Moody’s estimates that Catalonia will remain part of Spain; half a million people on the streets of Barcelona

The credit rating agency Moody’s sent a notice to investors on Monday estimating that the Spanish province of Catalonia will gain greater autonomy but will not secede from Spain despite the referendum announced for October 1.

“Our assessment is that Catalonia will continue to be part of Spain. There are many obstacles to achieving independence, including the firm opposition of the central government and legal and constitutional measures, as well as polls indicating that support for secession is below the necessary majority,” Moody’s stated in its notice.

The Spanish Constitutional Court banned the holding of the referendum after the Catalan parliament passed a law for its organization. Despite this, the Catalan government continues preparations for organizing the referendum, which has strained relations between Barcelona and Madrid.

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“If the referendum proceeds and the advocates of independence win, the lack of legal basis and absence of necessary participation will likely undermine its legitimacy,” said Moody’s analysts Sarah Carlson and Marisol Blázquez.

The self-determination referendum law, which was confirmed by the Catalan parliament last week, does not specify what percentage of residents must participate for the vote to be valid. The law stipulates that Catalonia’s independence will be confirmed if the number of votes in favor of independence exceeds those against it.

The referendum is scheduled to take place in 20 days, and if the supporters of secession win, the Catalan government intends to declare the Republic of Catalonia.

The right-center Spanish government of Prime Minister Mariano Rajoy has initiated a series of legal measures aimed at preventing the holding of the referendum. The Spanish Constitutional Court stated that the referendum is unconstitutional and warned public officials about the possible consequences of participating in the organization of the residents’ vote.

Fitch believes that despite the high tensions between Madrid and Barcelona, which temporarily prevent reaching an agreement on greater autonomy for the region in northeastern Spain, there is a realistic option for such an agreement.

“Given the pressure from advocates of independence, it is likely that the central government will transfer some powers to the regional government. Our opinion is that as part of finding a solution, the Catalan government will receive what has been most insisted upon in Catalonia, particularly in the area of fiscal policy and regional financing, which would be in accordance with the constitution,” Moody’s stated.

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“Spain is already one of the most decentralized countries in the European Union in terms of public sector spending, although in terms of tax collection authority, it is among the most centralized countries,” the agency added.

Fitch notes that since 2012, Catalonia has received 68.5 billion euros from the central government through various mechanisms, particularly through the autonomous liquidity fund (FLA) created that year.

The escalation of tensions could jeopardize Catalonia’s debt credit rating, as well as Spain’s credit rating.

Catalonia is home to 7.5 million of Spain’s total 46.5 million residents and contributes one-fifth to the country’s GDP, making it one of the wealthiest regions.

Around 500,000 Catalans on the streets of Barcelona

About 500,000 residents took to the streets of Barcelona on Monday celebrating Catalonia’s national day and demanding independence for the northeastern province from Spain.

“We will vote” and “independence” echoed through the city center as thousands marched carrying Catalan flags marked with the symbol of independence. A large banner read “the referendum is democracy.”

The celebration culminated at 5:14 PM in memory of the year 1714 when Barcelona fell during the international War of Spanish Succession that occurred after the death of the last Spanish king from the Habsburg family. In the province with 7.5 million residents, this day is commemorated every September 11, but this year it has additional significance as the Catalan government has called on citizens to participate in the independence referendum in 20 days.

The Spanish Constitutional Court declared the referendum illegal, and the right-center Spanish government in Madrid stated that public officials who participate in the attempt to organize it will be legally prosecuted.

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The National Assembly of Catalonia, the body that organized the celebration, announced that 1,800 buses full of independence supporters arrived in Barcelona to demonstrate the “peaceful” and “democratic” nature of the gathering.

Barcelona’s mayor, Ada Colau, stated that she will do everything possible to allow residents to vote, even though the Constitutional Court has banned the vote scheduled for October 1. She did not specify how she intends to facilitate voting but emphasized that she would not endanger the city government or public officials working there.

“We will do everything possible to ensure that the (referendum) on October 1 can be realized as normally and democratically as possible and to guarantee the right to democratic participation for all citizens,” the mayor stated. “Therefore, we are completely at your disposal,” she added.

Many of the 947 Catalan municipal administrations have stated that they will provide the necessary infrastructure for holding the referendum, while Colau has requested assurances from the Catalan government that its public officials will not face legal proceedings or job loss.

Her decision was among the most anticipated as approximately one-fifth of potential polling places are located in the Catalan capital, making the provision of voting space in Barcelona crucial for holding the referendum.

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Among the administrations opposing the referendum are areas around Barcelona where the Spanish Socialist Workers’ Party (PSOE) predominantly governs. The left-center PSOE and the ruling People’s Party of the right-center have alternated in power in Spain for the last four decades.

During a gathering of the People’s Party over the weekend in the city of Zaragoza, in the province of Aragón bordering Catalonia, Spanish Prime Minister Mariano Rajoy stated that the referendum in Catalonia will not take place. Spanish Justice Minister Rafael Catalá warned of the consequences of participating in organizing the referendum.

“Anyone who decides to provide space for the vote knows they are committing a criminal act and will take responsibility for it,” Catalá told reporters in the capital of the province of Aragón. Catalan President Carles Puigdemont told reporters in Barcelona that he is not afraid of arrest “because it will not happen” after once again calling on residents to go to the polls on October 1.

Three of the four largest parties in the Spanish parliament – the People’s Party, PSOE, and the center party Citizens – oppose changing the constitution to allow a referendum in Catalonia.