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What’s up, Europe? Mass protests in Greece and Spain

The image of Queen Elizabeth II on a 20 sterling note is seen between euro banknotes in London.

The summer optimism over Europe’s debt crisis seems to be fading. Two days of protest and unrest in Spain and a general strike in Greece have cast a pall over the drive to save the Euro.

And it had all been going so well. The European Central Bank had unveiled a plan to help the Eurozone’s stricken economies with a blitz of unlimited government bond-buying. The Germans had finally given their blessing to a new bailout fund. Investors had roared their approval and stockmarkets had taken off.

But now the people of Spain and Greece are delivering their verdict on the rescue plan and it is not a reassuring one. The people do not like the strings attached to the help on offer: more cuts in healthcare, welfare and public sector salaries. In other words, more austerity and another plunge in living standards. Even the head of the Chamber of Commerce in Athens, Konstantinos Michalos, sympathizes with the strikers and protesters.

"It’s a question of whether we can live -- or a large portion of the Greek population can live -- with a salary which is near the European Union poverty-line," says Michalos.

The protests in Greece and Spain alarmed investors and with good reason. Sony Kapoor of the Re-Define think tank in Brussels claims that the unrest is a sign that the social fabric in some Eurozone countries is rupturing and this poses the biggest single threat to the Euro.

Other analysts are less pessimistic. They point out that there have been many anti-austerity protests in Europe over the past two years but none has prevented a government from imposing budget cuts on its people.

Nevertheless, the latest angry outbursts in Spain and Greece do suggest that a brief but glorious summer of optimism in the Eurozone could be morphing into a winter of discontent.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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I was listening to your report, "What's up Europe" on WBUR and couldn't help but wonder if reporter Stephen Beard actually owned a calender.

He sais, "The summer optimism over Europe’s debt crisis seems to be fading." He closes with, " a brief but glorious summer of optimism in the Eurozone ..." Also, in the broadcast version -- but not the print one -- he referred to the ECB's bond buying plan being unveiled over the summer.

The optimism -- a decline in Spanish and Italian bond prices -- only took place for the last three weeks of the summer. It began when the ECB said it would be unveiling its plan, not when a plan was unveiled. Prior to that the Spanish 10 and 5 year bond prices were both over 7 percent and Europe was lurching from one economic crisis to another like a drunk tightrope walker.

He also cites analaysts who say "that there have been many anti-austerity protests in Europe over the past two years but none has prevented a government from imposing budget cuts on its people." That's true only if you ignore last weekend's u-turn by the government of Portugal.

The problem facing the euro is not civil unrest -- as Beard quotes another analyst as saying -- it is what is fueling that unrest. Take away the civil disorder and Spain and Greece are both still bankrupt and have economies that have all but ceased to function. There were only three property transactions registered in Spain during the second quarter of this year, down from an already staggeringly low 58 deals in the previous quarter.

The riots are a symptom, not a cause of the problem facing the EU.

The most recent burst of optimism in the eurozone pre-dates the September 6th announcement by the ECB spelling out the details of its bond buying programme.  It started a full month earlier.   Spanish  10 year government bond yields – for example -  fell sharply at the end of July following the ECB chief’s pledge to “ do whatever  it takes” to save the euro.  Those yields continued to fall throughout August ( a summer month ,the last time I checked my calendar) . And although the yields bounced up towards the end of that month , they never got back above the crisis level of 7% .  Clearly  investors believed the ECB  was preparing to bring its enormous firepower to bear on the eurozone bond markets.     Against this background it is surely fair to use the phrases “summer optimism”  and a “ brief but glorious summer of optimism”   ? 

You further  challenge the validity of the remarks by the two analysts quoted in the piece.

Holge Schmieding says that “ We’ve seen over the last two years a lot of protest  in various European places  and none of these protests have so far managed  to change the overall course of policy.”  Of course , the Portuguese government has  u-turned over its planned increase in social security contributions , but surely no-one can claim that amounts to a change in the overall course of policy in Portugal ?   It remains committed to austerity.   And with reference to the print version of this story :  the hike in social security payments is clearly not a budget cut.  

Your objection  to Sony Kapoor’s  remark : “ The social fabric is rupturing  the social fabric across all the peripheral countries . It poses the single biggest challenge to bringing  the euro crisis under control”   is pure quibble.    Obviously, the unrest  is a symptom of  the stalling economies of Spain and Greece – it did not happen out of the blue.   But it also seems to be a perfectly valid observation  that  this violent  unrest represents a major threat to the management of the crisis and therefore – by extension – to the euro itself.

Dr. Schumpeter is rolling over in his grave. These protests include a broad range of people damaged by German-imposed austerity that is directing their countries in a downward spiral, not by the few as you assert. Perhaps you can elaborate on the cynical observation that destroying the livelihood of tens of millions of people is the best way to reach economic equilibrium.

Haven't these ingrates accepted that austerity builds character?

No, they're civil servants just figure that they want to keep the cushy situation they had before the credit card hit it's limit. They don't care that it isn't sustainable or that their benfit comes at the cost of the rest of Greece.

Regarding the poverty line, different countries have different standards of living, and if the people's pay goes down, so too does the cost of many of the most expensive things they need to live such as the cost of housing.

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