Spain: Economy dominated by the politics - BBH

A small window for a de-escalation of Spain's crisis closed largely it would seem due to the failure of vision and imagination, according to analysts at BBH. 

Key Quotes

“Puigdemont has played a weak hand poorly.  He fell victim to the secessionist sentiment he fomented.  Rajoy, leading a minority government, seemed to thrive in the application of power, without mercy.  Puigdemont did not prepare Catalonia for independence and failed to secure support from a clear majority of Catalans, let alone a foreign power.  Although candidate Trump encouraged the UK to leave the EU, the US quickly endorsed the territorial integrity of its NATO partner.”

“Parliament has authorized invoking Article 155 that strips Catalonia of its autonomy.  A new regional election is scheduled for early December.  Even if the party representation in parliament is not significantly changed, it will likely move away from secessionist efforts.  Spain can still move in a more federal direction.”

“Market Impact: Spanish 10-year bond yield rose more than five basis points before the weekend, but at 1.57%, it is more than 20 bp below the October 5 high.  If anything, political crisis will serve as a mild economic headwind.”