Catalans vow to pursue independence as EU backs Madrid

(Bloomberg) Catalonia's separatists said nothing will stop their drive toward an independent state as the European Union (EU) backed the Madrid government's crackdown in Spain's biggest constitutional crisis since the 1970s.

In what threatens to be another dramatic escalation, Catalan President Carles Puigdemont is scheduled to make a televised address at 9 pm local time and has said he expects to declare independence within days following Sunday's unofficial referendum.

King Felipe VI joined Prime Minister Mariano Rajoy in condemning the vote, causing outrage among many Catalans.

“ It's a duty for any government to uphold the rule of law, and this sometimes requires the proportionate use of force – Frans Timmermans, first vice-president of the European Commission

The prospect of secession by Catalonia, which accounts for one-fifth of Spain's economic output, is piling pressure on the country's minority government.

Rajoy has been seeking political support for his hard-line approach after police stormed makeshift polling stations.

The next move could involve suspending the regional government and implementing direct rule from Madrid.

"There is general consensus that the regional government of Catalonia has chosen to ignore the law when organising the referendum held last Sunday," Frans Timmermans, first vice-president of the European Commission, told the European Parliament.

"It's a duty for any government to uphold the rule of law, and this sometimes requires the proportionate use of force."

Spanish bonds and shares in Catalan banks sank on concern about the standoff, while a Barcelona-based drugmaker said it was uprooting to Madrid as other companies started making contingency plans for a protracted political conflict.

No return

The clash between Madrid and the rebel administration in Barcelona heated up on Wednesday after the king, whose words traditionally carry weight in Spain, sought to impose his authority in a televised statement.

He condemned the "unacceptable disloyalty" of the Catalan leaders and promised to keep Spain together.

Regional government spokesman Jordi Turull said the verbal attack, with no reference to the police violence that saw more than 800 people injured, had given a "free bar" to state forces as they try to shut down the secessionists.

The king's reaction was "a mistake from every point of view", he said.

"It's clear to me that a point of no return has been reached and there's no road back to how things were before," said Caroline Gray, a lecturer in politics and Spanish at Aston University in the UK.

"However things turn out, the relationship between Spain and Catalonia seems to have fundamentally changed."

The parties holding the majority of seats in the regional parliament, Junts pel Si and CUP, asked Puigdemont to address lawmakers on Monday, a spokesman for the assembly said.

That could be a prelude to a formal declaration of independence.

Yields on Spanish 10-year bonds rose in each of the past three days, rising to as much as 1.8% on Wednesday.

The premium over similar-maturity German bonds reached the widest in more than five months.

Shares in Oryzon Genomics jumped by as much as 33% after the company announced it was moving headquarters to Madrid.

Catalan lender Banco Sabadell fell by 4%.

Rubber bullets

Rajoy is fighting to maintain control after Catalonia claimed 2.3 million voters defied both the central government and the Constitutional Court to cast ballots in the illegal referendum.

Regional police ignored orders to shut down the vote on Sunday. 

The National Court in Madrid started investigating possible sedition charges against the Catalan police chief and three leaders of the civic groups that helped organise the vote.

In July, before the situation spiraled out of control, only 35% of Catalans thought their region should be independent, according to a regional government poll.

But many moderates have been incensed by the scenes of police beating voters with batons and firing rubber bullets into crowds of protesters.

“ The relationship between Spain and Catalonia seems to have fundamentally changed – Caroline Gray, lecturer at Aston University

In Madrid, the main opposition Socialists are reluctant to share responsibility for any plan to push out the Catalan leadership after police were portrayed as bungling Sunday's crackdown.

Puigdemont has promised a formal announcement to regional lawmakers of the referendum results, triggering a 48-hour countdown to a unilateral declaration of independence.

He told the BBC in an interview his government would act at the end of this week or the beginning of next.