What now?

The markets are already registering the fallout from Sunday's shambolic and violent independence referendum in Catalonia. Shortly before 11am on Wednesday, Spain's benchmark index, the Ibex 35, dropped below 10,000 points for the first time since the spring of 2015. Among the companies hardest hit were Catalonia's two largest banks, with Caixabank's shares falling by 6.8% and Sabadell's by 6.3%. Bankia and BBVA also lost 4.2% and 3.6% of their share price respectively. But according to Spain's sanguine economy minister, Luis de Guindos, everything is fine: “Catalan and Spanish banks are solid and their clients have nothing to fear”, he said on Wednesday.

Naturally, de Guindos is not going to come out and say something like: “We expect widespread fiscal chaos to result from Sunday's vote and clients of big Catalan banks should be worried.” It's his job to say that everything is going to be OK, even as Spain enters unchartered political territory. Clearly, the economy minister is trying to pretend that nothing really happened last Sunday - a tactic that was also adapted by Mariano Rajoy in the referendum's immediate aftermath. Instead of declaring the result constitutionally invalid (which it is) Rajoy maintained that “there [was not] a referendum on self-determination in Catalonia”. We all imagined the televised scenes of state-funded aggression against peaceful voters last weekend, then.

It's true that the markets were relatively tranquil before the independence referendum was held - a fact which analysts attributed to the unlikelihood of secession actually happening, even if a “yes” vote was returned. Yet in the week leading up to the plebiscite, as Rajoy and separatist Catalan president Carles Puigdemont became increasingly hostile towards one another, the possibility of reasoned political dialogue between Madrid and Barcelona slumped to zero.

The business world started to get nervous about the standoff between Spain's two leading cities, with the Financial Times reporting that some Spanish and international companies were ready to exit Catalonia if independence was voted for. Indeed, Caixabank and Sabadell - the Catalan banking giants that were particularly hard hit by Sunday's plebiscite - had long been concerned about the prospect of their region splitting from Spain: in late 2015, they warned that “all banks with a presence in Catalonia would face serious problems of legal uncertainty” if secession occurred. At the end of last week they announced their change of address.

Caixabank in fact supported de Guindos' assurance this week that its clients have nothing to worry about, even though Puigdemont has promised to kick-start secession proceedings next week. It's understandable that the bank wants to reassure its customers that their deposits and investments are safe; but its executives decided to move La Caixa's Barcelona headquarters elsewhere to maintain stability in the wake of the events last week. Indeed, after the unprecedented events of October 1st and the questions they raise, such discussions will now be occurring in boardrooms all over Spain.