MADRID - Spain appeared to offer Catalonia’s separatists a last-minute way out of their standoff with the central government on Wednesday, suggesting fresh elections in the region could resolve the country’s worst political crisis in decades.

Hours before Catalan leader Carles Puigdemont faces a 10:00 am (0800 GMT) Thursday deadline to say whether or not he is declaring independence, a government source told AFP that elections “could be considered a return to legality”.

The government had earlier warned Puigdemont that unless he backs down, Madrid will start proceedings to take direct control over the semi-autonomous region.

Catalonia is deeply divided over whether to split from Spain but is proud of its autonomy. There are fears that moving to impose direct rule could inflame tensions in a crisis that has already sparked huge street rallies, prompted hundreds of companies to decamp to other parts of Spain, and rattled EU neighbours.

Spain has been in limbo since Catalonia held a banned independence referendum on October 1, which prompted a heavy police crackdown that shocked the world.

Puigdemont issued a cryptic “suspended” declaration of independence following the vote, saying he wanted time for talks with the government - a prospect Madrid has rejected.

“All I ask of Mr Puigdemont is that he acts with good sense,” Prime Minister Mariano Rajoy told parliament Wednesday as the government threatened to trigger Article 155 of Spain’s constitution, a never-before-used provision that would allow it to suspend Catalan autonomy.

But there were increasing indications later Wednesday that elections are being considered as a way to steer clear of these uncharted waters.

Elections sanctioned by Madrid - unlike the referendum, which the Constitutional Court ruled illegal - would allow Catalan voters to have a say on how to move forward.

“The only possible path for Mr Puigdemont is to restore legality and, from a political point of view, move the elections forward,” Spain’s opposition Socialist leader Pedro Sanchez, who is working with the government on the Catalan issue, told reporters in Brussels.

A Catalan government source said elections were “not one of our priorities” but did not rule them out.

“We are not going to react to non-official declarations from the government,” the source said. “We are waiting to see what (Madrid) will decide tomorrow.”

Barcelona football club’s Camp Nou stadium is set to display a massive banner emblazoned with the words “Dialogue, Respect and Sport” when it reopens Wednesday for its first match since playing to empty seats in protest at the crackdown on referendum voters, some of whom were dragged by their hair or thrown down stairs by police.

On the streets of the regional capital, Catalans have been growing increasingly frustrated at the stalemate.

“Politicians are paid to negotiate,” said Laura Penan, a 41-year-old optician who described herself as “angry at both governments”.

Tensions have also risen over the detention of two influential Catalan separatist leaders, Jordi Cuixart and Jordi Sanchez, who were preparing to spend a third night in jail Wednesday pending an investigation into sedition charges.

Tens of thousands of people held a candle-lit rally in Barcelona late Tuesday, urging their release.

Cuixart and Sanchez are the leaders of pro-independence citizens’ groups Omnium Cultural and the Catalan National Assembly (ANC) respectively, which count tens of thousands of members each and have emerged as influential players in the crisis.

They are accused of whipping up major demonstrations last month in the run-up to the referendum, when protesters blocked Spanish police for hours inside the Catalan administration’s offices as they were raiding the building.

Puigdemont claims the referendum resulted in a 90 percent “Yes” vote, but the turnout was only 43 percent as many supporters of Spanish unity stayed away.

Separatists argue that wealthy Catalonia, which represents about a fifth of Spain’s economic output, does too much to prop up the rest of the country and would be better off going it alone.

But opponents say the region has more clout as part of a bigger Spain and that the instability could be disastrous for its economy.

Madrid announced Monday that it was cutting its economic growth forecast for next year from 2.6 to 2.3 percent, pointing blame at the Catalan crisis.

The standoff has sparked a business exodus, with more than 800 companies moving their legal headquarters out of Catalonia in a bid to minimise the instability.