Spain plans new elections in Catalonia to end independence bid - Opposition

The Spanish government has secured opposition support for dissolving Catalonia's parliament and holding new elections there in January in its bid to defuse the regional government's push for independence.

The Socialists, the main opposition, said on Friday they would back special measures to impose central rule on the region to thwart the secessionist-minded Catalan government and end a crisis that has unsettled the euro and hurt confidence in the euro zone's fourth-largest economy.

Prime Minister Mariano Rajoy, who wants opposition support to be able to present a united front in the crisis, has called an emergency cabinet meeting on Saturday to pave the way for Madrid establishing central control in the region.

The government on Friday would not confirm whether January elections formed a part of the package, with Rajoy saying only that the measures would be announced on Saturday.

However a government spokesman saw regional elections as likely. "The logical end to this process would be new elections established within the law," said government spokesman Inigo Mendez de Vigo at a weekly government press conference.

It will be the first time in Spain's four decades of democracy that Madrid has invoked the constitution to effectively sack a regional government and call new elections.

Rajoy wants as broad a consensus as possible before taking the step, which has raised the prospect of more large-scale protests in Catalonia, where pro-independence groups have been able to bring more than one million people out onto the streets.

Catalan leader Carles Puigdemont, a former journalist who is spearheading the secession campaign, has refused to renounce independence, citing an overwhelming vote in favour of secession at a referendum on Oct.1.

Catalan authorities said around 90 percent voted for independence though only 43 percent of voters participated. Opponents of secession mostly stayed home.

ECONOMIC CONFIDENCE HURT

Spanish courts have ruled the referendum unconstitutional, but Puigdemont says the result is binding and must be obeyed.

The prolonged standoff has caused hundreds of companies to move their headquarters outside Catalonia and prompted the Spanish government to cut its economic growth forecast. The region accounts for a fifth of Spain's economy.

Later on Friday, Moody's was scheduled to review Spain's sovereign rating, days after warning that political tensions between Madrid and the rebel leadership in Catalonia were credit-negative for the sovereign.

In a test of investor appetite for Spanish stocks, housebuilder Aedas dropped over 6 percent in its debut on the Madrid stock exchange on Friday, although it later regained losses to trade close to its listing price.

The uncertainty surrounding the future of the region has rattled the euro. On Thursday, European Union leaders including Germany's Angela Merkel and France's Emmanuel Macron offered their support for Rajoy at an EU leaders summit in Brussels.

The EU says it will not act as a mediator and the crisis is for Madrid and Barcelona to resolve.

After Rajoy announces the direct control measures on Saturday, Spain's upper house will have to approve them in a session which could take place on Oct. 27, a Senate spokeswoman said on Friday.

Actions could range from dismissing the Catalan parliament and government, to a softer approach of removing specific heads of department. Direct rule from Madrid would be temporary while regional elections are held to form a new government.

Madrid on Friday stressed the move was not about taking autonomy away from Catalonia but temporarily imposing direct rule until a government was elected that would act within the law.

Socialist politician Carmen Calvo, a member of cross-party talks to establish what measures the government should take to impose direct rule on Catalonia, told TVE state television that January regional elections would form part of the package.

She gave no further details apart from saying the Socialists wanted a light-touch intervention.