ERC, CIU agree pact with eye on 2014 independence referendum

Two of the largest parties in Spain's northern region of Catalonia agreed an alliance on Tuesday that aims to pave the way for a referendum in 2014 on secession, a vote Madrid has said is illegal.

A prolonged recession and record unemployment have fuelled separatist sentiment in a region that is among Spain's wealthiest, adding to uncertainty for investors concerned that Spain cannot control its finances and may need international aid.

The centre-right Convergence and Union, or CiU, lost 12 seats in an election last month, leaving it with only a slim relative majority in the Catalan parliament. CiU leader Artur Mas, who headed the outgoing government, said he would need a political alliance to govern.

The pact on Tuesday between the right-leaning CiU and the Republican Left, or ERC, two parties usually at ideological loggerheads, fell short of a full coalition. "There is total agreement on the referendum. There will be a referendum in 2014, unless both parties agree to delay it," ERC head Oriol Junqueras said on Tuesday.

The parties said they would attempt to convince Madrid to give its blessing to the referendum, but suggested that they would go ahead whether it did so or not. Almost two-thirds of the seats in parliament are held by parties that want a plebiscite.

Mas had called the early election in an attempt to ride a wave of separatist sentiment after hundreds of thousands demonstrated in favour of independence in September.

The plan backfired on him as many voters turned away from the CiU, which had never previously flown the independence flag, towards smaller parties that had long advocated separation for Catalonia, which has its own distinct language and culture.

A source involved in the talks told Reuters the pact between the CiU and the ERC would give stability to the Catalan government and had two goals: passing the budget and approving the referendum.

The ERC increased its number of seats in parliament to 21 from 10.