SPAIN’s stock market came under pressure on Monday after Catalans voted in favour of independence, intensifying a political crisis in one of the eurozone’s best functioning economies.
Spain’s government borrowing costs also surged, while the euro drifted lower against the dollar as investors weighed fallout from the violent police crackdown on Catalans on Sunday.
This morning local officials announced 90 per cent of those who voted in the contested referendum on Sunday, which Madrid deemed illegal, called for independence from Spain.
Around 2.26 million people took part in the ballot, representing around 42.3 per cent of Catalonia’s 5.34 million voters.
The northeastern region of Spain accounts for a fifth of the country’s economy and its tax returns are crucial to the national budget.
Many analysts expect the crisis to be resolved with more autonomy, but some said the uncertainty could impact the Spanish government’s economic growth and soil Prime Minister Mariano Rajoy’s reputation.
Federico Santi, an analyst at Eurasia Group in London, said the vote was “probably the worst outcome for Madrid”.
He added: “There was violence but they didn't stop the vote either and public opinion in Catalonia is more polarised.
"It is clear that risks to government stability are increasing."
Spain’s mainstream political parties have largely backed Mr Rajoy’s opposition to the Catalonia independence referendum, but the prime minister faces criticism over his handling of the issue.
Nearly 850 people were injured when police clashed with independence protesters on Sunday as officers in riot gear closed polling stations and used batons to stop voters from reaching the ballot boxes.
Meanwhile, Spanish authorities denied accusations of police brutality and claimed that no referendum had taken place.
Following the vote, Spanish government bond yields rose 7 basis points to 1.68 per cent, while the cost of insuring exposure to Spanish debt via credit default swaps rose to a near one-month high.
S&P Global affirmed Spain’s BBB+ credit rating on Friday, but said tensions between the central government and Catalan authorities could impact business confidence and investment.
Spain’s benchmark IBEX equity index dropped around 1.3 per cent as banks Banco de Sabadell and Caixabank, both based in Catalonia, dropped 5.3 per cent and 4.4 per cent respectively.