Catalonia's independence movement is Spain's most dire constitutional crisis since the restoration of democracy in the late 1970's and the attempted coup in 1981. It threatens not just the unity of the Spanish state, but the integrity of the European Union and the euro.
If Catalonia secedes will the EU give its tacit approval by permitting it to retain membership in the union and keep the euro as its currency?
To judge by market prices in the euro there is no crisis. Since Friday's close at 1.1812 the euro has lost barely 50 points versus the dollar (1.1756, 9:49 am Eastern). Does Brussels and the EU think this dispute will be settled by negotiation? Has as the speed of the escalation taken everyone by surprise? Or, as with the Greek debt, has the patent been ignored until the explosion is imminent?
Whatever the reason, the euro will not be long immune.
Chief Market Strategist
WorldWideMarkets Online Trading