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Spain, Greece Erupt, As Protests Threaten Effort to Consolidate Budget Decisions in Central Authority

Yesterday, protests in Spain led to clashes with police. Today, a general strike in Greece also led to clashes with police.

Greek police have fired tear gas to disperse anarchists throwing petrol bombs near Athens’ parliament on a day-long strike against austerity measures.

Clashes erupted during the first trade union-led action since a conservative-led coalition came to power in June.

The protest is against planned spending cuts of 11.5bn euros ($15bn; £9bn).

The savings are a pre-condition to Greece receiving its next tranche of bailout funds, without which the country could face bankruptcy in weeks.

An estimated 50,000 people have joined the protests.

Virtually the entire country stayed out of work today.

The common thread here, as well as in Portugal, is resistance to austerity. This has been a feature of Europe for months, and has not generally slowed the march down the path of budget-cutting. Massive protests did cause Portugal to withdraw a plan to raise income tax rates, but they are working on an alternate strategy.

The more serious threat to the austerity agenda comes from the possible secession of Catalunya in Spain. The province has called for snap elections in November. They initially sought autonomy on tax payments to Madrid, but were rebuffed. The next step would be full autonomy, and a referendum on the formation of a new country, which the European Union has said they would not honor. This could reach crisis proportions, as Catalunya is relatively wealthy as Spanish regions go, and they don’t want to see their funds used to prop up other regional governments anymore.

This resistance is a major problem for the designs for a United States of Europe. Talks on centralizing budgets, complete with fiscal transfers, would push in that direction. However, the public resists giving up their sovereignty, especially when the prescription is nothing but austerity amidst a jobs depression, as we have in Spain and Greece. For some reason, Spanish and Greek and probably a whole lot of European citizens don’t favor the unelected Mario Draghi running policy for the entire continent. It may be easier to get Greece to knuckle under – their politics are a mess, and they are small enough that threats to dump them off the euro have the potential to work, as they did in the recent elections – but it’s not likely to work for the other peripheral countries, especially the big ones like Spain and Italy.

The bond market participants and financial market analysts thought that Europe had gotten through its rough patch, with the European Central Bank “bringing out the bazooka.” But the people, for some reason, don’t support needless suffering. Go figure.

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David Dayen

David Dayen

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