Protests erupted across Spain and Greece this week, with demonstrators in both of the debt-hobbled countries expressing their growing displeasure with austerity reforms.
The unrest comes just weeks after the European Central Bank announced that it would act as lender of last resort to eurozone nations facing rising borrowing costs, easing fears of sovereign defaults and calming financial markets. But now, with economic growth at a standstill and increasing numbers of Spaniards and Greeks facing impoverishment, the question has become whether these countries can survive the austerity cure, and if so, what it will take.
“Much has been made of this crisis signifying the death of the ‘European welfare state,’” Raoul Ruparel, the head of economic research at Open Europe, told Trend Lines in an email interview. “That seems a bit of an exaggeration, but it is likely that the previous approach to welfare and public-sector spending will no longer be sustainable. There will be a reduced public sector in all areas, while the welfare system will be streamlined and the power of unions likely reduced. Ultimately, the economy will need to rebalance away from a reliance on the state and find new drivers for growth. The impact of this socially will be significant.”