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Everything You Need To Know About Spain And Catalonia

The conflict between Spain and Catalonia secessionists reached a boiling point this week when Spain declared it will be invoking Article 55 of its constitution for the first time, allowing Madrid to take over direct rule of the autonomous region.

Catalonia is the wealthly northeastern-most region in Spain. On Oct. 1, Catalan voters chose overwhelmingly to secede from Spain and make Catalonia an independent nation. Catalonia has its own distinct culture and even its own language, and its citizens are displeased with the fact that the region contributes far more in taxes than it receives in public spending.

Catalonia exports more goods than any other region in Spain, mostly to the rest of the European Union. However, Catalonia also carries more debt than any other autonomous region in Spain as well.

Spain’s central government declared the referendum vote illegal and will now be taking over control of the region. The government argues that Catalonia is in violation of the Spanish constitution, which declares the nation is indivisible. Madrid is also concerned with keeping the peace in Catalonia and punishing what it sees as a rogue regional government. Two Catalan politicians have already been arrested on suspicion of sedition.

Article 55 was added to the constitution in 1975 to be used in times of crisis, but will be invoked in Catalonia for the first time. The announcement came after Catalan president Carles Puigdemont threatened to officially declare independence if the central government opts not to negotiate.

Despite the political disruption, investors seem to be mostly shrugging off the Catalonia headlines. The iShares MSCI Spain Capped ETF (NYSE: EWP) was down just 0.3 percent on Thursday and the Guggenheim CurrencyShares Euro Trust (NYSE: FXE) is up 0.5 percent.

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