Eurozone is breaking up

Greek riots, Spanish anti-austerity marches shatter Europe’s relative financial calm


ATHENS, Greece — Europe’s fragile financial calm was shattered Wednesday as investors worried that violent anti-austerity protests in Greece and Spain’s debt troubles showed that the continent still cannot contain its financial crisis.

Police fired tear gas Wednesday at rioters hurling gasoline bombs and chunks of marble during Greece’s largest anti-austerity demonstration in six months. The protests were part of a 24-hour general strike, the latest test for Greece’s nearly four-month-old coalition government and the new spending cuts it plans to push through.

The brief but intense clashes by several hundred rioters among the 60,000 people protesting in Athens came a day after anti-austerity protests rocked the Spanish capital.

In Madrid, thousands of angry protesters again swarmed as close as they could get Wednesday night to Parliament, watched by a heavy contingent of riot police. There was no fresh violence, but the demonstrators cut off traffic on one of the city’s major thoroughfares at the height of the evening commute.

The protesters chanted for the release of 34 people detained Tuesday night in clashes that injured 64 others. They also demanded new elections to oust Prime Minister Mariano Rajoy and his conservative government, which has imposed cutbacks and tax hikes, deepening the gloom in a country struggling with recession and unemployment of nearly 25 percent, the highest among the 17 nations using the common euro currency.

Spain’s central bank warned Wednesday the country’s economy continues to shrink “significantly,” sending the Spanish stock index tumbling and its borrowing costs rising.

Across Europe, stock markets fell as well. Germany’s DAX dropped 2 percent while the CAC-40 in France fell 2.4 percent and Britain’s FTSE 100 slid 1.4 percent. The euro was also hit, down a further 0.3 percent at $1.2840.

The turmoil Wednesday ended weeks of relative calm and optimism among investors that Europe and eurozone might have turned a corner. Markets have been breathing easier since the European Central Bank said earlier this month it would buy unlimited amounts of government bonds to help countries with their debts.

The move by the ECB helped lower borrowing costs for indebted governments from levels that only two months ago threatened to bankrupt Spain and Italy. Stocks also rose. Media speculation about the timing and cost of a eurozone breakup or a departure by troubled Greece faded.

However, the economic reality in Europe remained dire. Several countries have had to impose harsh new spending cuts, tax rises and economic reforms to meet European deficit targets and, in Greece’s case, to continue getting vital aid. The austerity has hit citizens with wage cuts and fewer services, and left their economies struggling through recessions as reduced government spending has undermined growth.

“Yesterday’s anti-austerity protests in Madrid, together with today’s 24-hour strike in Greece, are both reminders that rampant unemployment and a general collapse in living standards make people desperate and angry,” said David Morrison, senior market strategist at GFT Markets.

“There are growing concerns that the situation across the eurozone is set to take a turn for the worse,” he said.

Spain has struggled for months to convince investors that it can handle its debts. The government is to unveil an austere 2013 draft budget and new economic reforms Thursday. Many believe they could be a precursor to a request for financial help from the ECB. The government has already introduced €65 billion ($83.5 billion) in austerity measures designed to bring down its deficit.

The country is suffering its second recession in three years, with a predicted 1.5 percent economic contraction in 2012. The Bank of Spain warned Wednesday the recession could be deeper.

Spain has come under pressure to tap the ECB bond-buying program that has been partly designed to keep a lid on the country’s borrowing costs. So far, the government has been reluctant to ask for help for fear of the conditions that may be attached.

Spain’s IBEX stock exchange fell in 4 percent on Wednesday while the interest rate on its 10-year bonds rose 0.26 percentage points to 5.99 percent on concerns about the country’s economy and that it is taking too long to make up its mind about applying for ECB assistance.

“The demonstrations remind us that central bankers cannot solve the crisis alone. The ECB’s plan to intervene in sovereign bond markets can only succeed if governments in crisis countries can convince their electorates that ongoing austerity and reform are necessary to avoid bankruptcy,” said Martin Koehring of the Economist Intelligence Unit.

“This, however, is increasingly challenging without the return of economic growth.”

Greece, meanwhile, has been dependent since May 2010 on billions of euros in two rescue loan packages from other eurozone countries and the International Monetary Fund. In return, it slashed salaries and pensions and hiked taxes in an effort to reform an economy derailed by decades of overspending and corruption.

Although Greece accounts for only about 2 percent of the eurozone’s total economy, its crisis has shaken the euro and led to concern it could destabilize other, much larger economies in the 17-nation bloc. Greece is in its fifth year of recession, with unemployment above 24 percent.

Shortly before Greece’s strike got under way, Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras hammered out a €11.5 billion ($14.9 billion) package of spending cuts for 2013-14 demanded by the country’s international lenders, along with another €2 billion in improved tax collection.

The government has struggled to come up with austerity measures acceptable to the country’s creditors, with disagreements arising between the three coalition parties. The next payment of €31 billion hinges on the further cuts.

Stournaras was briefing the other two party leaders Wednesday, and Samaras was to meet with them Thursday morning. If they agree, the package will be presented to Greece’s debt inspectors.

Wednesday’s strike shut down Greece’s famed Acropolis and halted flights for hours. Ferry services were suspended, schools, shops and gas stations were closed and hospitals functioned on emergency staff.

Government spokesman Simos Kedikoglou said the limited violence and what he called a smaller turnout than opposition parties had hoped for showed that “Greek society understands what the government is doing is the only possible solution.”

September 27, 2012 | 4 Comments »

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  1. Israel will soon be involved on a major war and the Jews in Europe will have to take care of themselves on their own. They had enough information to leave Europe and or never settle there. Terrible as it may be, we simply cannot both defend ourselves here and fish out those over there.
    They MUST leave NOW!

  2. @ Bernard Ross:

    I think Israel will need to evacuate the Jews of Europevery soon(oddly enough, the ones in Eastern Europe will be safer this time, except maybe those in Hungary).

    Once they do that, I hope the Europeans – at least those in the Eurozone – go at each other’s throats in a continent-wide civil war and annihilate each other.

  3. Scotland has its first Muslim minister — Humza Yousaf — who has ties with Hamas. For some reason the BBC claims that Muslims feel it’s far easier to live in Scotland than in Britain (Scottish “values” for Jihad, Jew hatred, public floggings, etc. must be in such better alignment than elsewhere in Europe, and they no doubt feel themselves to be so much more “sophisticated” and morally “enlightened” — just like Obama’s calls for more “tolerance” — the West needs to learn how to throw people off buildings, sans trials, etc.) and, now Norway has its very own Minister of Culture — a Muslim who wanted to get to her terrorist buddies in Gaza and supported a flotilla. Yes, that’s Europe, as lost now as in the 1930s. Hopefully, their current fiscal crises will keep them occupied so that they cannot afford to make mischief elsewhere.

  4. I cannot help but think that these troubles are well deserved. Will there ever be a time that Europeans cease to kill, swindle, libel, Jews. All those “usual suspects” Europeans, Christians, Muslims, should really wonder about their endless endeavors and just stop their evil behaviors. Its astounding to watch these Europeans go to Israel to aid those who are intent on eradicating Jews from Israel, and finding ways to rationalize their chronic, congenital behavior. Churches against Israel, BDS, etc., who are they fooling? Some christians have attempted to reverse this chronic evil, but its not enough. Why dont they all just leave the Jews alone to live in Peace? Why dont they all stop swindling the Jews and fulfill their treaties, promises and obligations to the Jews? Why dont they all get together and come up with a behavior to atone for their sins rather than just confess and then rationalize them, only to begin again? They really should be looking at their abusive and evil behavior, right now there is no moral reason that they even should exist. Its hard to imagine what gods such people worship. There falling apart is a natural consequence of their ceaseless evil. G_d is allowing their decay and rot because they refuse to atone for their behavior by changing their behavior. It is fitting that they are being gobbled up by there internal disease.