What we know about Spain's crisis

Following an October 1 referendum banned by the courts, Catalan leader Carles Puigdemont told regional lawmakers he had accepted a mandate for "Catalonia to become an independent state".

But he immediately said he was suspending the declaration to allow more time for talks with Madrid.

Puigdemont and other Catalan leaders then signed an independence declaration, which a spokesman later said was "symbolic", leading to confusion over what exactly had been announced.

The region of 7.5 million people remains deeply divided over independence.

While separatist leaders say 90 percent of voters opted to split from Spain in the referendum, less than half of the region's eligible voters actually turned out.

Deadline from Madrid

On Wednesday, Prime Minister Mariano Rajoy gave Puigdemont a double ultimatum: decide definitively on independence by October 16 and, if he presses ahead, change his mind by October 19.

If that deadline passes then Madrid will start proceedings to suspend Catalan autonomy.

Under article 155 of Spain's constitution, the central government has the power to impose direct rule over its semi-autonomous regions.

Rajoy said he was prepared to invoke the never-before-used provision and urged Puigdemont to end his "fairytale" secession push.

Puigdemont is under intense pressure from his pro-separatist allies and on Wednesday he accused Madrid of being "more scared of dialogue than of violence."

No mediation

Catalonia, a region with its own language and distinct culture that accounts for about one-fifth of Spain's economic output, already enjoys significant powers over matters such as education and healthcare.

It has long grappled with the idea of independence, but Spain's economic crisis coupled with resentment with the central government over taxation -- and, more recently police, violence -- has pushed the secession cause to centre stage.

Puigdemont has called for international mediation on the crisis, an idea repeatedly batted away by Madrid.

Rajoy on Wednesday said there was "no mediation possible between democratic law and disobedience, illegality."

EU states have been careful not to undermine the Spanish prime minister and countries such as France and Germany have called on Puigdemont to back down.

Article 155

Spain is one of the Western world's most decentralised nations, with its 17 semi-autonomous regions enjoying various legislative freedom, from taxation to and health and policing.

In the form of article 155, its constitution gives the central government the option to retake full control of a region it deems to be acting in a manner that "seriously threatens the general interest of Spain".

Although it has never been used before, the provision allows Rajoy to take "necessary measures to oblige it forcibly to comply" with the constitution.

Puigdemont now has until October 19 to end his current independence ambitions or risk Madrid imposing central control over Catalonia -- a move many fear may spark unrest.

Analysts say that article 155 measures could include Madrid suspending the regional government, taking control of the region's police force, closing its parliament and even organising new elections there.

Constitutional reform?

Lawmakers in Madrid are united against Catalan independence but the main opposition Socialist Party has said it will work with Rajoy to examine reforming the constitution.

This project, initially due to last six months, will look at "how Catalonia remains in Spain, and not how it leaves," Socialist leader Pedro Sanchez said.

In the short-term however it appears the government is poised to reduce Catalonia's powers under article 155 rather than increase them via reform.

Economic pressure

Although one of Spain's economic powerhouses, Catalonia is heavily indebted and has no access to international lending, relying on Madrid for funding.

There are fears the long-term health of the wealthy region could suffer under independence, and a string of listed companies have already moved their legal headquarters -- though not their employees -- out of Catalonia as the uncertainty persists.

Madrid last month already took the extraordinary step of placing Catalonia's finance minister under its control and paying regional civil servants' salaries.

Ratings agency Standard and Poor's said Thursday that in the event of a unilateral breakaway, "Catalonia would almost certainly bear the heaviest impact, possibly leading to a sharp showdown, and maybe even a recession."