Rajoy Says He Won’t Negotiate Sovereignty With Catalans

Prime Minister Mariano Rajoy said he won’t engage in any talks with Catalan President Artur Mas that could result in a breakup of Spain.

“You can’t ask the prime minister to negotiate over national sovereignty,” Rajoy said at a press conference in Madrid today. “Independence is bad for the Catalans and it’s bad for the rest of Spain.”

Spain is facing the biggest challenge to its territorial integrity since the civil war in the 1930s as support for a breakaway builds in Catalonia, the country’s industrial heartland. Thwarted in his bid for hold a legal, binding referendum, Mas is threatening to call a regional election instead and make secession the only issue of the campaign.

The Catalans conducted an informal vote on Nov. 9 in defiance of orders from the Constitutional Court and the public prosecutor. Vox, a minority party including former People’s Party officials who’ve called for the government to take a tougher line over Catalonia, filed a lawsuit with the Supreme Court yesterday accusing Rajoy of neglecting his duty for not shutting down the vote.

Rajoy said today that his response to the vote had been “proportional” and that firmer action would have risked provoking a reaction from separatists.

More than 2.3 million Catalans, 37 percent of the electorate, took part in the consultation and 81 percent backed a split from Spain.

Catalonia is home to 7.4 million people in the northeast corner of the Iberian peninsula. It has an annual output of 193 billion euros ($241 billion). That’s about the same as Finland or Scotland, where in September voters opted to remain part of the U.K. in an independence referendum that was allowed by U.K. Prime Minister David Cameron.

Investors were demanding an extra 164 basis points of yield at 1:13 p.m. today in Madrid to hold Catalan bonds due 2018 instead of similarly dated Spanish debt, according to data compiled by Bloomberg. That compares with 91 basis points in June, the narrowest spread in the past 12 months.

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