Resistance to austerity stirs Europe

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

An unexpectedly broad general strike in Spain on Thursday 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 for the moment 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 by populations suffering deprivation and misery.

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 populations either retaliate in electoral tests or take to the streets in increasing numbers.

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

“There is a kind of resigned acceptance, but this resigned acceptance is not a stable equilibrium position. People do get fed up with being made to feel guilty for their horrible situation,” said Professor Erik Jones of Bologna's Johns Hopkins University.

He said populations were prepared to suspend judgement on their politicians and accept sacrifice if they believed there would be long term gain, but not indefinitely.

ONLY MONTHS LEFT FOR BENEFITS

“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 told Reuters.

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

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

On Friday the government announced savings of 27 billion euros ($36 billion) 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 treasured healthcare 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 Thursday in fear of losing their jobs.

However, the strike had a much bigger impact than a previous stoppage 18 months ago in a sign that patience may be wearing thin in a country with the European Union's worst unemployment.

Hundreds of thousands attended protest marches and factories and ports ground to a halt. There were brief outbreaks of violence on the streets.

“A lot of people accept austerity and economic reforms like some kind of divine punishment. But when the high unemployment drags on, I am convinced the social protests will take off,” said Jose Antonio Garcia Rubio, economic secretary for the United Left, a minority leftist party that did well in the November general election.

Rajoy also suffered an unexpected setback in a regional poll in Andalucia on March 25, another sign that his room for manoeuvre is not as big as previously thought.

MONTI'S HONEYMOON ENDS

In Italy, former European Commissioner Monti has won wide plaudits from Europe, America 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 move out of the shadow of technocrat Monti and 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.

Apart from a violent protest in February when shops and banks were set on fire, Greece has been comparatively quiet recently in contrast to almost daily demonstrations last summer by tens of thousands of people outside parliament.

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.

“Last year, I spent the whole summer protesting outside parliament but nothing changed. No one is listening,” 58-year old Angeliki Koutsioumba told Reuters.

“Damn them all. We must punish them with our vote in the elections,” she said, adding that she suffered a heart attack last year after a bank refused to give her a loan.

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

“This kind of strike does not help anyone, they are not the solution. It is all about hard work, only that will take us out of this hole,” designer Filipa Almeida told Reuters in Lisbon.

But Antonio Costa Pinto, 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, especially if more austerity measures are needed,” he said.

That is the picture across Europe. “Socially and politically, people are accepting austerity but you need to have light at the end of the tunnel,” said American economist Nouriel Roubini-nicknamed Dr Doom after predicting the subprime crisis.

“Growth, jobs, income, otherwise the political and social backlash; that is demonstrations, strikes, weak governments failing,” he told reporters at a business conference at Cernobbio on the shores of Lake Como. - Reuters


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