Basques Are Said to Seek Spain Budget Breakthrough in Catalonia

(Bloomberg) -- The Basque region’s ruling party is sending a delegation to Barcelona for talks with senior figures close to the Catalan separatists as it seeks to pave the way for a deal on the Spanish budget, according to people familiar with the matter.

Spain has been left without a budget this year after the divisions created by Catalonia’s push for independence last year left Prime Minister Mariano Rajoy without a majority in the national parliament. While the center-right Basque Nationalists helped Rajoy take office for a second term in 2016, they’ve refused to support his 2018 spending plans as long as the central government maintains its direct-rule in Catalonia.

With the damage to Spain’s reputation mounting, and the Catalans no closer to achieving their dreams of an independent republic, the Basques are hoping to extract concessions from both sides in order to break the budget deadlock, according to the people, who asked not to named discussing private negotiations. If they can pull it off, the Basques will release at least 188 millions euros ($230 million) in extra subsidies for their region that Rajoy included in the budget bill.

Envoys from the Basque Nationalist Party will meet Monday with politically connected business executives, to discuss the elements of a potential deal, the people said. A spokesman for the Basque Nationalists said no officials are in touch with the Catalans, though other contacts may be taking place.

The Basques have demanded that Rajoy end direct-rule in Catalonia as a condition of supporting his budget while the Catalans have forced Rajoy to maintain the extraordinary measures by nominating former President Carles Puigdemont for a second term, despite the fact that he’s in exile in Berlin and wanted by the Spanish police. Rajoy has said he won’t return devolved power to the Catalan administration until a new regional government has been formed.

The Basques’ own political balancing act has been complicated by the Catalan crisis because they have to keep in check more radical elements within their electoral base who also want independence from Spain. Beyond the immediate challenge of breaking the budget impasse, the Basques are also aiming to ease political tensions enough to allow direct talks between the two sides.

Separatists parties in Barcelona have until late May to form a government after defending their majority in December’s regional election. If they fail to agree on a candidate whom the Spanish courts can endorse, a fresh ballot will be triggered for the fall.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Ben Sills, Zoe Schneeweiss

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