Sinn Fein supporters protest outside Irish government buildings, in Dublin, Ireland, Wednesday, Nov. 24, 2010. The Irish government has unveiled a range of tough austerity measures designed to help solve the country’s debt crisis, among the spending cuts and tax rises are a reduction in the minimum wage, a new property tax and thousands of public sector job cuts. The four-year plan is designed to save the state 15 billion euro ($20bn; £13bn). The government is also negotiating a bail-out package with the EU and IMF, expected to be worth about 85 billion euro. (AP Photo/Peter Morrison)
DUBLIN (AP) — Anger and fear about Europe’s seemingly unstoppable debt crisis coursed through the continent Wednesday. Striking workers shut down much of Portugal, Ireland proposed its deepest budget cuts in history and seething Italian and British students clashed with police over education cuts.
Amid it all, analysts were deeply skeptical about the future — saying even the desperate efforts of governments, the European Union and the International Monetary might not be enough to prevent countries from defaulting or banks from going under.
The Irish Stock Exchange saw a bloodbath in bank stocks as investors pushed the panic button and bond traders were betting that it would only be a matter of time before Portugal and possibly Spain would be the next countries begging for outside help.
In Lisbon, strikers all but closed the airport, stranding passengers who couldn’t get in or out of the country.
Commuter Luis Moreira, catching one of the last trains out of Lisbon, said Europe’s woes only seem to be getting worse by the day. He supported the growing outrage over salary and pension cuts and wondered why billions were being thrown instead at governments and banks.
“People have to fight for their rights,” Moreira, 51, told The Associated Press. “People have to fight against what is happening.”
Government policies have “sent people into poverty and misery,” said union leader Manuel Carvalho da Silva, noting that Portuguese civil servants will see wage cuts averaging 5 percent next year.
Italian students occupied university buildings and piazzas to denounce education cuts being debated by Parliament, clashing briefly with police in Rome and blocking five main bridges over the River Arno in Pisa.
In Britain, students decried government plans to triple tuition fees.
“Education is not a rich kid’s game,” said Tash Holway, a 19-year-old student in London. “If this keeps up, the entire industry will change. It won’t be about talent, but only about who can pay.”
While Irish bank shares plummeted for a third straight day amid fears investors would be wiped out, yields on Portuguese and Spanish government debt shot up sharply because of rising concerns that their debt loads will prove unsustainable and put them next in line for European bailouts.
Irish Prime Minister Brian Cowen announced Wednesday he now expects the EU-IMF bailout loan to total euro85 billion ($115 billion). Some experts accused Ireland of minimizing the true scale of its financial disaster, saying Ireland probably needs a bailout of euro130 billion ($175 billion) because of looming defaults on residential mortgages.
“The government is completely in denial about the amount of money they’ll have to borrow,” said Constantin Gurdgiev, a finance lecturer at Trinity College Dublin.
He compared Ireland’s plight to that of Greece, which received a euro110 billion ($145 billion) EU-IMF rescue bailout in May.
“Our economy is more than three times over-indebted than Greece. If Greece is insolvent, where does that put us?” Gurdgiev asked.
Eurasia Group, a New York-based research and consulting company, warned that the problems of the 16-nation eurozone won’t stop with Ireland. It predicted a rescue plan for Portugal could be unveiled early next year, when Portugal needs to sell government bonds to finance spending.
“There is a strong presumption that a package will be necessary for Portugal and the related planning is under way,” Eurasia Group said. “Portugal will be pressed hard to accept a package even if the Portuguese government claims the country does not need it.”
Analysts have estimated Portugal will need at least euro50 billion ($67 billion), but a bailout for Spain could be exponentially costlier. Outside help for Spain — the eurozone’s fourth largest economy — could even mean the end of the eurozone itself, with either Spain forced out or Germany jumping ship back to its own Deutschmark currency.
“Spain is the ultimate crisis — the one that would really matter,” Eurasia Group said.
Sticking to a playbook used by every indebted nation so far, Spanish Finance Minister Elena Salgado insisted Wednesday that her nation doesn’t need a bailout and that strict rules for the country’s banks coupled with austerity measures cutting budgets, salaries and pensions will protect Spain’s financial system.
But even other politicians were skeptical and expressed nervousness about just how bad the economic turmoil in Europe could get.
“The crisis is not over, it is continuing to evolve. Europe is threatened by stagnation and the crisis of over-indebtedness is not yet finished,” French Premier Francois Fillon warned.
German Chancellor Angela Merkel and French President Nicolas Sarkozy — the two biggest heavyweights in the eurozone — will discuss “current problems in the eurozone” on Thursday.
Tempers even flared at the European Parliament in Strasbourg, France, where British legislator Godfrey Bloom was expelled from a debate on Ireland’s financial meltdown after he called a German legislator an “undemocratic fascist.”
Critics claim Merkel’s harsh stance on austerity measures has spooked the markets and is one of the reasons other European nations are in dire need of such massive bailouts — criticism that she dismisses.
Still, some countries have been in denial about the extent of their borrowing.
Portugal has borrowed huge amounts to finance welfare benefits and private consumption, at the same time protecting jobs through labor laws some call outdated that make it difficult to hire and fire workers.
Portugal’s austerity package, due to be introduced Jan. 1, cuts state salaries, trims welfare benefits and hikes income tax and sales tax — but the measures are forecast to stifle already weak economic growth.
In London, the university students and even younger pupils in school uniforms marched from Trafalgar Square toward Parliament chanting, “No ifs! No buts! No education cuts!”
Hundreds of police officers kept watch as some students climbed on top of bus shelters. Several attacked a parked police van, smashing its windows and scrawling graffiti.
The unrest could easily continue, because analysts said they see no immediate end in sight for Europe’s financial upheaval.
“Portugal has yet to show that the measures taken to curb the deficit are indeed bringing public finances on a sustainable path, while Spain has yet to implement significant restructuring of its banking sector,” said Marie Diron, chief economic eurozone adviser for Ernst Young.
“In this context, there is a danger that the Irish crisis cascades into (other) crises,” she said.
Rising doubts about eurozone countries’ ability to repay debts have driven the yields on their bonds to euro-era highs in recent weeks. If they stay at these levels, it will drive up each nation’s borrowing costs when they next sell bonds.
Bond yields rose all across the eurozone again Wednesday. Spain’s 10-year bonds topped 5 percent for the first time. Equivalent Irish bonds rose sharply to 8.9 percent, just short of a record high reached Nov. 11, the day before rumors of its bailout began. Portuguese bonds topped 7 percent for the first time since Nov. 11, too.
Even Germany’s 10-year bonds — a benchmark of global lending safety whose yields normally fall when the others rise — rose to above 2.7 percent, reflecting investors’ concerns that Germany’s own finances could be taxed by the weight of bailing out its neighbors.
The yield on 10-year Greek debt, the highest in the world, edged close to 12 percent for the first time since May, right before its bailout.
Clendenning reported from Madrid. Associated Press writers from across Europe contributed.