People Are Taking to the Streets All Over Europe

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I spoke with Control Risks Europe analyst David Lea yesterday on Benzinga Radio regarding the wave of protests sweeping across the eurozone. As Europe's leaders orchestrate privatization plans and bailouts in Greece, lay out visions for greater fiscal union, and generally explore any and every option that would avoid exposing European bankers to losses from debt restructuring in the periphery, tension is rising in major cities like Madrid, Barcelona, and Athens.

City squares like Puerta del Sol and Syntagma are filling up with protesters demanding an end to further austerity measures being imposed to, in the case of Greece, facilitate these bailouts, and in the case of Spain, keep the market for sovereign debt happy. However, with youth unemployment near a staggering 45%, the massive demonstrations there are no surprise, either. We've seen that elsewhere in recent months. Here is what David had to say about Spain:

"Zapatero is going to find it more and more difficult with every passing week to impose new austerity measures because his government is a minority, one that has lost virtually all of its friends in Parliament... I think there is a sense across Europe that Greece was a small economy, Ireland was a small economy, Portugal was a small economy. Eventually, the Europeans just got together and founded the EFSF and found a way through it.

The markets know that there is nothing like that for Spain because it is a much bigger economy, and there is effectively no endgame for Spain; there is no game at the end of it... In Spain, where youth unemployment is so overwhelmingly great and such a massive issue, I think that will remain the main the focus of protests of the sort we're seeing in Madrid and Barcelona at the moment."

Plans to provide Greece with a second bailout from the European "troika" (ECB, EU, IMF) were advanced yesterday, which include a privatization program that is raising eyebrows over how effective it can be as a one-off "shot in the arm" toward addressing what is an ongoing, spending-versus-revenue concern in Greece.

In a speech yesterday, ECB president Jean Claude Trichet called for greater fiscal union of eurozone member states, asking, “Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the union?” Perhaps, given the reaction on the streets in Athens. They're not too happy about the plunder of state assets, either. But time will tell. David's thoughts:

"I think there is a resurgence in sentiment among some Europeans--quite a lot of Europeans, in fact--that the nation-state is the way to do things. This has been entrained in Europe for quite a few years. The role that the Eurosceptic press, in places like the U.K., Scandinavia, or in the Netherlands, try to portray power as leaking constantly, constantly, constantly, toward the center.

It is, in fact, the reverse. The member states have become much more powerful in the last couple years than they ever were. I think, to an extent, the public is catching up with that and is trying to draw them even further ahead. This is a combination of what has been going on for a few years now. The financial crisis is only a small part of that."

"The interesting thing about these protests is that it reinforces that while it's a globalized world now, and Europe is ever more together than it was, they all reflect national characteristics, really. So, I think we need to look at places which have a culture of protest and haven't really taken off so far.

The obvious example is France, where you very often see left wing groups and students in the streets. There is a national culture of getting out and demonstrating there."

Keep a close eye on these demonstrations. If the governments in Greece and Spain are not delicate in their negotiations, popular opinion could set up a major tipping point for the future of the eurozone.

Follow me on Twitter @matthewboesler, @Benzinga


 

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