Spain's richest region, Catalonia has threatened to break away from Spain, but it is unlikely the move will succeed because the Spanish government is prepared to use "any legal instrument" to stop the region from holding a crucial referendum, according to UBS economist Matteo Cominetta.
In a report, Cominetta said the heavily indebted region will not be able to secede because the Spanish government has the legal right to prevent a referendum, which was approved by Catalonia's parliament last month.
According to article 155 of the Spanish Constitution, Spain's central government has the power to stop the vote from going ahead if "a regional government does not comply with constitutional law" or "acts against the general interest of Spain."
"The Spanish government could even suspend Catalonia's regional government, " Cominetta wrote.
Mariano Rajoy's government has already made clear "it will not authorize a referendum on Catalan independence."
The region is key because it's responsible for one-fifth of the country's economic output, and accounts for about one-fourth of Spain's exports. Catalonia's regional government claims it currently pays 16 billion euros more to the Spanish state than it receives in transfers every year.
The region's president Artur Mas has said he will go ahead with a vote "with or without the central government authorization."
Mas would be able to get around the constitution by using a Catalan law for consultations that says consultations on independence are not regarded to be a referendum.
According to Cominetta however, the Spanish central government has said it will lodge an appeal with the Spanish Constitutional Court to obtain a suspension of the law.
If Mas pushes the issue and holds a referendum without any legal substance, "huge economic" challenges would lie ahead for Catalonia, Cominetta added.
Although an independent Catalonia would have a gross domestic product (GDP) to debt ratio of 20 percent and its fiscal surplus would stand at 4 percent, Catalonia's economic prospects would be "gloomy, possibly even disastrous."
The region would not be in the European Union and the euro zone and would therefore lose access to its predominant export market. It would have to introduce a new currency "in an already troubled economic environment, with public debt fully denominated in a foreign currency, without access to bond markets and without [European Stability Mechanism] and [European Central Bank ] protection, " the report said.
Instead, what's likely to happen is a renegotiation of the inter-regional fiscal transfers.
"Mas is playing the independentist card with the central government to obtain a certain long-sought renegotiation of the intra-regional fiscal transfers' mechanism, rather vying for full independence, " Cominetta added.
Catalan people are increasingly in favor of independence. The latest poll from the Centre d'Estudis d'Opinion shows that for the first time since 2005 a majority of Catalans (51.1 percent) would vote in favor of such a move. In 2007, before Spain's debt crisis, only around 15 percent of Catalans were in favor of independence.
—By CNBC.com's Liza Jansen, special for CNBC.com; Follow Her on Twitter @lizajansen