As the accompanying chart shows, the spread between German and Spanish 10-year bonds widened as the Catalonian independence crisis emerged. European investors moved into German government linkers, a safe harbor hedge against monetary turbulence. Falling German yields, in turn, weakened the euro, which is now trading at 1.1763, down from a Sept. 8 high of 1.2036.

The Catalonia crisis threatens to disrupt the Spanish economy. Spanish Budget Minister Cristobal Montoro told the Spanish daily El Economista that if Catalonia does not back down from its threat to declare independence, the result could be a crisis on the scale of 2011.