The pain in Spain falls mainly in Catalonia as the Madrid Government today approved a law to make it easier for companies to relocate their corporate headquarters.
This tailored decree law now will be used by the directors of CaixaBank, the main economic institution of Catalonia which also controls Portugal's BPI, to approve the transfer of their head office from the Catalan capital of Barcelona to Valência, without having to convene an inconvenient general meeting of shareholders.
Another big business, Gas Natural, is expected to follow suit, followed by other banking institutions such as Sabadell that will go to Alicante, all delighting the Prime Minister of Spain, Mariano Rajoy, whose political persecution of the region now can be matched by this law, rushed through parliament and deliberately designed to encourage large businesses to move out of a region that is striving for independence, or at least recognition and accommodation.
"The rule clarifies which are the competent bodies to approve the change of registered office of the companies that so decide. Procedures are facilitated so that the board of directors is the competent entity to approve it, unless there is an express statement to the contrary by the articles of association of the company," explained the Minister of Economy, Luis de Guindos, quoted by El País.
The minister claimed that the new law results from "various businesses which are having difficulties in the normal functioning of their activities in a part of the national territory" - clearly referring to Catalonia which has been the scene of State-sponsored violence, roadblocks and strikes after last Sunday’s attempt at a peaceful referendum on independence - a referendum declared illegal by Spain’s Constitutional Court.
Banco Sabadell already has announced that it will move its headquarters from Barcelona to Alicante, due to the possibility of Catalonia’s regional government making a unilateral declaration of independence in the coming days.
According to El País, Gas Natural also is to hold an extraordinary meeting on Friday afternoon to decide whether to move its headquarters out of Catalonia.
The European Central Bank gave a 'no comment' on the consequences of Catalonia's potential independence, when asked by Bloomberg, but a source said that the ECB was monitoring the situation in Catalonia.
In 2015, the Governor of the Bank of Spain, Luis Marie Linde commented that if Calonia left Spain, the "exit from the euro is automatic, the exit form the European Union is implicit," with Catalan banks losing access to the ECB's credit lines, cutting the umbilical cord to the financial system and the euro zone.
Fitch has cotened on and has declared the region as having "unprecedented levels of uncertainty" an reducing Catalonia's rating to negative.
The ratings agency explained that its review is subject to European regulation and has to respect a timetable, but given the situation in Catalonia, it was necessary to anticipate the measure.
Fitch explains that the revision was due to "the political tension between the central government and Catalonia, which is expected to worsen in the short-term." The US agency believes that the tension could lead to "unexpected events, including the interruption of the sending of State funds from the Autonomous Liquidity Fund, to Catalonia," and a worst case scenario that Catalonia's regional autonomy is suspended.
Fitch expects to review the region's negative outlook over the next six months, "depending on developments in the relationship between Catalonia and the central government."
If Madrid cuts financial support to Catalonia, the agency warns, "the rating may go down several levels."
Meanwhile, senior officers from Catalonia’s regional police force, including its chief, Josep-Lluis Trapero, have appeared in Spain’s National Court in Madrid.
They are being investigated for sedition* following the weekend demonstrations in Barcelona in which members of the Guardia Civil force were blocked in their building and their cars damaged.
These acts carry a potential sentence of 15-years in prison. The court has the power to place all the suspects in custody pending trial. Also under investigation are Jordi Sanchez, head of the Catalan National Assembly (ANC), and Jordi Cuixart, head of Omnium Cultural.
Legally, Rajoy is in the right but has been politically out-foxed and now is viewed the villain of the piece. The accommodation made for the Basque region, after decades of violence, should act as a template for dealing with Catalonia.
Negotiations led by Rajoy could win him support from within Catalonia and in the rest of Spain but he prefers to play the hard line, immutable leader - much to his detriment.
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* 'Sedition' - conduct or speech inciting people to rebel against the authority of a state or monarch.