Balance of Power: Yet Another Crisis for Europe

It’s time to pay attention to Catalonia. The rest of Europe certainly is — anxiously.

Decades-long tensions between Spain’s biggest regional economy and Madrid are coming to a head in Sunday’s independence referendum that the central government and top court have declared unconstitutional.

While independence for Catalonia remains a distant prospect, despite its distinct cultural and linguistic heritage, the dispute is destabilizing the Spanish government — Prime Minister Mariano Rajoy pulled his 2018 budget bill last week after the Basque nationalists, who he needs for a majority, objected to his handling of Catalonia.

Extremists within the Catalan camp have plans to disrupt the economy with strike action if they don’t get their way. Rajoy has stationed thousands of Guardia Civil police from outside the region in cruise ships in the Port of Barcelona to maintain order come what may.

This is all shaping up to be a major headache for EU leaders who are trying to draw a line under a decade of upheaval and focus on their plans for the future. The last thing they need is a political crisis in the fourth-largest economy.

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Global Headlines

AIG out of penalty box ? | Nine years after AIG’s near demise prompted frantic meetings in Washington as politicians tried to forestall economic disaster, Jessie Hamilton reports that regulators are planning to release the insurer from the special government oversight ordered after its key role in the financial crisis. That’s said to be the topic of a last-minute Financial Stability Oversight Council meeting today, with Federal Reserve Chair Janet Yellen viewed as the likely deciding vote.

Private email probe | The White House has begun an internal review of staff use of private email for government business, the strongest indication so far Donald Trump’s aides may have engaged in the sort of behavior that was central to their attacks on Hillary Clinton during last year’s election campaign. The president dubbed Clinton “Crooked Hillary” over her use of private email as Secretary of State and encouraged supporters who chanted “lock her up” at his rallies.

May’s baffling business attitude | On the same day Theresa May gave a talk about the need for good governance she defended Uber against criticism it lacked corporate responsibility. Her political weakness and need to be seen protecting jobs help explain her conflicting statements, Robert Hutton reports. She also has to demonstrate she’s in control at the annual Conservative conference this weekend – especially with a poll today showing most party members want her out by the next election.

Rebel coal | Russia is helping Ukrainian separatists sell coal to evade an economic blockade imposed by Kiev, Stepan Kravchenko and Anna Andrianova exclusively report. The shipments of as much as 1 million tons a month circumvent U.S and EU sanctions and confirm Ukrainian accusations that Vladimir Putin is fostering ties with the insurgents, even though he denies planning a Crimea-style annexation of their breakaway region.

Holiday fireworks? | South Koreans hit the road for an annual 10-day autumn break with the apprehension that Kim Jong Un may disrupt festivities with another missile launch or nuclear test. The period’s end coincides with the Oct. 10 anniversary of the founding of North Korea’s ruling party, an event marked by speeches, parades and displays of military might.

And finally... For all the talk of Angela Merkel’s electoral setback leaving her beholden to a new political reality in Germany, she and French President Emmanuel Macron looked pretty relaxed in Estonia at a European Union summit. The two made a show of being Europe’s new power couple after the chancellor welcomed Macron’s EU reform plans, while saying that Germany has its own elements to add. If we’ve learned one thing about Merkel over the years, it’s never write her off.

Photo of Merkel and Macron posted on the chancellor’s Instagram account.

— With assistance by Kathleen Hunter, and Alan Crawford

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