I posted this from SG earlier on the crisis: SG on Catalonia: Luckily for Spain, the risk-on mood is masking the threats ahead ..
Via Barclays now:
We think the outlook for the Catalonia is binary and hinges on whether the Catalonian government declares independence.
- It might refrain from unilaterally declaring independence, since this could be perceived by the international community as a further escalation of the conflict.
- But if it does declare independence, it would likely to lead to more clashes and market volatility.
In that case, the central government would probably trigger Article 155, which allows it to take necessary measures to force a regional government to obey the constitution and national laws, and authorizes the government to issue instructions to all the authorities in the regions.
- This scenario could lead to further protests and potentially more street clashes with the police.
- We also would expect it to result in greater volatility in related financial markets
