BARCELONA, Spain (Reuters) - Separatists in Catalonia won a large majority in regional elections but a poor result for the biggest Catalan nationalist party will complicate a push for a referendum on independence from Spain.
A deep recession and high unemployment have fuelled separatism in wealthy Catalonia, piling political uncertainty on Prime Minister Mariano Rajoy as he fights a debt crisis that could force Spain to seek an international bailout.
Flying pro-independence flags - a lone star against yellow and red stripes - Catalan voters on Sunday handed 87 seats, almost two-thirds of the local parliament, to four different parties that want a referendum on secession.
But voters also punished the movement's figurehead, Catalan President Artur Mas. His Convergence and Union, or CiU, remains the biggest party in the local parliament, but it lost 12 seats and Mas said he will have to ally with another party to govern.
Mas tried to ride the separatist wave after hundreds of thousands of people demonstrated in September, demanding independence for Catalonia, a northeastern region with its own language that sees itself as distinct from the rest of Spain.
But Mas only recently backed Catalan independence, and while he stirred up enthusiasm for the idea, in the end he drove voters into the arms of parties seen as more genuinely representative of the separatist cause.
"Mas was hurt... The pro-independence movement is more distributed among different parties now, but the issue is important enough so that I think they will do everything to stay united," said Oriol Vilaseca, 38, who works for a family business and who voted for CiU.
With a population of 7.5 million people, export powerhouse Catalonia has an economy almost as big as Portugal. But it is labouring under a load of debt and Catalans think too much of their taxes go to the rest of Spain.
Mas, who has implemented tough austerity measures to rein in Catalonia's steep public deficit, said the situation was more complex now but he would still push for a referendum.
Unlike in Scotland, where the government of the United Kingdom has agreed to a 2014 referendum, a Catalan plebiscite on breaking away from Spain could trigger a constitutional crisis and the central government has vowed to block it.
Mas fell far short of his aim of winning an absolute majority of at least 68 seats, leaving the separatist movement without a strong leader to pressure Madrid to recognise Catalonia's right to hold a referendum.
LEFTIST SEPARATISTS WIN BIG
In Madrid, political leaders said Mas's poor showing would put an end to the referendum idea in Catalonia, which generates a fifth of the national economy.
"I've never seen such a ruinous political operation as Mas's," Prime Minister Rajoy said at a Monday meeting of leaders of his People's Party, or PP, according to El Mundo newspaper.
But leftist separatists who got a big boost in the polls said they were more determined than ever to hold a referendum.
"They've elected us to go ahead with a democratic project, It's massive support. We will have to respond to what the people have asked for," said Alfred Bosch, a deputy in the national Parliament in Madrid from the Republican Left, or ERC.
Bosch said the "will of the people" would trump any constitutional impediment to a plebiscite.
The ERC, a long-standing separatist party, was the big beneficiary of Mas's independence rhetoric, doubling its presence in the Catalan parliament to 21 seats and becoming the main opposition party in for the first time in its history.
The Socialists took 20 seats and the PP 19. Three other parties, including two that want a referendum on independence, split the remaining 25 seats.
Catalans travelled home from around Europe to vote in the election, which had a strong turnout of 68 percent, 10 percentage points higher than in the previous vote two years ago.
Spain's' borrowing costs rose and shares fell after the election result, reflecting some concern at the separatists' successes, but price moves were modest with investors focussed on efforts to solve Greece's debt problems.
A NEW MODEL FOR SPAIN
No matter what the election outcome was, the revival of Catalonia's long-dormant separatist movement will eventually force Spain to rethink the model it chose after the Francisco Franco dictatorship ended in the 1970s.
The 1978 constitution gave significant self-governing powers to the country's 17 autonomous regions, partly to appease centuries-old dreams of nationhood in Catalonia and the Basque Country.
Catalans and Basques have pushed for more autonomy, especially for more control over their taxes. But the flare up in separatism in Catalonia this year has been more radical.
Wary that separatism could spread to the Basque Country and beyond, Rajoy said the Catalan election was more important than general elections.
"The Catalan issue is an opportunity to discuss a model that has been under debate since its inception. It's about the territorial model for Spain," said Antonio Barroso, political analyst with Eurasia Group
Under the current model, Catalonia shares some tax revenue with the rest of Spain and many Catalans believe their economy would prosper if they could invest more of their taxes at home.
Barroso said Rajoy, who earlier this year refused to negotiate with Mas over taxes, would have to take up talks with Catalonia over modifications to the revenue sharing system.
Home to car factories and banks and the birthplace of surrealist painter Salvador Dali and architect Antoni Gaudi, the region also has one of the world's most successful football clubs, FC Barcelona.
Enthusiasm for independence could subside as Catalans contemplate the economic realities of a split from Spain, especially if the price to pay is leaving the European Union.
After a decade of overspending during Spain's real estate boom, Catalonia and most of the country's other regions are struggling to pay state workers and meet debt payments.
Catalonia has 44 billion euros of outstanding debt and the ratio of its debt to its gross domestic product is 22 percent, the highest among Spain's regions.
Mas was one of the first Spanish leaders to embark on harsh austerity measures after Catalonia's public deficit soared and the regional government was shunned by debt markets. He has also had to take billions of euros in bailout funds from the central government and he still has more fat to trim.
His austerity drive will run into trouble with the newly empowered Republican Left. Bosch said ERC would not form a coalition with Mas's CiU and would not agree to any more cuts in spending on schools and hospitals. (Additional reporting Clare Kane in Madrid and Robert-Jan Bartunek in Brussels; Editing by Giles Elgood)
Updated Date: Nov 27, 2012 01:15 AM