Voters may topple eurozone rescue plans

Rick Moran
Voters in Greece, Spain, and Portugal may hold the fate of the EU in their hands.

Patience with the largest budget cuts in memory in those three countries is wearing thin and there are indications that, given the opportunity, the electorates might force politicians to break their bail out agreements with the EU.

Reuters:

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 center 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.

There is great resentment, not only among left wing parties, but even conservative and center right parties, at the depth of budget cuts and the pain caused by years of recession/depression. More than 50% of Greek youth are unemployed. Similar numbers can be found in Spain and Portugal.

There is also a huge distrust of the IMF and the EU leadership in Brussels. Part of that is class based, but it is also a realization that Germany and other core countries in the EU are the beneficiaries of the austerity measures being implemented, and not the citizens of the countries affected. It is their banks who are being kept afloat, their economies that are being rescued as a result of the austerity-caused bail outs.

Even if those three countries emerge from near insolvency, their relationship with the rest of the EU may be permanently damaged. This does not bode well for the future of a united Europe.

Voters in Greece, Spain, and Portugal may hold the fate of the EU in their hands.

Patience with the largest budget cuts in memory in those three countries is wearing thin and there are indications that, given the opportunity, the electorates might force politicians to break their bail out agreements with the EU.

Reuters:

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 center 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.

There is great resentment, not only among left wing parties, but even conservative and center right parties, at the depth of budget cuts and the pain caused by years of recession/depression. More than 50% of Greek youth are unemployed. Similar numbers can be found in Spain and Portugal.

There is also a huge distrust of the IMF and the EU leadership in Brussels. Part of that is class based, but it is also a realization that Germany and other core countries in the EU are the beneficiaries of the austerity measures being implemented, and not the citizens of the countries affected. It is their banks who are being kept afloat, their economies that are being rescued as a result of the austerity-caused bail outs.

Even if those three countries emerge from near insolvency, their relationship with the rest of the EU may be permanently damaged. This does not bode well for the future of a united Europe.