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October 2017

Euro hit by Spain imposing direct rule on Catalonia

Published: Friday 27 October 2017

By Adrian Bishop

Spain has imposed direct rule over the province of Catalonia today after the region voted for independence.

Earlier, the Catalan regional parliament voted to create “a Catalan republic as an independent and sovereign state” as MPs backed the motion by an overwhelming 70-10.

In response, the Spanish senate gave Prime Minister, Mariano Rajoy, unprecedented powers to impose direct rule on Catalonia, which was passed by 214 votes to 47. He told senators direct rule was needed to return "law, democracy and stability" to the region.

As result, the Euro fell from 1.18 to 116 against the US Dollar, a three-month low.
 
Halo Financial’s founding director, David Johnson, says, “Given the ongoing turmoil, the Euro is likely to come under increasing pressure, at least until the crisis is resolved.

“The currency is also under pressure from yesterday’s ‘dovish’ signals by the European Central Bank (ECB) on monetary policy, which suggested interest rates might not rise for another two years.”

It is believed that Mr Rajoy will call a cabinet meeting to sack Catalan President, Carles Puigdemont, and assume control of the region, including taking over the region's finances.

The long-standing political crisis escalated the start of October, when Catalans backed independence in a referendum. However, the Spanish parliament ruled it was illegal.

Following today’s (Friday 27 October) Catalan vote, crowds gathered outside Catalonia’s parliament building in support of the decision. However, opposition MPs have attacked the move and some walked out before the vote.

They accused Mr Puigdemont and his allies of ignoring the views of most Catalans who wish to remain part of Spain.

A public survey commissioned by the Catalan government in July suggested 41% were in favour and 49% against independence.

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news