Is popular protest gaining the upper hand against austerity?

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Anti-austerity demonstrators hold up placards near the Spanish parliament in Madrid. Photo: Reuters

Something changed in Portugal early last week when hundreds of thousands took to the streets of Lisbon and other major cities in protest at new austerity measures.

What was different was that this outpouring of public anger succeeded.

Within days, Prime Minister Pedro Passos Coelho had backed down on his plan to make make workers pay more into the National Insurance fund so that employers could pay less.

However beneficial for jobs and exports it may have been, the unions were having none of it, and it was the Government that blinked.

The effect in Spain has been immediate. Simultaneous protests in Madrid did not weaken the resolve of Prime Minister Rajoy, but encouraged by the success of their neighbours, the Spanish were on the streets again last night in a protest that quickly turned ugly, and there may be more of the same tomorrow when a new raft of cuts are to be announced in the Cortes.

Protesters with portraits of Prime Minister Passos Coelho, with the word "thief" written underneath, in Lisbon. Credit: Reuters

And then there is Greece. Violent protest is nothing new in Athens, but the (brief) running battles in Syntagma Square today (Wednesday) are the first demonstrations against the new Government since the elections in June.

It seems unlikely that popular anger is going to change anything at this stage, but protesters we met today spoke of being inspired by events on the Iberian peninsula.

For months now, people have wondered if and when popular anger at endless austerity would finally force democratic Governments to back down. They are still wondering, but that day must be closer.

If austerity was producing anything but ever deeper recession it would be easier to stay the course, but the Greek economy will shrink by 7% this year, Portugal by 3% and Spain’s finance ministry has announced today that the third quarter of 2012 is going to produce a very sharp downturn.

The situation in Madrid is complicated by a second outbreak of discontent in the country’s wealthiest region, Catalonia.

The Catalans have complained for years that they pay more than their share into central Government coffers, so when their regional budget ran up an unsustainable deficit they felt justified in asking Madrid for a €5bn bailout.

Mariano Rajoy is refusing, at least on terms the Catalans can accept. To be fair to Rajoy, he’s pretty short of cash himself, but an argument over budgets is threatening to turn into something far more serious.

Demonstrators hold banners at Sant Jaume Square during a Catalan pro-independence rally in Barcelona. Credit: Reuters

Buoyed by the sight of more than a million Catalans on the streets of Barcelona a fortnight ago (it’s that popular protest thing again), the President of Catalonia Artur Mas is going into full Alex Salmond mode and pushing for outright independence.

He has brought regional elections forward to November 25th this year, and although these won’t decide anything in themselves, a big swing to pro-independence parties could make a full-blown referendum inevitable. And then the Spanish story would get really interesting.

Brussels-dictated austerity has caused all sorts of problems in southern Europe, but if it was to lead to the actual break-up of the fourth biggest member of the Eurozone, well that would be quite something.

We are a long way from that, of course, but every democratic administration has a breaking point, and Spain’s may be closer than some had thought.

As for Greece, we are being told that the required packed of €11.5bn in new spending cuts has (finally) been agreed and may be ready for a Parliamentary vote next week.

A leading member of the Government told me this morning that this was positively the last time that the country would go through this, although Greeks have heard that before. This time, though, I think they might mean it.

There is a limit to the pain that you can ask any country to absorb, and the Greeks have already taken much more than many had expected.

So this package, and the bail-out that goes with it, had better work.

Recent history, though, gives few grounds for optimism.