investors remain very jittery over Sweden’s potential exposure to currency devaluations in Baltic

TO BE NOTED: From Alphaville:

"Is Eastern Europe on the edge again? Posted by Izabella Kaminska on May 29 09:34.

Edward Hugh over at A Fistful of Euros draws our attention to the following warning over the Baltic region issued by Danske Bank on Thursday:

The event risk has risen sharply in the Baltic markets and we advise outmost caution. Yesterday, the Swedish central bank Riksbanken said it will increase its currency reserve by SEK 100 bn through a loan from the Swedish debt agency. Investors seem to believe that this is a buffer to deal with potential problems arising from the Baltic crisis.

The big fears are mainly focused on Latvia, which following a disastrous Q1 GDP reading of -18 per cent is literally teetering on the edge, according to some commentators. Hugh offers some more context:

Swedish banks have claims in Latvia, Lithuania and Estonia amounting to about $75 billion, according to ING Groep NV, with SEB, Swedbank and Nordea accounting for 53 percent of Latvia’s lending market. Sweden’s central bank raised the amount of euros available for the Latvian central bank to swap for lats to 500 million euros ($670 million) at the start of May. Latvia’s central bank first entered the swap agreement with both its Swedish and Danish counterparts to borrow as much as 500 million euros for lats last December. The Riksbank was to provide 375 million euros and the Danish central bank the remainder.

Latvia has already spent over 500 million euros buying lats this year to support the currency.

Certainly, investors remain very jittery over Sweden’s potential exposure to currency devaluations in Baltic. Shares in both Swedbank and Skandinaviska Enskilda Banken fell sharply on Thursday as the market widely interpreted the Riksbank’s move to rebuild currency reserves as a signal it may be preparing to inject liquidity into commercial lenders.

But while prospective Baltic devaluations may already be having far-reaching effects on Swedish lenders operating in the region, the wider implications: eg. those that a Baltic state could very realistically default some time soon, should now really begin registering as a possibility among investors.

Just how a green-shoot obsessed market would react to such a piece of news is the big question.

Related links:
The Eastern European carry-trade meltdown, reviewed - FT Alphaville
Estonia, nul points - FT Alphaville
Emerging market credit fundamentals deteriorating, S&P says - FT Alphaville

This entry was posted by Izabella Kaminska on Friday, May 29th, 2009 at 9:34 and is filed under Capital markets. Tagged with Eastern europe, Latvia."

And A Fistful Of Euros:

"Danske Bank Warn On The Baltics by Edward Hugh

Danske Bank has issued the following advice to investors:

The event risk has risen sharply in the Baltic markets and we advise utmost caution. Yesterday, the Swedish central bank Riksbanken said it will increase its currency reserve by SEK 100 bn through a loan from the Swedish debt agency. Investors seem to believe that this is a buffer to deal with potential problems arising from the Baltic crisis.

No comment.

The krona fell for a third day after the Riksbank announced the loan, and declined more than any of the 16 most-traded currencies against the dollar and the euro. Stefan Ingves, central bank governor, said in the statement that the financial crisis may be “prolonged”. Since the start of the financial crisis, Sweden has spent 100 billion kronor on swap agreements with Iceland, Estonia and Latvia and on dollar injections into Swedend’s financial system.

Swedish banks have claims in Latvia, Lithuania and Estonia amounting to about $75 billion, according to ING Groep NV, with SEB, Swedbank and Nordea accounting for 53 percent of Latvia’s lending market. Sweden’s central bank raised the amount of euros available for the Latvian central bank to swap for lats to 500 million euros ($670 million) at the start of May. Latvia’s central bank first entered the swap agreement with both its Swedish and Danish counterparts to borrow as much as 500 million euros for lats last December. The Riksbank was to provide 375 million euros and the Danish central bank the remainder.

Latvia has already spent over 500 million euros buying lats this year to support the currency.

Earlier this week the New York Times Economix Blog said the following:

The jury is still out on whether Latvia can do what it takes to rebalance its budget and qualify for the bailout money it received from the International Monetary Fund and the European Union. Take a look at this analysis of Latvia’s situation from Danske Bank, which has consistently offered hard-headed – that is, pessimistic – views of the Baltic nations of Latvia, Lithuania and Estonia. (The bank was also far ahead in calling the disaster in Iceland.)

The most interesting aspect of the story, from a global perspective, was the notion that a default — even by a small country — could trigger a cascade of bad news at a time when the financial situation appears to be easing.

Let us just all hope that this last mentioned “notion” remains just that, “an interesting notion”.

Meanwhile, Swedish media seem to be treating the devaluation as almost a “fait accompli” - those of you who don’t speak Swedish can try putting this and this through your Google translator if you are interested."

Their anti-crisis strategy is to hope the US and China deliver sufficient growth to pull Europe out of recession

TO BE NOTED: From the FT:

"Like a fish, Europe is rotting from the head

By Wolfgang Münchau

Published: May 10 2009 18:58 | Last updated: May 10 2009 18:58

Helmut Schmidt, the former German chancellor, last month made an astute observation: “The European Central Bank is the only institution in Europe that works well.”

It is a remarkable statement in several ways. It implies of course that the other European institutions are not working well. I am afraid this is true. I have on previous occasions criticised the unco-ordinated policy response of Europe’s political leaders. Their anti-crisis strategy is to hope the US and China deliver sufficient growth to pull Europe out of recession. That will probably not happen this time.

But there is another, less frequently discussed dimension to Europe’s mistaken policy response. The European Commission, the executive arm of the European Union whose job is to implement the region’s law and to drive its policy agenda, has failed abysmally in this crisis. The Commission was largely absent during the worst months of last year, and its subsequent responses fell consistently below what one would expect.

Of course, the Commission is not a government. It has only a small budget, no powers to raise taxes or issue bonds, and it operates under strict guidelines. But as various dimensions of economic policy are now integrated across Europe, one would expect the Commission to play a leading role as a co-ordinator and as a source of new ideas to fight the crisis.

The problem with the Commission is not its civil servants. In the absence of political leadership, they apply the rules as they are, for example when they recommend brutal and politically suicidal wage cuts in Latvia, when they apply accession criteria to the eurozone with no flexibility, or when they produce ineffective financial regulation. These are not causes of the problem but mere symptoms of a lack of political direction.

There is a saying that the fish rots from the head, and this is exactly what has been happening here. There is nothing in European politics that stinks more than the apparent inevitability of another five-year term for José Manuel Barroso, the Portuguese president of the Commission. He spent most of the last few years on his bid for re-election rather than doing his job. If the centre-right wins the elections to the European parliament, as everybody seems to expect, nothing can stop Mr Barroso’s bandwagon.

This state of affairs sends out a disastrous message – that job performance is irrelevant and that Europe has already reverted to business as usual. Mr Barroso is a conservative from a small country, who followed a socialist from a large country. Europe’s top jobs are not awarded on the basis of electoral success, but on whether you fit into an opaque political matrix.

In the case of a Commission president who has already served for five years, one would expect that he should at the very least be able to answer the questions: What exactly did you achieve during your first term? And what is your big idea for the second?

In my view, Mr Barroso is among the weakest Commission presidents ever, a vain man who lacks political courage. He and his supporters will tell us that his big achievement is his dogged pursuit of the Lisbon agenda, a programme to boost Europe’s international competitiveness. Another supporter of Mr Barroso told me that his biggest legacy was the decision to set up the De Larosière committee, named after a former central banker whose group produced a moderately ambitious report to reform Europe’s system of banking supervision. Okay, let us give him some credit for that.

I suspect his big idea for the next five years is to relaunch the Lisbon agenda, and waste another five or 10 years on voodoo economics, and diverting attention from real and urgent policy issues, such as a more coherent system of economic crisis management.

Everybody in Brussels is saying that Mr Barroso’s reappointment is almost a done deal. I suspect they are right. Ms Merkel apparently finds him a congenial and pliable Commission president, and the Socialists are too incompetent to field their own candidate. Gordon Brown, the British prime minister, is also supportive. Nicolas Sarkozy is not a fan, but then the French president is not a supporter of a strong and self-confident European Commission either, so Mr Barroso might suit him well for that reason. Silvio Berlusconi, the Italian prime minister, has other problems at the moment.

There are still a few potential obstacles to Mr Barroso’s re-election. The European elections might not go as well for the Christian Democrats as they hoped, and the centre-right might end up too fragmented. It is possible that the outcome of the second Irish referendum on the Lisbon treaty will have a bearing on the decision, which is why Mr Barroso wants EU heads of government to decide on his reappointment at their meeting next month, rather than in October, as Mr Sarkozy recently proposed.

So it is not quite game, set and match yet, but it is as close as it could get at this stage. This is all very depressing. Mr Schmidt is right about the ECB. Indeed the central bank made a number of good decisions last week, when it delivered a robust policy response to the crisis.

But I never thought that we would ever celebrate a central bank as the only political institution that really works in Europe. How did we get there?

munchau@eurointelligence.com"

Investors are demanding more than triple the yield they sought a year ago to own Hungarian bonds denominated in foreign currencies.

TO BE NOTED: From Bloomberg:

"IMF Lending Exceeding $55 Billion Prompts Bondholders’ Anxiety

Share | Email | Print | A A A

By Simon Kennedy and Sandrine Rastello

April 20 (Bloomberg) -- The International Monetary Fund may be so conscious of having handed out bad advice to needy countries in the past that it isn’t offering them enough guidance now.

The Washington-based lender is combating the worst financial turmoil in its 64-year history with more than $55 billion in loans for nations from Pakistan to Serbia. As the fund prepares to lend even more, it is retreating from its practice -- carried out with adverse effects a decade ago in Asia -- of demanding that governments overhaul their economic systems in return for aid.

The risk is that without more-stringent loan requirements, borrowers won’t reform their foundering economies, leaving investors to enforce the discipline -- and delay recovery -- by shunning the nations’ debt and currencies. Among the economies whose markets may be most vulnerable are those in eastern Europe such as Latvia and Hungary, say Brown Brothers Harriman & Co. and Royal Bank of Scotland Group Plc.

“The pendulum may be swinging too far,” says Claudio Loser, former head of the fund’s Western Hemisphere department and now a fellow at the Inter-American Dialogue in Washington. “There was a strong perception that the IMF used to ask too much of countries. Now there is a major danger it’s moved too far in the direction of not setting enough conditions.”

$750 Billion

Little more than a year ago, the IMF -- which convenes its spring meeting in Washington April 25 -- lacked both relevance and resources. Now its lending firepower is being tripled to $750 billion by the Group of 20 nations. The G-20 also agreed to give the IMF another $250 billion in Special Drawing Rights, an overdraft facility for its 185 members.

“The IMF needs to adapt,” Dominique Strauss-Kahn, the fund’s managing director, said in an April 16 speech. “Its lending must become more flexible and better tailored to country circumstances.”

The fund said last month it would set fewer goals for nations to commit to in return for aid and would place less emphasis on structural reforms such as overhauling banking or tax systems. It also eased terms for a credit line introduced in October that is now attracting interest from Mexico and Poland.

“There’s lots of money but little pressure for economies to adjust,” says Kenneth Rogoff, former IMF chief economist and now a professor at Harvard University in Cambridge, Massachusetts. “It’s much more fun being Santa Claus than Scrooge.”

Market Rally

So far, aid packages from the IMF have buoyed markets in some emerging economies. Mexico’s peso strengthened 8 percent against the U.S. currency, and Poland’s zloty appreciated 1.1 percent versus the euro since the countries said they will seek IMF credit lines.

Ukraine’s equities and bonds have rallied since the IMF announced its $16.4 billion bailout in October, with the benchmark PFTS stock index gaining 47 percent, and the nation’s 7.65 percent U.S. dollar bonds due 2013 climbing 35 percent.

If governments don’t improve their fiscal policies, though, investors will deprive their economies of capital and punish their bonds, stocks and currencies, says Win Thin, senior currency strategist at Brown Brothers Harriman in New York.

“We cannot see investors piling back into the emerging- market countries with the worst fundamentals, even if the global crisis continues to abate,” Thin says.

Triple the Yield

Investors are demanding more than triple the yield they sought a year ago to own Hungarian bonds denominated in foreign currencies. Pension funds may pull out of Latvia after Fitch Ratings on April 8 downgraded its debt to junk, says Karlis Danevics, head of the Latvian credit department of Stockholm- based bank SEB AB.

Fitch said about half the countries in central and eastern Europe may face credit-rating downgrades. The ability of governments to stick with their IMF commitments will help determine the ratings, Fitch said.

Thin says ratings companies may still be too confident in the sovereign debt of Latvia, Hungary and Romania. ING Romania analysts say the country may exceed the budget-deficit target of 4.6 percent of gross domestic product that its government agreed on with the IMF.

“IMF money helps resolve issues to do with liquidity, but is only one part of the process of overhauling economies with more fundamental problems, for example Latvia, Ukraine and Hungary,” says Timothy Ash, head of emerging-market economics at Royal Bank of Scotland.

Missing Opportunity

Economists from countries now receiving aid say the fund is missing an opportunity to force lasting reforms.

Zoltan Torok of Raiffeisen International Bank AG in Budapest says the IMF has been “very soft” on Hungary -- first calling for the budget deficit to be reduced to 2.6 percent of gross domestic product from 3.4 percent last year, then settling for about 3 percent.

He says the IMF didn’t go far enough in pushing for cutbacks to Hungary’s pension system. Almost a third of the population of 10 million is retired, and their benefits account for 10 percent of GDP, according to the Paris-based Organization for Economic Cooperation and Development.

In Serbia, Stojan Stamenkovic, head of the Belgrade-based Economic Institute, says the fund has suggested it “will accept any solution” from the government that cuts the 190 billion- dinar ($2.7 billion) budget deficit by 100 billion dinars. That’s not enough, given that Serbia’s economy is likely to contract 10 percent this year, he says.

Social Programs

Elsewhere, the fund has eased its embrace of free markets and aversion to big government while increasing its emphasis on social programs. For its $7.6 billion loan package, Pakistan was given the goal of tripling spending for the poor to 0.9 percent of GDP. Asad Farid, an economist at AKD Securities in Karachi, says the IMF lacks a “long-term policy” that would encourage Pakistan to cut its trade deficit and increase capital investment.

The biggest test for the IMF’s new strategy may come in Turkey, where aid talks collapsed in January. Economic Minister Mehmet Simsek said March 26, after the talks resumed, that he expected the fund to show more flexibility.

“It would be positive if the new approach means there’s a new perspective” on the size of the spending cuts the IMF will seek, he said.

Ukraine’s Deficit

The fund hasn’t completely rolled over. It delayed a second installment of financing for Ukraine after objecting to the government’s proposal to run a budget deficit of 5 percent of GDP, agreeing April 17 to accept a shortfall of 4 percent. It also postponed a 200 million-euro ($264 million) transfer to Latvia after the government failed to cut its deficit quickly enough. Iceland was ordered to lift its benchmark interest rate to a record 18 percent.

Such demands prove to Kevin Daly, who helps oversee about $4 billion in emerging-markets bonds at Aberdeen Asset Management Plc in London, that the IMF is “striking the right balance” between support and restraint.

“There’s a realization that there is still some discipline from the IMF and that countries will have to address its measures,” Daly says.

Still, the fund’s shift signals recognition that it went too far in the 1990s demanding free-market policies that often deepened crises and alienated it from nations it sought to help.

Sweeping Cuts

In 1997 the IMF pushed sweeping spending cuts and interest- rate increases on Thailand in return for a $3.9 billion loan. Within six months, the fund conceded it had been too aggressive as Thailand’s growth and tax revenue plunged. Riots flared in Indonesia when the government carried out the IMF’s call to eliminate fuel and food subsidies for the poor.

“The good news is that they’ve committed themselves not to have the structural conditionality that was part of the rigidity, part of the problem in the East Asia crisis,” Nobel Prize-winning economist Joseph Stiglitz said in an April 16 interview.

For some countries that need aid, such as Mexico and Poland, “we won’t ask them for anything to change, because they have the right policies and it’s absolutely not their fault that they’re in a difficult situation,” Strauss-Kahn, 59, said in response to a question after his April 16 speech.

In other cases, such as aid to Romania, he said he asked his team not “to fix the world, fix all the problems” as sometimes they wanted to do in the past “but just to fix the problems they’re facing.”

Jonathan Anderson, an economist at UBS AG in Hong Kong, says that even if the IMF has relaxed its conditions for assistance, that’s no reason for governments to delay paring debts and fiscal imbalances.

“If depositors in Latvia, Lithuania, Ukraine or other cases wake up one morning and decide they all want to get out of the currency at once, it probably doesn’t matter how big the IMF package is,” Anderson says. “There are still potential blowup scenarios out there.”

To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net"

"At the end of the day, they know there's no alternative to the market economy."

From the Washington Post:

"Economic Crisis Fuels Unrest in E. Europe
Shaky Governments Face Growing Anger

By Philip P. Pan
Washington Post Foreign Service
Monday, January 26, 2009; A01

RIGA, Latvia -- On a frigid evening this month, more than 10,000 people gathered outside a 13th-century cathedral in this Baltic capital to protest the government's handling of Latvia's economic crisis and demand early elections. The demonstration was one of the largest here since the mass rallies against Soviet rule in the late 1980s, and a sign of both the public's frustration and its faith in the political system.

But at the end of the night, as the crowd dispersed, the protest turned into a riot. Hundreds of angry young people, many drunk and recently unemployed, rampaged through the historic Old Town, smashing shop windows, throwing rocks and eggs at police, even prying cobblestones from the streets to lob at the Parliament building.

Similar outbursts of civil unrest have occurred in recent weeks across the periphery of Europe, where the global financial crisis has buffeted smaller countries with fewer resources to defend their economies. Especially in Eastern Europe, the turmoil reflects surging political discontent and threatens to topple shaky governments that have been the focus of popular resentment over corruption for years. ( YES )

Europeans have compared the unrest to events of the 1960s and even the 1930s, when the Great Depression fueled political upheaval across the continent and gave rise to isolationism and fascism. But no ideology has tapped into public anger and challenged the basic dominance of free-market economics and democratic politics in these countries( GOOD NEWS SO FAR ). Instead, protesters appear united primarily by dashed economic hopes and hostility against the ruling authorities.

"The politicians never think about the country, about the ordinary people," said Nikolai Tikhomirov, 23, an electronics salesman who participated in the Jan. 13 protest in Riga. "They only think of themselves."

Days after the riot, a demonstration by 7,000 protesters in neighboring Lithuania turned violent, leading police to respond with rubber bullets. Fifteen people were injured. Smaller protests and clashes have erupted in Bulgaria, the Czech Republic and Hungary, following weeks of street violence in Greece last month. On Thursday, police in Iceland used tear gas for the first time in half a century to disperse a crowd of 2,000 protesting outside Parliament in Reykjavik. The next day, Prime Minister Geir Haarde agreed to call early elections and said he would step down.

Dominique Strauss-Kahn, head of the International Monetary Fund, said the financial crisis could cause further turmoil "almost everywhere," listing Latvia, Hungary, Belarus and Ukraine as among the most vulnerable nations. "It may worsen in the coming months," he told the BBC. "The situation is really, really serious."( I AGREE )

There is particular concern about the relatively young and sometimes dysfunctional democracies that emerged after the fall of communism in Eastern Europe, where societies that endured severe hardship in the 1990s in the hope that capitalism and integration with the West would bring prosperity now face further pain.

"The political systems in all these countries are fragile," said Jonathan Eyal, director of international security studies at the Royal United Services Institute, a research group in London. "There's a long history of unfulfilled promises and frustration with the political elites going back to the Communist era."

Eyal warned of a revival of ethnic conflict in the region, where most countries have large minority populations, adding that tensions could rise after workers who have lost jobs in Western Europe return home. But he noted that extreme nationalist movements have won only limited support in Eastern Europe in recent years.

"People here instinctively know the idea of a strongman who imposes order doesn't work," he said, arguing that the region's history with Communist rule, its integration with the European Union and its anxiety about Russia's intentions make a turn toward authoritarianism unlikely. "They have seen the past, and a return to previous populist schemes isn't very persuasive. At the end of the day, they know there's no alternative to the market economy."( I HOPE HE'S RIGHT )

That assessment rings true in Latvia, where the government's approval ratings have fallen as low as 10 percent -- the worst in the European Union, and lower than at any other time in the nation's post-Soviet history -- but where people scoff when asked if they want to abandon markets and political freedoms.

"If some politician said, 'Let's leave the E.U., give up democracy and free markets,' you can be sure that nobody would vote for him," said Aigars Freimanis, director of Latvia's largest polling firm. The memory of Soviet occupation makes it difficult even for mildly left-wing parties to win elections, he said.

But Freimanis said public anger could bring significant political change, noting that the crisis has renewed debate on constitutional reforms, including measures to give citizens the right to dismiss Parliament and to vote for individual lawmakers instead of only political parties.

"We want more democracy, not less( GOOD )," said Renata Kalivod, 28, a social worker who attended the protest in Riga. She said that her father, who recently lost his job, had given up on elections but that she still believed it was possible for the public to have an impact. "If I gave up, I would leave the country like other young people. But I'm still here," she said.

After enjoying double-digit growth rates that were among the highest in the E.U., Latvia is now struggling to defend its currency and survive a sharp slowdown. The economy is forecast to shrink by 5 percent this year, after a 2 percent drop last year. Unemployment has doubled in the last six months to 8 percent, with the rate three times as high among young people.

Forced to accept a $10.5 billion bailout from the IMF, the European Union and other sources -- including neighboring Estonia, a fact some considered humiliating -- the government has embarked on an austerity program involving 25 percent budget cuts, 15 percent wage reductions for civil servants and large-scale layoffs.

Aigars Stokenbergs, an opposition leader in Parliament who quit the ruling coalition and helped organize this month's protest, said the public was as upset about corruption as economic mismanagement. The same conservative parties have dominated the government for years, he said, and many believe they serve a handful of billionaires who struck it rich in the privatization schemes of the 1990s.

"People don't want this government anymore. They don't trust it," he said, criticizing Parliament for firing the nation's anti-corruption chief in June and adopting the IMF reforms in a single day without consulting unions, businesses or other groups.

But Andris Berzins, a leader in the ruling coalition and former prime minister, said the public's anger is misplaced because the country's problems are rooted in decisions by previous administrations to expand spending instead of building up reserves. "The government needs to take some very serious economic reforms, but it hasn't been able to build public support for them," he said.

Public anger intensified in December when the finance minister, Atis Slakteris, badly fumbled an interview on Bloomberg Television. Asked what had caused Latvia's economic crisis, he replied, "Nothing special." The words were soon emblazoned on T-shirts and shop windows as parodies proliferated on the Internet.

The riots, which left about 25 people injured and resulted in 106 arrests, have unnerved people in part because Latvia has practically no history of such violence. Some are worried the crisis will exacerbate tensions between ethnic Latvians and the nation's Russian-speaking minorities, who make up more than a third of the population.( THIS ETHNIC CONFLICT IS WORRYING )

President Valdis Zatlers has responded by distancing himself from the ruling coalition that elected him and essentially siding with the opposition, threatening to dismiss Parliament if it fails by March 31 to pass a set of reforms and take other specific actions to build public trust.

But under Latvia's aging constitution, the president must call an unprecedented referendum to dismiss Parliament. Early elections would be held if it passed, followed by talks to form a new government. The entire process could take more than eight months, and some say such a prolonged period of political uncertainty would hinder Latvia's efforts to repair its economy, resulting in further unrest.

Governments across Eastern Europe face similar uncertainty, and analysts said the timing of electoral cycles could determine which ones fall. Newly elected governments in Lithuania and Romania might survive, for example, while the Bulgarian government faces elections this summer and is in trouble.

Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington, said it makes sense in Latvia to hold new elections because the current Parliament is "utterly discredited" and can do little for the economy in any case. "You can't have a government that has no support," he said. "It's useless."( TRUE )

Analysts said the E.U. serves as a bulwark against radical politics in the region, but they warned of a backlash if the developed nations that dominate policymaking ignored the problems of the smaller ones( YES ). In Latvia, politicians and business leaders complain about E.U. agricultural subsidies that benefit farmers in Western Europe and trade barriers in the service sector. But they have praised the E.U.'s swift response to the country's economic crisis so far.

Pavel Nazarov, 21, a physics student who participated in the rally, said he welcomed E.U. intervention for another reason. "They can keep an eye on our corrupt politicians," he said, "even when we can't."

All in all, considering there are protests and riots, this is good news.

Protests against governments and banks have increased in some European countries as the global economy has deteriorated.

Proof of what I've been warning about with social dislocations and disruptions. From Reuters:

"Jan 22 (Reuters) - Protests against governments and banks have increased in some European countries as the global economy has deteriorated.

Here are details of some of the protests around Europe:

* ICELAND:

-- Police used teargas against anti-government protesters when a demonstration outside parliament turned violent on Thursday.

-- The parliament building has become the focus of anger against Prime Minister Geir Haarde's coalition government's handling of the financial crisis. Demonstrators have called for the prime minister and other senior officials to resign and his limousine was pelted with eggs by demonstrators on Wednesday.

* BULGARIA:

-- Hundreds of Bulgarians demanded economic and social reforms in the face of a global slowdown on Wednesday in a second week of anti-government protests.

-- Students, teachers, green activists, doctors and public servants took part in the rally in front of parliament in Sofia, calling on the Socialist-led government to take action or step down. Many shouted "Mafia" and "Resign".

-- Last week hundreds of protesters clashed with police, smashed windows and damaged cars in Sofia when a rally against corruption and slow reforms( NB ) in the face of the economic crisis turned into a riot.

* GREECE:

-- High youth unemployment( NB ) was a main driver for unrest in Greece, initially sparked by the police shooting of a youth in an Athens suburb. General unemployment runs just above the EU average at 7.4 percent but the figure is 21.2 percent for the 15-24 age group and 10.5 percent for those aged 25-34. The protest forced a government reshuffle.

* LATVIA:

-- Last week, a 10,000-strong protest in Latvia descended into a riot, some protesters trying to storm parliament before going on the rampage. Government steps to cut wages( NB ), as part of an austerity plan( NB ) to win international aid, have angered people.

* LITHUANIA:

-- Police fired teargas last week to disperse demonstrators who pelted parliament with stones in protest at government cuts in social spending( NB ) to offset an economic slowdown. Police said 80 people were detained and 20 injured during the violence.

-- Prime Minister Andrius Kubilius, who was only sworn in in December, said the violence would not stop an austerity plan( NB ) launched after a slide in output and revenues."

These governments are not facing protesters who want less government. Dream on. To the extent that governments seem incompetent, indifferent, and corrupt, there are very real chances of major social disruptions and dislocations. Anybody not taking this problem seriously is making a major mistake.