Spanish Prime Minister Mariano Rajoy said Wednesday the central government aims to avoid further economic damage to the wealthy northeastern region of Catalonia due to its secession bid by exercising direct rule.
The Spanish government's plans to take unprecedented control of Catalonia's key affairs and halt that region's push for independence are "exceptional," the prime minister told parliament. But he hoped they would not last long.
The application of the Constitution's Article 155 was the "only possible" response to restore the region's legality, which Rajoy said has been liquidated by Catalan President Carles Puigdemont's push to secede.
Rajoy said the aim of Article 155 is not to suspend Catalonia's self-government but "to restore legality, boost the social co-existence that has been broken in Catalonia and tackle the economic consequences that its decisions are provoking."
More than one thousand firms have moved their legal headquarters out of Catalonia to avoid volatility caused by the independence bid, according to the companies registry, and the uncertainty has prompted Madrid to cut economic forecasts.
The Spanish economy minister, Luis de Guindos, also said Wednesday that an independent Catalonia would be forced out of the European Union and euro area which would directly hurt the regional economy.
"It'd be out of all the treaties, 70 percent of its gross domestic product would be subject to tariffs and physical borders. It would be out of the euro zone and the banks wouldn't have ECB coverage ... it would have to create its own currency which would be very depreciated," he told parliament.
Such a depreciation would lead to an estimated 25-30 percent drop in regional economic growth, elevated inflation and a doubling of unemployment rates, the minister added.
With Catalonia representing about one-fifth of Spain's annual gross domestic product, any slowdown in the region would affect the national economy.