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Gloom, anger spreads as European economies teeter

By Shawn Pogatchnik

Associated Press

Published: Wednesday, Nov. 24 2010 10:50 a.m. MST

DUBLIN — Anger and fear about Europe's seemingly unstoppable debt crisis coursed through the continent Wednesday. Striking workers shut down much of Portugal, Ireland proposed its deepest budget cuts in history and seething Italian and British students clashed with police over education cuts.

Amid it all, analysts were deeply skeptical about the future — saying even the desperate efforts of governments, the European Union and the International Monetary might not be enough to prevent countries from defaulting or banks from going under.

The Irish Stock Exchange saw a bloodbath in bank stocks as investors pushed the panic button and the bond markets decided it would only be a matter of time before Portugal and possibly Spain would be the next countries begging for outside help.

In Lisbon, strikers all but closed the airport, stranding passengers who couldn't get in or out of the country.

Commuter Luis Moreira, catching one of the last trains out of Lisbon, said Europe's woes only seem to be getting worse by the day. He supported the growing outrage over salary and pension cuts and wondered why billions were being thrown instead at governments and banks.

"People have to fight for their rights," Moreira, 51, told The Associated Press. "People have to fight against what is happening."

Government policies have "sent people into poverty and misery," said union leader Manuel Carvalho da Silva, noting that Portuguese civil servants will see wage cuts averaging 5 percent next year.

Italian students occupied university buildings and piazzas to denounce education reform being debated by Parliament, clashing briefly with police in Rome and blocking five main bridges over the River Arno in Pisa.

In Britain, students decried government plans to triple tuition fees.

"Education is not a rich kid's game," said Tash Holway, a 19-year-old student in London. "If this keeps up, the entire industry will change. It won't be about talent, but only about who can pay."

While Irish bank shares plummeted for a third straight day amid fears investors would be wiped out, Portuguese and Spanish borrowing costs shot up sharply because of rising concerns that the governments' debt loads will prove unsustainable and put them next in line for European bailouts.

Irish Prime Minister Brian Cowen announced Wednesday he now expects the EU-IMF bailout loan to total €85 billion ($115 billion). Some experts accused Ireland of minimizing the true scale of its financial disaster, saying Ireland probably needs a bailout of €130 billion ($175 billion) because of looming residential mortgage defaults.

"The government is completely in denial about the amount of money they'll have to borrow," said Constantin Gurdgiev, a finance lecturer at Trinity College Dublin.

He compared Ireland's plight to that of Greece, which received a €110 billion ($145 billion) EU-IMF rescue bailout in May.

"Our economy is more than three times over-indebted than Greece. If Greece is insolvent, where does that put us?" Gurdgiev asked.

Eurasia Group, a New York-based research and consulting company, warned that the problems of the 16-nation eurozone won't stop with Ireland. It predicted a rescue plan for Portugal could be unveiled early next year, when Portugal needs to sell government bonds to finance spending.

"There is a strong presumption that a package will be necessary for Portugal and the related planning is under way," Eurasia Group said. "Portugal will be pressed hard to accept a package even if the Portuguese government claims the country does not need it."

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