Europe slipped into recession for the second time in three years against a backdrop of large and often violent demonstrations against austerity measures adopted by several European governments aimed at restructuring their ailing, debt-ridden economies.
There were violent demonstrations in Spain, Italy and Greece where millions of workers struck work and several hundred were arrested following clashes with police.
Wave of protests
Across northern Europe, protesters turned out more in sympathy than in anger. Several thousand gathered at the Brandenburg Gate in Berlin, and there were stoppages and marches in Belgium and France. But it was southern Europe that was hardest hit. "There is a social emergency in the south," said Bernadette Segol, the secretary general of the European Trade Union Confederation. "All recognise that the policies carried out now are unfair and not working."
The Eurozone's economic output further fell by 0.1 per cent in the third quarter. These economies had already registered a 0.2 per cent drop in the second quarter. The Organisation for Economic Cooperation and Development (OECD) predicted more gloom and doom ahead. The Christmas season has started on a note of despondence and the New Year is unlikely to bring cheer.
The two successive dips in economic output formally placed the Eurozone economies in recession with Greece registering its fourth straight year of recession. Its economy has shrunk steadily by between 4 per cent and 6 per cent each year for the past four years. The Greek government pushed its latest austerity package earlier this week to get the next tranche of the EU and IMF's bailout money.
Last week, the German Chancellor, Angela Merkel, expressed her dissatisfaction with the way France was handling its debt-cutting measures. Although President Hollande has taken several measures to raise taxes and has given small and medium companies tax cuts to stimulate employment, growth and exports, in German eyes that is nowhere enough. In order to reassure German leaders of the seriousness of France's intentions to get its house in order, Paris, on Thursday, dispatched Prime Minister Jean-Marc Ayrault, a German speaker, to Berlin for talks with Ms. Merkel and senior members of her team.
The EU has come a long way since the Greek crisis a year ago and fears of a Eurozone break-up have receded. However, consumer confidence has taken a hit as have stocks and there continues to be tremendous volatility in the markets. There has been a spate of suicides in Greece and Spain, especially by older citizens who have lost their homes and seen their pensions shrink. These individual tragedies might stay the hands of governments in administering more bitter medicine in the short-term.
Greece has been thrown a two-year lifeline. Spain continues to demand that the cuts demanded by the EU take into account the fact that most southern economies are deeply mired in recession with little or no immediate prospects for growth.