Spanish region Catalonia would be automatically excluded from the euro zone and its banks would lose access to European Central Bank facilities if it becomes independent from the rest of country, the head of the Bank of Spain said on Monday.
Catalan independence would mean euro zone exit - Bank of Spain
"The stimulus programme is working very well and, right now, there is no reason to change it. As long as the inflation target of near 2 percent is not reached, the programme will continue," he said.
The warning came as polls suggested Catalan separatists were on track to win a small majority of seats in the Catalan Parliament at a regional election on Sunday, the minimum needed to launch a "road map" to secession within 18 months, according to Catalan President Artur Mas.
"The exit from the euro is automatic, the exit from the European Union is implied," Luis Maria Linde said during an event in Madrid.
Uncertainties and tensions over the election are affecting Catalan and Spanish banks, Linde said, echoing worries by major lenders which said on Friday a split with Catalonia would be a serious threat to financial stability in the region.
Scottish voters faced similar warnings of a possible exit from the whole EU if they chose independence in a referendum a year ago. That vote, and the initial strong showing by separatists followed by a decision to stay in the UK, was closely watched in Spain.
Linde said the ECB's monetary stimulus policy, which is expected to spend more than a trillion euros on bonds to counter a potentially deflationary spiral, was working and would continue until inflation in the bloc was nearer ECB targets.
On concerns surrounding the national election, due by the end of the year, Linde said he was not worried on who won as long as the new government continued to follow certain economic policies.
"It would be good to maintain some policies such as the fiscal adjustment or fiscal consolidation, so that public debt in relation to gross domestic product doesn't continue to rise," Linde said.
Spain's fight against one of the euro zone's highest public deficits has been key to regaining market confidence since soaring debt yields pushed the country close to requesting an sovereign bailout in 2012.
Alternative parties such as Syriza-style, left-wing Podemos and business-friendly Ciudadanos have gained popularity as voters rally against Brussels-lead austerity policies and unpopular pro-banking measures after a prolonged slump.
Linde also said that normalisation of monetary policies in the United States and Britain had been delayed due to a global growth slowdown, which had been worse than expected.
"The (U.S. Federal Reserve) wanted to begin a process of rate rises, given lower unemployment, but inflation, far from reference levels, and a weak external environment has made that difficult," he said.
JOIN OUR PULSE COMMUNITY!
Eyewitness? Submit your stories now via social or:
Email: eyewitness@pulse.ng