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Europe's southern discomfort

Scandals and infighting are weakening the euro zone's southern flank.

Greece protests 07 19 2013Enlarge
Protestors denounce new austerity in Athens this week. Some doubt whether the government can steer through further measures needed to meet the terms of Greece's international bailout. (Aris Messinis/AFP/Getty Images)

LISBON, Portugal — The revista is a typically Portuguese form of theater — an all-singing-all-dancing spectacle of political satire whose undoubted modern master is writer and director Filipe La Feria.

His Grande Revista à Portuguesa is currently packing in crowds with a cast of crooked mayors, miserly ministers, stony faced international creditors and newly rich Angolan oligarchs buying up chunks of Portugal's crisis-stricken economy.

"With this crisis and the politicians we've got, I'm not short of material," La Feria told GlobalPost, as he greeted fans ahead of recent sold out performance. "You'll see, I give a good spanking to whole bunch: the left and the right."

But even La Feria's fertile imagination would struggle to concoct the blend of farce and tragedy being played out by real-life politicians in the counties in Europe's south.

From Portugal through Spain and Italy to Greece, the risk of political crisis is threatening to re-ignite the euro crisis as governments tasked with balancing their books and hauling economies out of recession are instead struggling to survive scandals or bouts of political infighting.

Spain's Prime Minister Mariano Rajoy is fighting for his political life after allegations surfaced that he and other senior members of the conservative People's Party took kickbacks from a slush fund fed by construction magnates for years.

The recent publication of text messages of support Rajoy sent to the jailed former party treasurer at the center of the scandal have further eroded the PM's position.

"Spain cannot carry on like this, Rajoy is damaging Spain," said opposition leader Alfredo Perez Rubalcaba. His Socialist party has torn up an agreement to help the government pull out of the crisis and demanded Rajoy's resignation.

Rajoy denies the accusations and says he's being blackmailed by his former friend, the jailed party accountant Luis Barcenas, but he's facing the prospect of a vote of no-confidence in parliament.

In Italy, competing scandals relating to racism, alleged shady deals with Kazakhstan and the never-ending saga of former Prime Minister Silvio Berlusconi's sex and business affairs are undermining the uneasy governing coalition of rival left and right-wing parties thrown together after February's election.

Fears of a return to instability led President Giorgio Napolitano to issue a stark warning to the parties Thursday.

"If you put at risk the continuity of this government," he warned in a speech. "The backlash against us, in international relations and financial markets would be immediate and perhaps irreparable."

Berlusconi's conservative People of Freedom party (PdL) is threatening to bring the government down if its leader Angelino Alfano is forced to resign as interior minister over his role in the deportation of the wife and daughter of prominent Kazakh dissident Mukhtar Ablyazov.

Alma Shalabayeva and her six-year-old daughter Alua were seized in a late-night raid on their home in Rome in May and bundled onto a private plane headed to Kazakhstan, where Ablyazov has emerged as a prominent critic of President Nursultan Nazarbayev.

Alfano denies advance knowledge of the expulsion and has refused to follow his chief of staff in resigning.

However, the case raises uncomfortable questions about both the relations between Nazarbayev and Alfano's political mentor Berlusconi, and lucrative deals between Italian and Kazakh energy companies.

The PdL has also threatened to bring down the government of center-left Prime Minister Enrico Letta if appeals courts uphold recent guilty verdicts against Berlusconi on charges of paying for sex with an underage girl, abusing power and dodging taxes.

Differences between left and right have also been inflamed by comments by the Senate’s deputy leader Roberto Calderoli, who last weekend likened Italy's first black minister to an orangutan.

Calderoli is the latest in a stream of politicians from the right-wing Northern League party to hurl racial insults at Congolese-born Integration Minister Cecile Kyenge since her appointment by Letta in April.

Letta, on a visit to London on Wednesday, said Calderoli had "brought shame on the country" and demanded his immediate resignation. Although while some figures in Berlusconi's party have joined in the condemnation of his comments, the PdL has yet to add its voice to calls for him to step down.

Although the Northern League is currently in opposition, it has previously worked closely with Berlusconi's party. Calderoli served as a minister in three governments led by the billionaire media tycoon.

In Greece, another left-right coalition government has been left with a wafer-thin majority in parliament after one left-wing party stormed out over Prime Minister Antonis Samaras's failed attempt to shut down the state television network.

That left the government with just five seats more than the opposition in the 300-seat parliament.

The latest austerity bill — to end job security for 25,000 police, teachers and other public workers — scraped through on Wednesday night despite protests in the streets. However, persistent doubts remain about the government’s ability to steer through further measures needed to meet the terms of Greece's international bailout.

Portugal's government — made up of two rival conservative parties — has been teetering on the brink of collapse for two weeks since the finance and foreign ministers resigned in a dispute over the pace of austerity.

Fears the country would be unable to keep promises to its creditors sent markets into a tailspin and caused a shiver of panic across the euro zone.

In response Prime Minister Pedro Passos Coelho made some hasty concessions to his junior partner and appeared to have averted a government meltdown, until country's President Anibal Cavaco Silva — whose role is largely ceremonial — used his constitutional powers to reject the coalition deal and demand that the opposition Socialist Party be brought into a new "national salvation government."

The president says unity is needed to steer the country through to the end of its dependence on an international bailout program, which is optimistically scheduled for mid-2014 — but the opposition and governing parties are deeply divided. Talks between them broke down in acrimony Friday leaving the country in political limbo.

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The political punch-ups in the south have spooked markets, but at least some economists say the fact that Europe’s real power lies elsewhere means the economic risks of instability shouldn’t be overblown.

"Things would be dramatic if it looked like an extremist party from the left or right were to come to power, but that didn't happen in the worse case, which was Greece, and I don't think it’s going to happen in Portugal or Spain," says Rui Barbara, asset manager at Portugal's Banco Carregosa.

"So long as we have a minimum of stability, the solution to the crisis depends more on our European partners, particularly Germany or the European Central Bank, than it does on any political changes here."

http://www.globalpost.com/dispatch/news/regions/europe/130719/europe-southern-discomfort-greece-portugal-italy-scandal