Spanish PM faces crisis after violent secession vote

The streets of Barcelona, the Catalan capital, were quiet on Monday, but newspaper editorials said the referendum, in which Catalan officials said 90 percent of voters had chosen to leave Spain, had set the stage for a decisive clash between Madrid and the region.

"It could all get worse," the moderate Catalan newspaper La Vanguardia said in an editorial after Spanish police used batons and rubber bullets to disrupt the vote,

which had been declared illegal by Madrid. Catalan officials said 840 people had been injured.

"We're entering a phase of strikes and street protests ... and with more movement, more repression."

Catalonia is a centre of industry and tourism accounting for a fifth of Spain's economy, a production base for major multi-nationals from Volkswagen to Nestle, and home to Europe's fastest-growing sea port. Although it already has extensive autonomy, its tax revenues are crucial to Spain's state budget.

Catalonia's regional leader, Carles Puigdemont, declared on Sunday that voters had earned the right to independence and said he would present the results to the region's parliament, which then had the power to move a motion of independence.

The referendum has no legal status; it has been blocked by the Madrid government and Constitutional Court for being at odds with the 1978 constitution, which states that Spain cannot be broken up, and there is little sign of support for Catalan independence in any other part of Spain.

Puigdemont called an emergency meeting of the Catalan regional government. In Madrid, Rajoy planned to coordinate next steps in a meeting with Pedro Sanchez, leader of the opposition Socialists.

Puigdemont's comments threw down a challenge to Rajoy, who has the constitutional power to sack the regional

government and put Catalonia under central control pending fresh elections.

That would raise tensions further in the region of 7.5 million people, a former principality with its own language and culture, and potentially hurt the resurgent Spanish economy.

The euro lost a third of a U.S. cent after the vote, though it later recovered ground. By 0800 GMT, Spain's IBEX stock index was down 0.6 percent, easing back from steeper losses at the opening; the main losers included the Catalan banks Sabadell and Caixabank.

Yields on Spain's 10-year benchmark rose initially but also fell back through the morning.

Major investment banks expect the crisis eventually to be resolved with an offer from Rajoy of more autonomy.

"We believe the risk of larger confrontations in the near-term is rising, involving at the extreme wide disruptions with potential severe economic costs," Citibank said in a note on Monday, It did not, though, see this as the most likely outcome. Catalan trade unions have called a general strike for Tuesday.

Rajoy offered to call all-party political talks on Sunday to "reflect on the future" of Catalonia, but maintained his outright rejection of independence as an option.

The Madrid government's attempts to prevent Sunday's referendum through the use of police force brought criticism from fellow members of the European Union, including Britain and Belgium. But there has been silence from the EU itself.

At home, the crisis does not appear to have endangered support for Rajoy's minority national government, with mainstream parties largely backing his opposition to Catalan independence.

There was, however, criticism of his handling of the issue. The anti-independence newspaper El Pais wrote in an editorial

of Rajoy's "absolute inability to manage the crisis since the very beginning".

Ordinary Spaniards tried to digest the tumultuous scenes that had played out across cities in Catalonia on Sunday and were splashed across front pages of newspapers.

The Catalan government said 2.26 million people had cast ballots on Sunday, a turnout of about 42 percent, despite the crackdown.