By Fiona Ortiz
MADRID (Reuters) - Local lawmakers in the northeastern Spanish region of Catalonia voted to seek a referendum on breaking away from Spain on Thursday, setting themselves up for a battle with an implacably opposed central government in Madrid.
The Catalan Parliament in Barcelona voted 87 to 43, with 3 abstentions, to send a petition to the national parliament seeking the power to call a popular vote on the region's future.
The independence movement in Catalonia, which has its own language and represents a fifth of Spain's national economy, is a direct challenge to Prime Minister Mariano Rajoy, who has pledged to block a referendum on constitutional grounds.
Independence for the region, which already has significant self-governing powers, is thus considered a remote possibility, but Catalan President Artur Mas is buoyed by a groundswell of public support to defy Madrid with plans for a referendum.
Polls show roughly half of Catalans want independence, but as many as 80 percent want the right to vote on the matter.
Pro-independence leaders in Catalonia say Rajoy should follow the example of British Prime Minister David Cameron, whose government opposes Scottish independence, but is allowing the Scots to decide in a vote later this year.
Outside the Catalan Parliament building, a few dozen demonstrators gathered, both for and against staying in Spain. Many flew the separatist banner - a lone white star in a blue triangle, against the background of Catalonia's official red-and-yellow-striped flag.
"Rajoy is totally resistant to change. I don't think he's even aware of what is going on. He thinks this is a small spark that will fade away if he buries his head in the sand," said demonstrator Isabel Guerrero, a 58-year-old retiree.
PRESSURE ON RAJOY
Business and political leaders of all stripes have piled pressure on Rajoy to diffuse the situation, perhaps by offering Mas greater control over taxes in exchange for dropping the referendum idea.
Isidre Faine, chairman of Barcelona-based La Caixa, Spain's third biggest bank, this week called on Spanish and Catalan political leaders to negotiate a "grand pact".
But Rajoy has so far refused to engage in public talks with Mas.
Critics worry the prime minister's inertia has fanned the flames in Catalonia. But time may once again be on the side of Rajoy, who over the last two years successfully resisted pressure to seek an international rescue to ward off a sovereign debt default and to force out cabinet members or party leaders during a corruption scandal.
Several factors play into his hands.
An incipient economic recovery could take off, easing tensions over tax distribution, one of Catalans' main beefs with the central government. The independence drive could falter on internal political tensions in Catalonia or on quiet opposition from big business. And, without international support, Catalans could balk at the idea of having to leave the European Union or give up the euro to gain independence.
Thursday's vote in the Catalan Parliament will trigger a chain of events that will likely lead to stalemate.
First, the national Parliament in Madrid will almost certainly turn down the Catalan petition.
Then, Catalan leader Mas will set a date without permission from Madrid, which the Constitutional Court will block.
Mas has indicated that once all legal roads are exhausted, he will use Catalonia's next regional election in 2016 as a proxy.
He could call early elections but he is more likely to wait until his conservative Convergence and Union (CiU) political alliance gets a poll boost from an expected economic recovery. If he held the proxy vote now, opinion polls show he would lose to the more radical independence party, Catalan Republican Left,
"The biggest concern is the absolute disconnect between Madrid and Barcelona. There's no room for a negotiated solution right now," said Antonio Barroso, political analyst with Teneo Intelligence.
Rajoy has little incentive to negotiate, said Barroso. He doesn't want to give Catalonia a tax deal that will anger Spain's other 16 autonomous regions nor launch a complex and controversial constitutional reform.
Asked about Catalan independence on a visit to Washington, D.C., this week, Rajoy insisted, "It's not going to happen."
Such intransigence doesn't go down well in Catalonia.
"It's nonsense to say there is no problem and that it will never happen," said Joan Maria Pique, Mas's press secretary. "You can't avoid a question as important as this. The Spanish government thought the protests were a soap bubble, but it hasn't disappeared."
Catalonia has always had a strong movement for greater autonomy, but a more radical independence movement took hold in the last few years during a prolonged economic slump that hit all of Spain. The movement is fed by perceptions of unfair tax burdens, frustration with Madrid's resistance to handing more power to the regional government and friction over the region's Catalan-language school system.
In 2012 and 2013, millions of Catalans took to the streets on their national day, September 11, demanding the right to vote on breaking away from Spain.
Opinion surveys show that Catalans would be less enthusiastic about independence if it meant losing the trade and currency benefits of the European Union and euro zone.
There are enormous uncertainties over how Catalonia's economy would weather a difficult transition period if it had to reapply to enter the European Union, which is the official stance from Brussels.
Mas's government has not set out specific plans on what currency the region would adopt if it were blocked from joining the euro, whether it would set up its own central bank or how to handle Catalonia's portion of the Spanish national debt.
All of which gives Rajoy seeds of doubt to sow.
Pro-independence politicians in Catalonia say they are confident Europe's democratic traditions would lead to it re-writing the rules to respect self-determination if Catalans showed in a vote that they wanted their own country.
"Rajoy can ignore us all he wants. When we have a popular mandate, we'll take it to the international community and we'll go for independence and ask for international support," said Alfred Bosch, a leader of the ERC party.
(Additional reporting by Elena Gyldenkerne in Barcelona; Editing by Will Waterman)