Anti-Austerity protests turn violent in Greece; Spain in turmoil over budget proposals
Greece looks headed for a fall and Spain isn't far behind if the protests in those two countries yesterday tell us anything.
Demonstrators have clashed with police on the streets of Athens and Madrid in an upsurge of popular anger at new austerity measures being imposed on two of the euro zone's most vulnerable economies.
In some of the most violent confrontations on Wednesday, Greek police fired tear gas at hooded rioters hurling petrol bombs as thousands joined the country's biggest protest in more than a year.
The unrest erupted after nearly 70,000 people marched to the Greek parliament chanting "EU, IMF Out!" on the day of a general strike against further cuts demanded by foreign lenders.
"We can't take it anymore - we are bleeding. We can't raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros ($1,250) a month.
In Madrid, Prime Minister Mariano Rajoy faced violence on the streets of the capital on Tuesday, and growing talk of secession in Catalonia as he moves cautiously closer to asking Europe for a bailout, aware that such an action has cost other European leaders their jobs.
In public, Rajoy has been resisting calls to move quickly to request assistance, but behind the scenes he is putting together the pieces to meet the stringent conditions that will accompany rescue funds.
Rajoy presents a tough 2013 budget on Thursday, aiming to send a message that Spain is doing its deficit-cutting homework despite a recession and 25 percent unemployment.
Spain appears on course to miss its public deficit target of 6.3 percent of gross domestic product this year, and the central bank said the economy continued to contract sharply in the third quarter.
Rajoy is facing intense pressure from euro zone policymakers to take tougher measures, particularly on freezing pensions.
On Friday, Moody's will publish its latest review of Spain's credit rating, possibly downgrading the country's debt to junk status.
If Rajoy thinks he has problems now with unions and the separatists in Catalonia, wait and see the popular anger that develops against him if he goes the bailout route - as he almost certainly must.
Spain prides itself on being a major economy - unlike Greece which is ranked only 15th largest in the EU, 29th in the world. The Spanish economy is the 4th largest in the European Union and is ranked the 12th largest in the world. A bailout from the IMF would be a huge blow to Spanish national pride and give plenty of fodder to the socialists (whose policies caused all the trouble to begin with). It is problematic whether Rajoy would be able to push through his austerity budget if it were in response to conditions imposed by the IMF for a bailout.
No such nuance attends the Greek meltdown. Prime Minister Samaras is trying to reach a deal with his socialist coalition partners on another painful round of budget cuts. But the trouble in the streets is not making his job any easier and with the IMF, ECB, and EU in Athens this month assessing Greek compliance with budget cutting targets, it seems likely that the IMF will deny Greece the next $40 billion tranche to pay its debt and Greece will default.