Catalonia’s ruling Convergence and Union party (CiU) lost grounds to the center-right nationalists in regional elections on Sunday. With this, the secessionist drive in the state would subside and is unlikely to derail Prime Minister Mariano Rajoy’s austerity measures. Catalonia has no other option than to comply with austerity measures because it cannot survive without funding from the central government. Additionally, the Catalan banks have borrowed more than 60 billion euros ($77 billion) from the European Central Bank. So the banks would also obstruct the region’s possible independence.

artur mas

The ruling CiU coalition, led by Artur Mas, lost 12 seats in the 135-seat state legislature, falling from the last election’s 62 to 50 this time. The state’s second largest political force, the separatist Republican Left, or ERC, now holds 21 seats. The Socialist Party won 20 seats in the legislature, and the Popular Party, which currently governs Spain, has 19 seats.

CiU regional president Artur Mas had called for early elections and pledged to push for a referendum on independence of Catalonia from Spain. His move was in response to a separatist movement in Catalonia, where people are frustrated with the crisis-ridden Spain. People in the state said that every year 16 billion euros ($21 billion) of taxes paid in Catalonia are never returned to the state by the central government. The CiU leader wanted to negotiate a new tax system with the central government so that the state could gain more funds to invest in its own economy.

But now CiU has lost ground, and Artur Mas can’t defy the constitution to hold a referendum on independence without the psychological backing of a two-third majority. This year, Prime Minister Rajoy has bailed out Catalonia twice. First, Rajoy’s government paid billions of euros to get the state current on wages and payments to suppliers. Later, Mas requested the central government loan 5 billion euros  ($6.48 billion) to meet debt payments.

Prime Minister Mariano Rajoy is persuading investors in an attempt to reduce the painfully high borrowing costs. And the growing sense of separatism in Catalonia is a big challenge for Rajoy. Artur Mas wants Catalonia to be an independent nation that would be a part of EU and keep euro as their currency.

The defeat of the CiU party in the elections would postpone any calls for the referendum on independence. However, the independence fervor is unlikely to disappear completely. Now it all will depend on the possible coalition government.

In any case, the full independence of Catalonia would take years. Even if it does get separated, Catalonia may not be a part of EU. That is a big concern for Catalans and their businesses. During the polls, a majority of Catalans have backed independence. But the number dropped drastically when they were asked whether they would still want independence if the region falls out of the European Union.

Analysts think that the Catalonia concern wouldn’t affect international investors who have started investing tentatively in Spanish bonds again. Next year, Catalonia again faces 6 billion euros in debt redemption, which means it will again turn to the central government for help.