Prime Minister Mariano Rajoy is poised to take direct control of Catalonia if its regional government decides to break away.
Regional leader Carles Puigdemont has until tomorrow to make his intentions clear after defying Madrid once already this week.
If not, Mr Rajoy will trigger Article 155 of the Spanish constitution which will allow it to impose direct rule on the region.
It would be the first time in Spain’s four decades of democracy that direct rule has been imposed.
The article can be used if a regional government breach its constitutional obligations or threaten the nation’s “general interest”.
In such an instance, the central government can “take necessary measures to oblige it forcibly to comply or to protect” the country.
Once Article 155 is set in motion, Madrid can take control of the region’s various political institutions.
That could mean suspending the regional government, closing the Catalan parliament and placing the local police under its control.
It could also call regional election in the region to try and break the want-away politicians’ grip on power.
However, Mr Rajoy would need the support of the Senate, which must approve any actions he plans to take under Article 155.
After being sent to a committee, Spanish senators would then need to vote through the proposals.
Mr Rajoy’s People’s Party holds an absolute majority in the house, allowing the move easy passage.
Catalan newspaper La Vanguardia reported that Madrid then plans to appoint its own delegates to run regional government departments.
Mr Puigdemont would remain nominally in his role but stripped of all powers.
Other, more unlikely options are also open to the Government, including declaring a state of emergency.
Madrid could also choose to haul a number of high-profile Catalan figures through the courts after starting proceedings against some already.
Many Spaniards fear the unprecedented step of imposing direct rule could lead to social unrest.
The crisis has already prompted hundreds of Catalan firms to move their headquarters, led Madrid to cut economic growth forecasts and hit the euro.
Speaking today, Mr Rajoy said: “I ask Puigdemont to act sensibly, in a balanced way, to put the interests of all citizens first.”
He told Parliament: “It’s not that difficult to reply to the question: has Catalonia declared independence?
“Because if it has, the government is obliged to act in one way, and if it has not we can talk here.”