Spain’s acting Prime Minister Mariano Rajoy said on Tuesday that a new regional election in Catalonia was inevitable after its pro-independence bloc fractured over who would be the new government’s leader. Catalonia has been unable to form a government since an election in September due to disagreements between the pro-independence parties who together gained a majority. If a new candidate is not chosen before Jan. 11, new regional elections will be called automatically, acting regional head Artur Mas told a news conference on Tuesday. The most likely date would be March 6, he said. The failure to form a Catalan government mirrors a political stalemate gripping all of Spain following an inconclusive national election on Dec. 20, and increases the likelihood all Spaniards will return to the ballot box this year.
“I sincerely don’t know what could possibly happen in the next five days, but I believe that the best that could happen is that Mas drops his independence drive and, as that doesn’t seem possible, there’s no alternative to elections,” Rajoy said in a radio interview.
Bond markets reacted positively to the bloc’s division, with Catalonia’s five-year bond yield falling to a three-week low on Tuesday, a few basis points away from is lowest level in around five months.
“Short-term the disagreement is a positive as it delays any independence plans, and potentially pushes for new elections,” said Alberto Gallo, head of global macro credit research at RBS.