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Is Europe losing hunger for reform?

Tuesday, May 26, 2015 - 02:08

Signs of growing public dissatisfaction in Spain and Portugal - combined with Greece's woes - have sent the euro to its lowest level in a month. Kirsty Basset looks at whether Europe has lost its hunger for reform.

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The battering Spain's government took at the weekend in local elections contributed to a fall in European shares on Tuesday. Spanish banks Popular, Sabadell and Caixabank were down 1.8 to 2.2 per cent. Spanish 10-year yields hit their highest mark in nearly a week. And the euro fell to its lowest level in a month. It came after the country's ruling party suffered its worst defeat in over 20 years in local elections - amid growing opposition to austerity. Spanish Prime Minister Mariano Rajoy. (SOUNDBITE) (Spanish) SPANISH PRIME MINISTER MARIANO RAJOY SAYING: "Everytime there is a social and economic crisis - such as the one we've been through - governments always get weaker and suffer the consequences." Last week in Lisbon, ECB President Mario Draghi warned Europe was letting its guard down on reform. He praised Portugal for making difficult changes to the way its economy works. But economists say that drive is waning, after a three-year bailout program ended last year. Is enthusiasm on the wane elsewhere? Although Spain's ruling party has helped turn its economy into one of the fastest growing in the euro zone it's now paying the political price for its reforms. Berenberg European economist Christian Schultz. (SOUNDBITE)(ENGLISH) BERENBERG EUROPEAN ECONOMIST, CHRISTIAN SCHULTZ, SAYING: "Everything is on the mend, but the big problem is that it doesn't help politicians, the politicians that took the tough decisions that delivered this improvement because unemployment is still very high at 23 per cent." With general elections due later this year, some are now worried Spain might follow Greece in electing a populist government. But Schultz doesn't agree. (SOUNDBITE)(ENGLISH) BERENBERG EUROPEAN ECONOMIST, CHRISTIAN SCHULTZ, SAYING: "The disaster that we're seeing unfolding in Greece should stop Spanish voters voting for these left wing populists. We don't want an Inglesias recession after we've just had a Tsipras recession in Greece." As voters sent Rajoy a clear message they've had enough of austerity, Rajoy has vowed to better explain the economic recovery to Spaniards. But it may be too late - his party faces the prospect of a coalition if it's to stay in power.

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Is Europe losing hunger for reform?

Tuesday, May 26, 2015 - 02:08