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Catalan leader calls for international mediation in Madrid stand-off

By Sonya Dowsett

MADRID (Reuters) - The leader of Catalonia called for international mediation on Monday to resolve a standoff with Madrid, the day after hundreds were injured as police tried to forcibly disrupt a referendum on independence that had been ruled illegal.

Spain's biggest constitutional crisis in decades has raised fears of unrest and prolonged political instability in its wealthiest region, deepening the divide between Madrid and Barcelona and threatening the economic outlook.

The crisis could deepen further if the Catalan regional parliament uses the vote as justification for a unilateral declaration of independence, a move foreseen by the region's referendum law if a majority voted to leave Spain.

"It is not a domestic matter," Carles Puigdemont told a news conference on Monday. He said it was "obvious that we need mediation", adding: "We don't want a traumatic break ... We want a new understanding with the Spanish state."

The sight of riot police using rubber bullets and batons in a show of force to stop the vote shocked Spain, at a stroke raising the temperature of a standoff that had been passionate but civil, and drawing international condemnation. Authorities said almost 900 people had been injured.

Despite calling for mediation, Puigdemont, who went ahead with the referendum in defiance of a court order, said the vote was valid and binding, and had to be applied.

His comments opened the door to a possible declaration of independence within a few days, although that would be flatly rejected by Madrid, which has called the vote a farce.

With 95 percent of the vote counted, authorities said the "Yes" vote stood at 90.1 percent, on a turnout of 2.26 million out of 5.34 million registered voters.

WIDESPREAD OPPOSITION

The tally was no surprise as most of those who backed continued union with Spain were expected to disregard the vote and stay home. Recent opinion polls have put support for independence at only around 40 percent.

Elsewhere in Spain, Catalonia's bid for independence is fiercely opposed and led to pro-unity demonstrations in many cities from Zaragoza to Madrid over the weekend.

Puigdemont's comments threw down a challenge to Prime Minister Mariano Rajoy, who has the constitutional power to sack the regional government and put Catalonia under central control pending fresh elections.

Justice Minister Rafael Catala said Spain could use that power if the regional parliament declared independence.

"I don't agree with the police charging at people but, on the other hand, when you do something illegal you have to take responsibility for the risks," said Madrid resident Gemma Lopez.

"It's a clash between two madmen," said one 63-year-old pensioner, resting after jogging in central Barcelona, who did not vote on Sunday and did not want to give his name. "It's a failure of politics in the face of hard-and-fast extremism."

Puigdemont urged Rajoy to say whether he was in favor of mediation, which he said should be overseen by the European Union. He said Brussels had been timid and lacked courage on the matter.

Puigdemont also said he would start legal proceedings against those responsible for Sunday's violence, and demanded that Madrid withdraw national police from the region.

Shortly before Puigdemont made his proposal, the European Commission urged all sides to move swiftly from confrontation to dialogue. "Violence can never be an instrument in politics," it said.

The EU spokesman declined to say whether the Union would mediate, although it would be unusual for Brussels to take such a step within one of the bloc's own member states.

MARKETS RATTLED

Commission President Jean-Claude Juncker later spoke to Rajoy, after being in contact over the weekend.

French President Emmanuel Macron expressed support for Spain's constitutional unity in a telephone conversation with Rajoy, a source in the French president's office said.

Financial markets were rattled. Spain's borrowing costs surged and its blue-chip stock index was down 1.8 percent, on track for its biggest one-day fall in 11 months. [.EU]

Any move to impose central control over the region of 7.5 million people, with its own language and culture, risks denting Spain's emergence from years of recession.

Catalonia is a center of industry and tourism accounting for a fifth of Spain's economy, a production base for major multi-nationals from Volkswagen to Nestle, and home to Europe's fastest-growing sea port. Although it already has extensive autonomy, its tax revenues are crucial to Spain's state budget.

Rajoy planned to coordinate the next steps in meetings with Pedro Sanchez, leader of the opposition Socialists, and centrist Albert Rivera.

Even though Rajoy heads a minority government, the fact that most of the other parties oppose Catalonia's secession bid suggests that his position is not in danger.

The ballot, which asked voters if they wanted an independent republic, has no legal status as it was banned by Spain's Constitutional Court for being at odds with the 1978 constitution, which states Spain cannot be broken up.

(Writing by Sonya Dowsett and Adrian Croft; Editing by Kevin Liffey)