Catalonia's call for independence creates uncertainty in European markets

BARCELONA, Spain, Oct. 6 (UPI) -- As the local government of Catalonia prepares to hold an independence referendum, outright ignorning Madrid's attempt to criminalize the region's strives for independence, local and European markets face uncertainty as the influence and stability of the Spanish government is called into public question.

On Monday, Madrid asked local courts to declare Catalonia's independence referendum unlawful, but Catalan leader Artur Mas, backed by two-thirds of the local government in Catalonia, formed a referendum commission on Thursday to oversee the intended Nov. 9 vote.

Regardless of the outcome, businesses and investors are already treating the Spanish economy with caution bordering on pessimism, as the news of Catalonia's resolve for independence pushed the gap between Spanish and German bond yields to their widest since Scotland's failed independence referendum gave momentum to the free Catalan movement.

"Investors are pricing the risk of political instability in Catalonia," Francesco Marani of Auriga Global Investors SA in Madrid warned Bloomberg. Marani is a fixed-income trader who specializes in government and regional debt.

"The independence issue has already been hurting the Spanish economy, and it's not over."