After the Scotland referendum, Catalonia is voicing its desire for an independence vote as well, potentially heightening volatility in Spanish stocks and country-specific exchange traded funds.

The iShares MSCI Spain Capped ETF (NYSEArca: EWP) has declined 10.3% over the past three months and is up 1.5% year-to-date.

Catalonia has been increasingly forceful in its push toward a democratic yes or no vote to stay as a part of Spain, but the country’s Constitutional Court has halted plans for a referendum, reports Jeannette Neumann for the Wall Street Journal.

Spanish stock observers are keeping a close on eye on the situation as Catalonia makes up almost one-fifth of Spain’s gross domestic product and one-quarter of exports. Losing the region would put a significant dent in Spain’s ability to dig itself out of the prolonged slump. To put this potential impact in perspective, Catalonia’s economy represents twice as large a percentage of Spain’s gross domestic product as Scotland does for the United Kingdom’s.

If Catalonia separated from Spain, financial sectors could take a hit, namely Spanish Caixabank and Banco De Sabadell, which are headquartered in Catalonia. Caixabank makes up 3.3% of EWP’s underlying holdings and Banco de Sabadell makes up 3.1%. The financial sector is the largest component in EWP’s holdings, accounting for 48.9% of the underlying index.

Morgan Stanley, though, believes that there is a high probability that Catalonia will remain within Spain but Madrid will have to make concessions, namely a greater share of tax revenue for the region.

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