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Europe Faces Rising Austerity Protests in 2011
Wednesday, 15 Dec 2010

As austerity bites, Western Europe faces a near inevitable rise in protest and unrest in 2011 which is likely to hit markets and dampen weak governments' appetite for reform but not affect policies dramatically.

So far, social unrest over the financial crisis has varied from country to country. In some of the worst affected nations such as Ireland and Latvia, acceptance and even apathy has prevailed, while Greece has seen fatalities and street clashes.

Increasingly, there are signs of rising social pressures. Many Western European countries are only just embarking on multi-year deficit-reduction packages, a hard sell in states where expectations have risen for generations.

Greek protesters clashed with police in central Athens on Wednesday as tens of thousands marched against austerity measures aimed at pulling the country out of a debt crisis. On Tuesday, Italian rioters and police fought battles in Rome after Prime Minister Silvio Berlusconi won a no-confidence vote.







Britain saw its worst clashes in two decades last week as students demonstrated over tuition fee rises, with Prince Charles and wife Camilla caught up in the melee. More unrest is expected next year as unions protest against much broader cuts.

"It's almost inevitable that there will be more protest in 2011 than 2010, particularly in countries such as Greece and the UK where there are real public divisions over how much austerity is necessary," said Carina O'Reilly, European security analyst at IHS Jane's. "It's going to get nastier. We could well see deaths or serious injuries. We could well have seen deaths in the London riots last week. We were just lucky."

None of the European protests have so far had a major policy impact. But in some countries at least, particularly those with upcoming elections, worries over further unrest will deter the government from more aggressive reforms.

French President Nicolas Sarkozy forced through pensions reform despite widespread protests earlier this year. But he faces elections in 2012 while Berlusconi is expected to test the electorate next year despite having won this week's vote.



ANGRY UNIONS

"The propensity for civil unrest in France and Italy will act as a check on their governments," said Nomura political analyst Alastair Newton. "Sarkozy may have seen off the unions ... but they are angry and will want to reassert themselves possibly around the public sector pay round in the spring."

Spain has elections in 2012 and Portugal's minority government is also seen lacking the political clout to manage serious street protests -- again slowing reform at least as long as markets remain more forgiving than for Ireland or Greece.

But at the same time, Portuguese and Spanish unions and many potential protesters are also seen as reluctant to take steps which could spark the downfall of left-of-centre governments and usher in the right.

The two Western European countries facing the deepest cuts -- Greece and Ireland -- have seen very different trends in terms of protest and unrest. Both are being watched closely by wider markets, and any suggestion reforms might be threatened could spook investors worldwide.

Violent demonstrations in Athens in May which saw three people die in a burning bank hit global markets, but also sparked national soul-searching and a falloff in protests.



NATIONAL DIVISIONS

The Socialist government elected last year is seen as strong enough to force through reforms, but not without a backlash that has so far also included apparent anarchist parcel bombings.

Ireland has seen some of the largest demonstrations in Europe, but much less violence. Elections expected next year will likely oust the government, but the Fianna Gael opposition looks set for similar policies to keep its IMF-EU deal in place.

"The Irish still seem broadly accepting austerity," said IHS Jane's O'Reilly. "In Greece, it's a different matter. There are a lot of people who simply see it as being imposed from outside. In Britain, again, enough people just aren't convinced."

Britain's Conservative-Liberal Democrat coalition was elected in May, and most see it serving a full five-year term in part because the junior partner Lib Dems are now so unpopular they face electoral annihilation if they spark elections. The coalition is pushing through the toughest cuts in a generation.

Britain is under much less immediate market pressure than troubled Eurozone borrowers such as Greece or Ireland, where some potential demonstrators have openly said the fear of a bond market meltdown has deterred them from protest.

That dynamic -- together with the emergence of a hard-core of angry young protesters with an increasingly antagonistic relationship to police -- could provide a fertile soil for protest even if it does not prevent austerity.

"I would expect to see violence on the streets of Britain for some time to come," said Nomura's Newton. "I also expect there to be an increase in public sector strikes and demos as the cuts bite harder. But, overall, I suspect public sympathy is limited and the government will be able to tough it out."