More than 100,000 marchers converged on Brussels from across the EU to protest austerity measures on Wednesday, while Spanish unions took the extraordinary step of breaking ranks with Spain's socialist government by launching a general strike."Workers are on the streets today with a clear message to Europe's leaders," said John Monks, head of the European Trade Union Confederation. "There is a great danger that workers are going to pay the price for the reckless speculation that took place in financial markets. You have to reschedule these debts so that they are not a huge burden and cause Europe to plunge down into recession," he said, reflecting growing bitterness among ordinary people that they are bearing the brunt of austerity while bondholders have been shielded from losses.
Spain's car industry was entirely paralysed with the exception of the Mercedes plant in Vitoria, and transport stoppages caused severe disruption. Ignacio Fernandez Toxo, head of the country's CCOO trade union, said premier Jose Luis Zapatero was committing "political suicide" by carrying out harsh cuts while unemployment hovers at 20pc, or 41pc for youths.
Austerity fatigue is surfacing across a large arc of Eastern and Southern Europe, raising concerns that electorates may start to rebel. The Fidesz government in Hungary has already sent the EU and the International Monetary Fund packing, opting for "economic nationalism". Even the police joined demonstrations last week in Romania, hurling their kit at the presidential palace to protest public sector wage cuts of 25pc.
The pro-Russian Harvest Party is leading the polls in Latvia's election this week, threatening to tear up its EU-IMF rescue deal. Critics say the country should have devalued in order to cushion the blow rather than undergoing to harsh deflation under its euro peg.
Latvia's economy has contracted 18pc since the peak. Unemployment is 20pc, and teachers, nurses and police have seen wage cuts of up to 30pc. Diplomats suspect Harvest may try to play off Moscow against Brussels to extract better terms.
France bowed to pressure for further fiscal tightening yesterday, pledging to cut its deficit from 7.7pc of GDP this year, to 6pc next year, still a modest effort by EU standards.
"Considering the current monetary disorder, investors who finance our debt are attentive to our debt-reduction effort," said finance minister Christine Lagarde, alluding to a rise in spreads on France's 10-year bonds to 55 basis points over German Bunds.
In Italy, premier Silvio Berlusconi warned foes that they were playing with fire as his government faced a confidence vote last night after weeks of paralysis, in part triggered by cuts in grants to the regions. "It is absolutely not in the interests of our country to risk a period of instability at a moment when the crisis is not yet over," he said.
Italy's public debt is 118pc of GDP and the world's third biggest in absolute terms.
The protests in Spain and Brussels came as the Commission proposed plans for automatic sanctions of up to 0.2pc of GDP on states that persistently breach the EU's debt and deficit ceilings of 60pc and 3pc of GDP. The mechanism is tougher than the old Stability Pact since states need a qualified majority to stop punishment. There will also be a 0.1pc fine for states that run trade imbalances, including surpluses – a twist likely to anger Germany.
"The EU politicians think they can somehow wipe away economic reality and the structural differences between these countries by bureaucratic means. It's ludicrous," said Ruth Leae, economic adviser to Arbuthnot Banking Group.
Mr Monks said the proposals totally misguided. "How is that going to make the situation better? It is going to make it worse," he said.
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