IMF, Spain warn on economic growth as Catalan crisis persists

The International Monetary Fund and the Spanish government warned Friday the country's economic growth could be dealt a blow if Catalonia's drive to break away persists, just as the Catalan leader's separatist allies pressed him to go ahead with independence.

The central government has given Carles Puigdemont until next Thursday to abandon Catalonia's push for secession, failing which it may trigger unprecedented constitutional steps that could see Madrid take control of the semi-autonomous region.

Puigdemont's separatist allies pressed him Friday to defy Madrid and declare independence.

But with dozens of companies having already moved their legal headquarters from Catalonia, concerns are rising that growth in the region could take a hit, and by extension that of Spain as a whole.

In Washington, IMF Europe Director Poul Thomsen said: "If there was prolonged uncertainty, that could weigh on growth, and obviously we want to avoid that."

Spain's deputy prime minister Soraya Saenz de Santamaria warned that if "there is no quick solution, we see ourselves having to lower economic forecasts for 2018".

- 'Domino effect' -

She (Munich: SOQ.MU - news) accused Puigdemont of "seriously damaging Catalonia's economic stability" as uncertainty over the fate of the region of 7.5 million people damages business confidence.

The eurozone's fourth largest economy said in July it expected growth of 2.6 percent next year.

Spain's Association of Registrars said Friday that 540 firms had sought to relocate their legal addresses from Catalonia from October 2-11.

Ratings agency Standard (Other OTC: SNDH - news) and Poor's said the region's economy risked sliding into recession if the crisis dragged on.

European Commission President Jean-Claude Juncker said Friday he was against Catalan independence because it could trigger a separatist domino effect in the EU.

"I wouldn't like to have a European Union which consists of 98 states in 15 years' time," he said during a speech in Luxembourg. "It's already relatively difficult at 28, no easier at 27 (after Britain leaves), but at 98, that seems impossible."

The Mobile World Congress, the phone industry's largest annual trade fair held every year in Barcelona, said it would hold its 2018 in February as planned, after media reports suggested it was considering delaying.

A spokeswoman told AFP "we are continuing to monitor developments in Spain and Catalonia and assess any potential impact."

Meanwhile Spain's CEOE business lobby group said this week that Catalonia was already "seriously affected" by the crisis.

Ricardo Mur, vice-president of the Aragon Business Confederation said the region, which borders Catalonia, had seen a surge in activity.

"Industrial estates are almost full due to the transfer of Catalan businesses," he told AFP.

- Pressure to break away -

But Puigdemont is also under pressure from his separatist allies who feel that any decision to back down would infuriate hundreds of thousands of Catalans who voted to split from Spain in a banned referendum.

On Friday, the far-left CUP party, an ally of his coalition government, said in an open letter that "only by proclaiming a republic will we be able to respect what the majority expressed in the polls."

The referendum took place on October 1 despite a court ban that ruled it unconstitutional, and regional authorities say 90 percent chose to split from Spain in a vote marred by police violence.

Turnout was 43 percent, they say, but the figures are impossible to verify as the referendum was not held according to official electoral standards.

Adding to pressure, Catalonia is deeply divided over independence, and those who want to stay in Spain are increasingly making their voices heard, having staged two mass rallies in just five days.

Puigdemont had pledged to declare independence if the "yes" vote won, but on Tuesday he gave an ambiguous statement.

Saying he accepted a mandate for "Catalonia to become an independent state," he immediately suspended the declaration, calling for more time for talks with Madrid.

Prime Minister Mariano Rajoy retorted that Puigdemont had until next Monday to clarify whether or not he would press ahead with secession and then until next Thursday to reconsider, otherwise Madrid would act. He rejected any form of mediation.

Apart from the CUP's open letter, the Catalan National Assembly, an influential pro-independence association whose followers are ready to take to the streets, also called on him to lift his suspension of the independence declaration.

Source: AFP