A unilateral declaration of independence from Catalonia would have "no practical implications" for Spanish credits, according to analysts at DBRS, who added that the role of swing voters in potential snap regional elections would be key.
Catalonia might be about to declare independence from Spain later Oct. 10, a move which would likely be met with the imposition of direct rule from Madrid.
"We would expect an immediate response from the central government," said Javier Rouillet, lead analyst for Spain at DBRS, on a conference call Tuesday afternoon in London.
"[The Spanish government] has several legal tools available. It has no practical implications. We are not concerned by this particular declaration, though tensions could escalate."
The rating agency kept Spain at 'AL (stable)' on October 6 following a scheduled review, saying "several strengths" underpin that rating, namely a large and diversified economy, strong job creation, growing domestic demand and deleveraging by the private sector.
DBRS's view is critical for fixed income investors since it is this 'AL (stable)' rating that makes Spanish government bonds subject to lower haircuts when used by banks to borrow from the European Central Bank, an important factor in demand for the instruments, and by extension the country's borrowing costs.
Moody's, S&P Global and Fitch all rate Spain lower, at Baa2, BBB+ and BBB+, respectively.
DBRS's "baseline scenario" for Catalonia is that it will remain part of Spain in the short to medium term.
However, Nicolas Fintzel, lead analyst for European sub-sovereigns, said the violence seen as police tried to impede voting Oct. 1 — when Catalonia went ahead with a referendum declared illegal by Madrid — had made the situation more unpredictable.
"We said before the vote that political noise would increase and the situation would remain fluid until the next regional parliament elections in November 2019," he said on the same conference call.
"There was an emotional reaction to the clashes between voters and police on Oct. 1 and the question is the impact this might have on swing voters if snap elections are called."
A number of Catalonia-based banks and companies have set out plans to move out of the region if independence is declared or the political uncertainty continues, which Fintzel said would partly counteract the effect of the police actions during the referendum for swing voters.
"We believe this rational response supports our base case of continuity for Spain in the short to medium term," he said.