Spain is to begin the process of taking control of Catalonia’s powers, imposing direct rule on the semi-autonomous region, an official in Madrid said.
Spanish Prime Minister Mariano Rajoy is to hold a Cabinet meeting on Saturday to trigger proceedings - an unprecedented move.
Catalan president Carles Puigdemont, ignored a 10am deadline to drop his secession campaign and threatened Rajoy with a formal declaration of independence in the Catalan parliament, Reuters reported.
The two statements increased uncertainty over a political crisis that has raised fears of social unrest, led the euro zone’s fourth-largest economy to cut its growth forecasts and rattled the euro.
If Rajoy invokes Article 155 of the 1978 constitution, which allows him to take control of a region if it breaks the law, it would not be fully effective until at least early next week.
It needs the approval of the Spanish parliament.
The country’s government said on Thursday it had a wide political backing from other parties.
Government spokesman Inigo Mendez de Vigo said in a statement: “The government will use all the tools available to restore as soon as possible the law and the constitutional order, recover peaceful cohabitation between citizens and stop the economic damage that the legal uncertainty is creating in Catalonia.”
In theory, Madrid can sack the local administration and install a new team, take control of police and finances, and call a snap election.
But some members of the Catalan government have already questioned this interpretation of the constitution, suggesting the stand-off could extend for at least several more days.
Puigdemont has already defied Rajoy once this week, when he ignored a first deadline to drop the independence campaign and instead called for talks.
Rajoy says the Catalan government has repeatedly broken the law, including when it held a banned vote on independence on October and made a symbolic declaration of independence on Oct. 10, only to suspend it seconds later.
Catalan officials claim that 1 October vite resulted in almost 90% voting in favour of independence. The vote was declared illegal by Madrid.
Puigdemont says a violent police crackdown on the referendum and arrests of pro-independence leaders on charges of sedition show the Spanish state has become authoritarian.
Tens of thousands of people have taken to the streets over the past few weeks to protest following a violent police crackdown - that resulted in 900 people being injured - against the banned independence referendum.