Last week there were general strikes in Greece and Britain. These two general strikes may be just the tip of the iceberg previewing what may be coming in 2012. Given the widespread anger among middle and lower classes that deficit reductions unfairly target them by to pay for the economic woes created by an upper class that is escaping the pain of tax increases and service cuts, more general strikes seemingly would be an unsurprising reaction to austerity measures.
The situation in Greece is particularly dicey. Next year's budget, which aims to push the deficit down to 6.7% of GDP from over 9% this year, will both aggravate the debt crisis and anger labor. If the planned austerity measures lead to a series of crippling general strikes, the economy will suffer and the deficit hole will grow even larger.
There are only three solutions to Europe’s debt problem: 1) turn on the printing presses; 2) default on sovereign debt, or 3) austerity measures. However given the likely reaction in the streets to austerity measures, it will be interesting to see if Europe’s political leadership can hold the line on implementing deficit cuts. Do not be surprised if after a token effort at austerity measures leads to massive general strikes, the EU either turns on the printing presses or the Euro zone breaks apart.