The Basque people who are frequently in the news for their separatist activity live in

The Basque people inhabit a region known as the Basque Country, which is located in the western Pyrenees. This region straddles the border between north-central Spain and south-western France. While a small portion of the population lives in France, the vast majority of the territory, the population, and the historical separatist movement led by the group ETA are centered in Spain. In the context of competitive exams like the UPSC, the Basque separatist movement is primarily associated with its long-running conflict with the Spanish government for independence. Therefore, Spain is the most appropriate answer among the given options.