Copying a post of mine made in the AAR website:
I think that, there should be events to include the Basque nationalism rise and their demands that eventually ended with granting the Basquelands with a statute of autonomy in october 6th 1936 in order to make Basquelands aligned with the Spanish Republic despite the initial reluctance of the Sapnish republican government (the treasury minister Indalecio Prieto said in 1931: "i don't want to have a Vaticanist Gibraltar in the north" in reference to the anti clericarism ruling along spain during those days and the catholic character of the Basque Nationalist party (being a catholic democrat one) -although there was other party, Basque Nationalist Action, that was a secular party and was the second political force- which was, most probably, the one which would rule the Basquelands if that statute was approved.
Although the statute didn't plan the creation of a Basque army, it was created due to the need to defend those lands and this ad-hoc army (composed of battalions grouped together according to the ideology of their soldiers)managed to stop the fascist advance in a small town called Elgeta for seven months, until these fascist received aerial and bigger artillery support. One of the air units that fought the Basque Army was the Legion Condor, the ones that made the sadly famous bombing of Gernika.
There was also created some fortifications in Biscay, surrounding it's capital, Bilbao, called "cinturón de hierro" (Iron Belt) however the main engineer in charge of the construction of these forts, defected towards fascists giving the plans of these forts making the fascist advance easier.
That statute created some kind of a puppet state of the Republic with their own government, police (Ertzaintza),their own army (Euzko Gudarostea) and their own navy (Eusko Itsas Gudarostea -which had only two destroyers and 9 BOU, a fishing ship converted into a warship, that took part in the battle of cape Matxitxako).
If you want to read more, here are some links, some of them are only in spanish or french:
Wikipedia entry about statute of autonomy of 1936 (in spanish only)
http://es.wikipedia.org/wiki/Estatuto_de_Autonom%C3%AD%C2%ADa_del_Pa%C3%ADs_Vasco_de_1936
The statute itself (in spanish only)
http://es.wikisource.org/wiki/Estatuto_de_Autonom%C3%ADa_del_Pa%C3%ADs_Vasco_de_1936
The nowadays Basque statute (read the "earlier statutes" section
http://en.wikipedia.org/wiki/Statute_of_Autonomy_of_the_Basque_Country
Wikipedia article for Basque nationalism
http://en.wikipedia.org/wiki/Basque_nationalism
Wikipedia article about Basque Army
http://en.wikipedia.org/wiki/Euzko_Gudarostea
Wikipedia article about Basque auxiliar navy (spanish only)
http://es.wikipedia.org/wiki/Marina_de_Guerra_Auxiliar_de_Euzkadi
Wikipedia article about battle of cape machichaco
http://en.wikipedia.org/wiki/Battle_of_Cape_Machichaco
Wikipedia article about Basque Nationalist Party
http://en.wikipedia.org/wiki/Basque_Nationalist_Party
Wikipedia article about Basque Nationalist Action
http://en.wikipedia.org/wiki/Eusko_Abertzale_Ekintza
Wiki article about Iron Belt
http://en.wikipedia.org/wiki/Iron_Belt