From The Observer. The article notes that “Another problem in Romania, as elsewhere in the region, is that many new middle-class house owners have taken out mortgages in euros. With local currencies collapsing, repayment is becoming harder.” Also note that German export recovery is highly dependent on Eastern European demand for its capital and consumer goods, and that the longer Germany stays in the doldrums, the more difficult global recovery will be to achieve.
Eastern Europe braced for a violent ‘spring of discontent’
Riots and street battles are set to spread through Bulgaria, Romania and the Baltic states as inflation, unemployment and racism fuel tension, reports Jason Burke
The Observer, Sunday 18 January 2009
Eastern Europe is heading for a violent “spring of discontent”, according to experts in the region who fear that the global economic downturn is generating a dangerous popular backlash on the streets.
Hit increasingly hard by the financial crisis, countries such as Bulgaria, Romania and the Baltic states face deep political destabilisation and social strife, as well as an increase in racial tension.
Last week protesters were tear-gassed as they threw rocks at police outside parliament in Vilnius, capital of Lithuania, in a protest against an austerity package including tax rises and benefit cuts.
In Sofia, Bulgaria, 150 people were arrested and at least 30 injured in widespread violence. More than 100 were detained after street battles between security forces and demonstrators in the Latvian capital, Riga.
According to the most recent estimates, the economies of some eastern European countries, after posting double-digit growth for nearly a decade, will contract by up to 5% this year, with inflation peaking at more than 13%. Many fear Romania, which joined the European Union with Bulgaria in 2007, may be the next to suffer major breakdowns in public order.
“In a few months there will be people in the streets, that much is certain,” said Luca Niculescu, a media executive in Bucharest. “Every day we hear about another factory shutting or moving overseas. There is a new government that has not shown itself too effective. We have got used to very high growth rates. It’s an explosive cocktail.”
Major Romanian companies threatening massive job cuts include low-cost car-maker Dacia, where up to 4,000 posts could go if sales do not recover. A spokeswoman for Renault, which owns Dacia, said such deep cuts would only be considered in a “catastrophic scenario”, but production in Romania has already been halted for two months after local demand plunged by more than half. Other major companies have already announced plans to relocate, with one Japanese wire factory heading for Morocco.