Spain's political showdown with Catalonia appears set to boil over on Thursday as a deadline to clarify the region's independence intentions arrives.

In an unprecedented move since Spain returned to democracy in the late 1970s, Prime Minister Mariano Rajoy will impose direct rule in Catalonia unless, by 08:00GMT, the region's leader Carles Puigdemont retracts an ambiguous declaration of independence he made last week.

Puigdemont told members of his Catalan Democratic Party on Wednesday night not only he would not back down, but he would press ahead with a more formal declaration of independence if Rajoy suspends Catalonia's political autonomy.

It is not yet clear how and when this declaration would take place and whether it would be endorsed by the regional assembly, though many pro-independence legislators have openly said they wanted to hold a vote in the Catalan parliament to make it more solemn.

If Rajoy invokes Article 155 of the 1978 Constitution of Spain, 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 as it needs parliamentary approval, offering some last minute leeway for secessionists to split unilaterally.

This prospect has raised fears of social unrest, led the eurozone's fourth-largest economy to cut its growth forecasts, and rattled the euro.

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Puigdemont has already defied Rajoy once this week, when he ignored the 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 1 and made a symbolic declaration of independence on October 10, only to suspend it seconds later.

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.