,” he said. The crowds he addressed chanted ‘independence, independence’ revealing the true extent of the desire for a separate Catalonian state.
Dreams of an independent state are feasible as Catalonia, with 7.5 million people, is more populous than Denmark and its economy is almost as big as Portugal’s and it generates one fifth of Spanish gross domestic product.
Spanish Prime Minister Mariano Rajoy will wish that the Catalonians would drop their push for independence, especially now as he tries to negotiate a possible bailout for debt ridden Spain. He should remain relatively confident that the increasingly vocal region will not get its wish as for a referendum to be called changes would have to be made to Spain’s constitution a move that none of the ruling parties have the appetite to change.
Elsewhere the Euro could make new gains against its rivals if the ongoing Greek situation is resolved positively. However, if it goes badly then the Euro will almost certainly weaken.
The Pound to Euro exchange rate is currently trading at 1.2343
The Pound to US Dollar exchange rate is currently trading at 1.6008
The Pound to Australian Dollar exchange rate is currently trading at 1.5326
The Euro to US Dollar exchange rate is currently trading at 1.2964
The Euro to Pound exchange rate is currently trading at 0.8098
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