BARCELONA: Separatists looked set on Friday to regain power in Catalonia after voters rejected Spanish Prime Minister Mariano Rajoy’s attempt to neuter its independence movement, instead re-igniting the country’s biggest political crisis in decades.

Spanish markets recoiled at a surprise result that is also a setback for the European Union, which must now brace for more secessionist noise as it grapples with the disruption of Brexit and simmering east European discontent.

By risking a parliamentary election in the region, Rajoy appears to have made the same mistake that leaders including Greece’s Alexis Tsipras, Britain’s David Cameron and Italy’s Matteo Renzi have made in recent years: betting that voters would resolve their troublesome domestic conundrums for them.

With well over 99 per cent of votes from Thursday’s election counted, separatist parties had secured a slim majority.

Spain’s stock market fell around one per cent and the country’s borrowing costs rose as investors bet the ensuing ramp-up in tensions with its richest region will hurt the euro zone’s fourth-largest economy.

Rajoy ruled out calling national elections over events that have weakened his authority, while both he and exiled separatist leader Carles Puigdemont said they were open for dialogue. But they offered no details and such calls in the past have failed to yield any solution.

After several strained months that saw secessionists organise an illegal referendum on Oct 1, the election result has done nothing to resolve the standoff either.

The secessionists kept a majority, but it was reduced and they may have difficulty forming a government; and support for unionist party Ciudadanos has surged, but not enough to catapult them into power.

“The divisions are huge. It will take time to mend them and that should be the priority for all political actors, reconciliation within the remit of the law,” Rajoy told a news conference at the government’s Moncloa headquarters.

With Catalonia accounting for a fifth of its economy, Spain had already trimmed growth forecasts for 2018, and the prospect of prolonged uncertainty worries business leaders.

“More companies leaving, less economic activity there — and worse for everyone,” said the chief executive of a major listed Spanish company, speaking on condition of anonymity because of the tense climate of the independence debate.

More than 3,100 firms have shifted their headquarters out of the region since October’s referendum.

Rajoy, who called the election after sacking the previous secessionist government, had hoped to mobilise hitherto quiescent supporters of union with Spain and deal separatism a decisive blow.

Instead, his own party performed miserably, and the result raises the question of a return to power for Puigdemont, who campaigned from self-imposed exile in Brussels after Rajoy deposed him as Catalan president.

“Catalonia is back to square one,” said Marco Protopapa, an analyst at JP Morgan, forecasting that tensions would quickly return between Madrid and an “emboldened pro-independence camp eager to exploit the tactical advantage of a favourable election outcome”.

Published in Dawn, December 23rd, 2017