EQUIPO NIZKOR |
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02jun10
Europe faces summer of intermittent unrest
Europe is likely to see intermittent protests over the summer against painful economic measures, impacting markets but much tamer than the violent unrest in Greece that sent jitters through southern Europe.
Long regarded as the most prone to street violence in western Europe -- as well as the most financially troubled -- Greece has seen several angry protests culminating in clashes early last month, that left three dead in a burning bank.
Greek militant groups have also detonated bombs, one of which killed an Afghan youth and another targeting the bourse.
Analysts say in southern Europe in particular, street protests are likely to recur periodically, but the main concern is whether governments rethink austerity measures as a result.
"There are going to be protests and people are going to try to torch banks from time to time," said Eurasia Group analyst Jon Levy. "It is going to be occasional and far from the sort of thing that will bring society crashing down. But it will get a lot of media coverage and that means it may well have market impact."
The violence in early May hit Greek assets, the euro and broader global markets as 24-hour news channels focused on Greece and investors worried the backlash might prompt the government to backtrack on vital reforms.
"When it comes to market reaction, the important thing is not so much how bad the violence and damage is as how much media attention is focused on it," said Levy. "With Greece... it dominated the media agenda for several days."
That wall-to-wall coverage maximized market impact, he said.
Insurer say they have seen a notable uptick in enquiries about political risk cover -- which protects against expropriation, political violence and exchange controls -- particularly for Portugal and Spain as they face stringent cuts.
Risk Greatest in Capital Centres
That could marginally push up the cost of doing business in those countries.
"The main risk is going to be in capital city centres where you have a risk of protest," said Daniel Riordan, head of political risk at insurers Zurich.
But he said the increase had been limited to the southern euro zone with Ireland -- usually included in the list of troubled economies with Portugal, Italy, Greece and Spain -- not a big worry for investors at this stage.
Ireland was the first euro zone country to significantly slash public spending, mollifying markets and initially prompting severe street protests. More recent protests have been on a much smaller scale, if albeit occasionally violent, and analysts say the population has largely acquiesced to the cuts.
Ireland's trade unions have also said they are reluctant to force a major industrial unrest campaign for fear of sparking a bond market sell-off that would ultimately hurt Ireland more. That contrasts with a much tougher line in Greece.
But unions are seen as having little choice but to call occasional strikes and protests to show they have relevance.
Analysts say there is also a modest chance of social unrest in Britain as it pushes through what policymakers say will be some of the toughest cuts since the Second World War. But again, any industrial action is expected to be limited and much lower key than union unrest and poll tax riots in the 1980s.
"Britain has just had an election, which in itself usually reduces the risk of unrest," said David Lea, Western Europe analyst at Control Risks. "The coalition has a large enough majority that it's very unlikely unrest would change anything, so that is also a factor."
Greek Deaths Prompt Reappraisal
Overall, most analysts say Italy has probably the greatest risk of violent unrest along with France, although the latter is considered to be in much less dire financial difficulties than the southern euro zone and so even sustained street violence there would probably have less market impact.
"Social unrest trends in France have never had that much to do with economic cycles anyway," said Lea. "When you saw the violence in the suburbs several years ago there was no market impact at all."
Markets would probably react more negatively to violent demonstrations in Spain, worried that could prompt the government to roll back on its only recently announced austerity measures and further undermine its battered creditworthiness.
But Spanish unions are ultimately seen as reluctant to risk toppling the government and ushering the right into power.
Even in Greece, analysts say the death of three last month severely dented appetites for further demonstration violence. Since then, turnout at street protests has fallen markedly.
"I think the deaths ... prompted something of a reassessment," said Exclusive Analysis Western Europe analyst Pepe Egger. "The anarchists don't have a problem with destruction of property but they don't want to kill."
Greece fringe groups would continue to mount occasional bomb attacks on banks and other targets, he said, but such incidents have a long history in Greece with minimal investor impact.
"The police caught those behind the car bomb attack on the stock exchange but there are at least two other groups and we can expect this to continue," he said. "But this is really something you only see in Greece."
[Source: Reuters, Edt, 02Jun10]
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