Patience wears thin in southern Europe

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Most of the people of southern Europe have been surprisingly stoical up to now in the face of some of the most painful budget cuts in living memory, but there are signs that their patience may soon run out.

An unexpectedly broad general strike in Spain on March 29 and mounting opposition to Prime Minister Mario Monti in Italy are among indicators that resistance is growing in a region at the centre of concerns about a resurgence of the euro zone debt crisis.

Portugal remains very subdued and even Greece, scene of repeated violent street protests, has quietened recently. But there are signals that political leaders will soon be directly in the firing line across Europe, especially if more cuts are required to reduce sovereign debt.

The atmosphere seems a combination of two opposite tendencies – acceptance of the message that deep cuts are the only way to save their countries from economic catastrophe, and a mounting feeling that greater pain cannot be borne.

The problem for politicians like Monti and Spain’s Mariano Rajoy is that the very austerity measures imposed to cut debt under pressure from euro zone leaders could deepen recession and create a need for even more severe cuts. There may only be a few more months left for reforms to start producing benefits before people either retaliate in elections or take to the streets.

Investors are starting to show concern again about economic difficulties and political uncertainties in Spain and Italy, with bond yields starting to climb after being brought under control earlier this year.

Professor Erik Jones of Bologna’s Johns Hopkins University said people were prepared to suspend judgment of their politicians and accept sacrifice if they believed there would be long-term gain, but not indefinitely.

“We have only got about six months to run before voters start looking at their politicians and taking off the rose-tinted glasses.

“Once that happens, we are going to find not just a rapid turnover in incumbent governments that happen to go to the polls, but also an increase in the general level of disquiet that will be expressed in the form of strikes and other forms of social disobedience,” Jones said.

Belt tightening

Jean-Paul Fitoussi, an economics professor at the Sciences Po institute in Paris, told reporters at a business conference in northern Italy on March 30, that austerity measures were “a dangerous approach that could trigger social unrest”.

Many Spaniards seem resigned to belt tightening from Rajoy, whose conservative government was elected last November in the full knowledge that he planned austerity.

On March 30, the government announced savings of e27 billion (R277bn) from the central government budget, equivalent to 2.5 percent of gross domestic product.

A recent poll showed half of Spanish adults would accept cuts in health care and education services if that was what it would take to put the economy back on track.

Unions represent only a fifth of workers and many people crossed picket lines on March 29 in fear of losing their jobs. However, the strike had a much bigger impact than a previous stoppage 18 months ago, a sign that patience may be wearing thin in a country with the EU’s worst unemployment.

Hundreds of thousands attended protest marches and factories and ports ground to a halt. There was even some violence on the streets. Rajoy also suffered an unexpected setback in a regional poll in Andalucia on March 25.

Labour reform

In Italy, Monti has won plaudits from Europe, the US and elsewhere for his economic expertise and swift action to head off the debt crisis.

But he too has recently run into trouble over a labour reform that is at the centre of his programme to jump start Italy’s chronically stagnant growth. Trade unions are planning protests and a general strike, his approval ratings have dropped and he has got involved in a messy row with the political parties he depends on to pass laws. The political problems are partly a function of local polls in May; politicians are anxious to improve their woeful public esteem levels ahead of a general election next spring.

Politicians are also likely to be punished in Greece, where a general election is expected on May 6, after the country was obliged to swallow even bigger cuts in pensions, wages and services in exchange for a second international bailout.

Greece has been comparatively quiet recently in contrast to almost daily demonstrations last summer.

Greeks appear to be waiting to punish the thoroughly discredited political class in the election, with nearly a third planning to abstain or cast blank ballots, according to polls.

The Portuguese have been the most resigned to the pain of austerity following an international bailout, and a general strike on March 22 had little impact on the economy.

But Antonio Costa Pinto, a research professor at Lisbon’s Institute of Social Sciences, said the mood of resignation would not last forever. “Discontent is there, so if there are no signs of a turnaround, if the European slowdown prevents the Portuguese economy from starting to recover towards the end of the year, this acceptance will be hard to sustain,” he said. – Reuters