BARCELONA (REUTERS) - Catalonia's leader stepped back from a formal declaration of independence from Spain on Tuesday (Oct 10), claiming a mandate to launch secession but saying he would delay doing so to allow time for talks with Madrid on the region's future.

Carles Puigdemont's speech to the autonomous region's parliament disappointed thousands of pro-independence supporters gathered outside in hopes of hearing the assembly adopt a unilateral proclamation of independence.

Puigdemont had been under intense pressure from all sides. The Spanish government had threatened tough action, possibly including imposing direct rule on Catalonia from Madrid, if he had gone ahead with breakaway moves.

Both Spanish Prime Minister Mariano Rajoy's government and European Council President Donald Tusk had urged Puigdemont not to proclaim independence. And French President Emmanuel Macron rejected Puigdemont's call for European Union mediation, saying he was confident Madrid could handle the situation.

Puigdemont's government has been locked in a confrontation with Madrid since holding a referendum on Oct. 1 that was declared illegal by a Spanish high court.

The Catalan government said 90 percent of those who voted backed independence but turnout was only 43 percent as many opponents of independence stayed at home. Hundreds were injured as Spanish police intervened to close polling stations.

Puigdemont told the Barcelona regional parliament that the result provided a popular mandate for independence.

"I assume ... the mandate that Catalonia become an independent state in the form of a republic," he said to prolonged applause in the assembly, which was tightly guarded by Catalan police.

"I propose suspending the effects of the declaration of independence to undertake talks in the coming weeks without which it is not possible to reach an agreed solution."

He and other regional politicians later signed a document proclaiming "full sovereignty" for Catalonia, but it was unclear whether the move had any legal value.

"We call on all states and international organisations to recognise the Catalan republic as an independent and sovereign state. We call on the Catalan government to take all necessary measures to make possible and fully effective this declaration of independence and the measures contained in the transition law that founds the republic," the document read.

The Catalan standoff is Spain's worst political crisis since an attempted military coup in 1981.

Rajoy's conservative government planned to decide on next steps over Catalonia at a meeting on Wednesday, and he was in consultations with other parties about how to proceed.

STOCKS RISE AFTER PUIGDEMONT'S SPEECH

After Puigdemont's speech, stocks around the world rose as Wall Street eked out record highs ahead of earnings season, while US Treasury prices pared gains.

Some analysts, however, said Puigdemont's stance would prolong the uncertainty and risk from the Catalan impasse.

The Catalan crisis has deeply divided the northeastern region as well as the Spanish nation. Opinion polls conducted before the vote suggested a minority of around 40 percent of residents in Catalonia backed independence.

The stakes are high - losing Catalonia, which has its own language and culture, would deprive Spain of a fifth of its economic output and more than a quarter of exports.

Some of Catalonia's largest companies have moved their head offices out of the region this week and others were set to follow if he had declared independence.

Thousands of supporters of independence, many waving the separatist Catalan flag, watched Puigdemont's speech on large screens set up outside the 18th-century parliament building.

Initially, people chanted "independence", cheered and kissed each other. But as it became clear there would be formal declaration of independence by Puigdemont and no parliamentary vote, some people whistled, shook their heads and tutted.

'I AM DISAPPOINTED'

Disappointed activists began folding up their Catalan flags and walking away.

Julia Lluch, an 18-year-old student who had come from Girona to hear the speech, was tearful. "I am disappointed. I hoped for a declaration of independence and it didn't happen," she said."Independence is our future and depends on us, young people."

Pensioner Marisol Rioja, 65, said: "We would have liked more. But he (Puigdemont) couldn't do it."

Eric Martinez, a 27-year-old manager, also wept as he watched the speech with his girlfriend. "There is no solution through mediation with Spain. Mediation with Spain is useless," he said.

The Spanish government appealed to Puigdemont earlier on Tuesday to reflect and not take an irrevocable step.

"I want to ask Mr Puigdemont not to do anything irreversible, not to take a path of no return, not to carry out any unilateral declaration of independence and to return to legality," Madrid government spokesman Inigo Mendez de Vigo told reporters.

EU APPEALS FOR RESTRAINT

Tusk, the European Council president, asked Catalan leaders to "respect, in your intentions, the constitutional order and not to announce a decision that would make such a dialogue impossible".

"Diversity should not, and need not, lead to conflict, whose consequences would obviously be bad for the Catalans, for Spain and for the whole of Europe," Tusk said in a speech in Brussels.

There were also splits within the pro-independence parties in the Catalan parliament, with some wanting radical action and others calling for a conciliatory approach.

It is not clear whether the far-left, pro-independence CUP would maintain its key support for Puigdemont's government.

CUP leader Anna Gabriel said her party believed the Catalan parliament should have proclaimed a Catalan Republic on Tuesday."Perhaps... we have missed an historic opportunity," she said.

She however signed the document declaring independence.

"We can't suspend the effects of nothing. You say we are suspending the effects because we are going to negotiation and mediation. Negotiation and mediation with whom? With a Spanish state that continues to harass and persecute us?" she said.

Puigdemont said various mediation initiatives had been put forward since the referendum and proposals for talks at a national or international level. "Some of these (initiatives) are public and other aren't yet," he said.

However, Rajoy has ruled out mediation and has said he will not talk to Catalan leaders unless they abandoned their ambition of declaring independence.

Hundreds of thousands of people demonstrated in Barcelona against independence at the weekend, waving red-yellow Spanish flags through the city centre.

That rally occurred a week after police fired rubber bullets and stormed crowds with truncheons to disrupt the referendum.