Europe: The Dangers of Spring
May arrives and with it perhaps a European Spring. For the eurozone, however, it promises a month of turbulence.
The battle for the Elysee Palace in France is a curtain-raiser for the battle for Europe.
Francois Hollande - the socialist candidate and favourite to win the French elections - has quite deliberately put himself at the head of the anti-austerity first movement. In doing so he has thrown the gauntlet down to Angela Merkel and German leadership.
He promises to renegotiate the so-called fiscal pact (the treaty to enforce budgetary discipline in the eurozone). Since the crisis began, no piece of legislation has been more important to the German leader. Mrs Merkel late last week said quite simply it "cannot be renegotiated". Francois Hollande delivered a stinging reply. "It is not Germany," he said, "that will decide for the entirety of Europe."
What is being exposed is a major flaw with Mrs Merkel's fiscal pact. It is undemocratic”
If Mr Hollande wins, he will say to Berlin, "Your way isn't working and that the French people have 'made a decision'."
He wants to re-cast the emphasis towards growth. The two leaders' first meeting will be tense to say the least.
Spain will concentrate Franco-German minds. According to one of its ministers, it is "in a crisis of enormous magnitude". One Spanish minister compared the country to the Titanic and had a warning for the Germans: "If there's a sinking here, even the first-class passengers drown."Revolt brewing?
The markets do not believe Spain can reduce its deficit to 5.3%. Its banks are nursing billions in bad loans from the collapse of the housing bubble - 367,000 jobs were lost in the first three months of the year.
There is increasing resistance to austerity. At the weekend there were protests against cuts to health and education. There could be protests on Thursday outside an European Central Bank meeting in Barcelona and 'Los Indignados' - the indignants - who occupied squares last year may try to repeat the action in the middle of the month.
A big economy - double the three economies rescued already - is heading into bailout territory. At the very least its banks will need help.
Next Sunday the Greeks go to the polls. They still have to implement some of the austerity measures that were a condition of the second bailout agreed last month. It is possible that a majority of MPs elected will be opposed to further spending cuts. Greece could be back in crisis.
At the end of May, the Irish will give their views of the pact in a referendum. The Italians, too, are holding local elections. The European public is getting a chance to deliver its verdict on austerity. Last week two European governments fell over the issue - the Netherlands and Romania.
Hollande's plans to reform pact
- New euro bonds for industry infrastructure projects
- Freeing up investment funds
- Financial transaction tax
- Mobilising unused structural investment funds
What is being exposed is a major flaw with Mrs Merkel's fiscal pact. It is undemocratic. It ties the hands of future governments - and that, of course, was its intention but it doesn't stop voters opposing further cuts.
In the eurozone, deficits are being reduced. But debt - in many cases - is still growing. Growth is almost non-existent. Recession has returned for countries like Spain and Italy. The gap between the German economy and the southern economies is only widening.
Privately in Brussels there are fears that a revolt against more cuts will draw them in. They have become the enforcers of austerity. Some officials are worrying they will be caught in the backlash. Last week over 30% of French voters supported parties hostile to Brussels. The vote was dismissed as "populism" - which is the default response to most criticism - but they were the votes of real people.
The economist Nouriel Roubini described the eurozone crisis as a "slow-motion train wreck".
As we go into May, there are signs of a revolt against austerity gathering pace. If it happens it will be a new and unpredictable phase of the eurozone crisis.