Catalan uncertainty paralysing regional investment, Spain's economy minister says

  • World
  • Thursday, 05 Oct 2017

Spain's Economy Minister Luis de Guindos speaks during an interview with Reuters at Economy Ministry in Madrid, Spain October 5, 2017. REUTERS/Sergio Perez

MADRID (Reuters) - Investment projects in the northeastern region of Catalonia have been paralysed and the sale of a stake in state-run lender Bankia put on hold because of the current political uncertainty, Spain's economy minister said on Thursday.

Catalonia's parliament is set to declare independence on Monday after going ahead with a banned referendum on Oct.1, while heavy-handed tactics employed by Spanish police trying to stop the ballot have been widely criticised.

"This is generating uncertainty that is paralysing all investment projects in Catalonia," Economy Minister Luis de Guindos told Reuters in an interview.

"I'm convinced that, right now, not one international or national investor will take part in a new investment project until this is cleared up."

Catalonia is a centre of industry and tourism that accounts for one-fifth of Spain's economy. It is a production base for major multi-nationals from Volkswagen to Nestle and home to Europe’s fastest-growing sea port.

On Thursday, Spain's fifth-largest bank, Sabadell , said it was considering whether to shift its headquarters away from Catalonia in the first major sign that the wealthy region's push for independence from Spain could scare away big business.

Caixabank , Spain's third largest lender by market capitalisation, is also considering moving its legal base outside Catalonia, a source with knowledge of the situation said. A spokesman for the bank said no decision had been taken on a move.

Tensions between Madrid and Barcelona have intensified since the poll, which was overwhelmingly in favour of independence but which nearly 60 percent of Catalan voters boycotted.

Catalan President Carles Puigdemont has said he favours mediation to find a way out of the crisis but that Spain's central government had rejected this. Prime Minister Mariano Rajoy's government has meanwhile called on Catalonia to "return to the path of law" before any negotiations.

"They know very well that independence, which isn't going to happen, would have very negative consequences," de Guindos said.

"It won't happen because the Spanish government won't let it happen. It's illegal."

De Guindos said the crisis had not yet had any effect on the wider Spanish economy, which he expects to grow more than 3 percent this year.

"For the moment, we've seen absolutely no economic impact. Preliminary indicators have been positive and show that the Spanish economy will continue to show strong growth," he said.

But worries over the situation were growing.

"We're starting to see an enormous concern due to the irresponsibility of the Catalan government, and alarm has been growing in the last days and hours," de Guindos said.

On the government's plans to sell a further stake in Bankia , de Guindos said Madrid would look at the placement again once the Catalan situation had been resolved.

De Guindos said in July that Spain would explore selling a further stake in Bankia some time after the summer, estimating the stake sale would be around 7 percent.

Spain's bailout fund had an advisor that was looking at different windows of opportunity, he said.

"Right now Catalonia is more important, but as I'm convinced the Catalan situation will change course and we will fix it, as soon as circumstances and prices improve, we will look at the possibilities (of a share sale)," he said.

(Reporting by Carlos Ruano; Writing by Paul Day; Editing by Catherine Evans)

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