Crisis talks will be held in Spain on Wednesday after Catalan leaders suspended a declaration of independence on Tuesday in favor of dialogue with Madrid.
Prime Minister Mariano Rajoy will chair an emergency cabinet meeting a day after Catalan leader Carles Puigdemont signed a suspended declaration of independence and called for negotiations with Madrid.
Puigdemont said on Tuesday that he had accepted "the mandate of the people for Cataloniato become an independent republic" following a banned referendum earlier this month.
In a much-anticipated speech to the Catalan parliament, ringed by thousands of protesters and hundreds of armed police, Puigdemont made only a symbolic declaration on Tuesday, claiming a mandate to launch secession but suspending any formal steps to that end.
“We aren’t criminals, nor crazy, nor coup plotters, nor abducted,” he said. “We are normal people who ask to be allowed to vote and who have been ready for all the dialogue necessary to achieve it in an agreed way.
“I assume ... the mandate that Catalonia become an independent state in the form of a republic,” he said to prolonged applause.
“I propose suspending the effects of the declaration of independence to undertake talks in the coming weeks without which it is not possible to reach an agreed solution.”
Spain's political establishment rounded on Puigdemont following the declaration, and support among separatists in Catalonia was mixed.
Deputy prime minister Soraya Saenz de Santamaria told reporters shortly after the signing that Puigdemont was "a person who doesn't know where he is, where he's going or with whom he wants to go".
But the speech pleased financial markets, boosting the euro on hopes that his gesture would mark a de-escalation of Spain’s worst political crisis since an attempted military coup in 1981.
Rajoy has vowed to use everything in his power to prevent independence and has refused to rule out imposing direct rule over the semi-autonomous region -- an unprecedented move many fear could lead to unrest.
At stake is the future of a region of 7.5 million people, one of Spain's economic powerhouses, whose drive to break away has raised concern for stability in the European Union.
In Brussels, there was a sense of relief that the euro zone’s fourth-largest economy now had at least bought some time to deal with a crisis that was still far from over.
European Council President Donald Tusk had urged Puigdemont not to proclaim independence. And French President Emmanuel Macron rejected Puigdemont’s call for European Union mediation, saying he was confident Madrid could handle the situation.
One EU official said Puigdemont “seems to have listened to advice not to do something irreversible”.
Spain and Catalonia now enter into the unknown, as Madrid has repeatedly said independence is not up for discussion.
Marc Cazes, a student in Barcelona, said: "I did not expect independence to be declared today because of all the processes that the government of Spain has begun, both with police actions and with threats."
Catalonia pressed ahead with an independence referendum on October 1 that the central government said breached Spain's constitution.
The Catalan government said 90 percent of those who voted backed independence but turnout was only 43 percent as many opponents of independence stayed at home.
Demands for independence in Catalonia, which has its own language and cultural traditions, date back centuries.
But a 2010 move by Spain's Constitutional Court to water down a statute that gave Catalonia additional powers, combined with a deep economic meltdown in Spain, sparked a surge in support for independence.