The euro remains under pressure on the international currency market FOREX amid the spread of protests in European countries. Investors are assessing the risks to economic activity, public finances and political stability in the region. Additional attention is drawn to Greece, where on 21 October thousands of students, teachers and public sector workers took to the streets.

According to Reuters, participants in demonstrations in Greece are demanding increased funding for education, improvements to schools and universities, higher pay and a solution to the problem of overcrowded classrooms. Dissatisfaction is also fuelled by the high cost of living, expensive rents and rising energy costs.

Which countries are seeing protests

The wave of demonstrations that began in France in September has spread to several European states. As of 22 October the countries where protests are taking place include:

  • France — discontent over the cost of living and the state of public services; some actions involved clashes and property damage.
  • Spain — protests, in particular, related to the housing issue and the affordability of rents.
  • Belgium — reasons for demonstrations include problems in the education system.
  • Italy — participants in the actions are speaking out against rising living costs and problems in public services.
  • Portugal — among the main reasons for discontent are the cost of living and housing affordability.
  • Albania — protests are linked, among other things, to accusations of corruption and economic difficulties.
  • Greece — students, teachers and public employees joined the all‑European wave, demanding better educational conditions and higher salaries.

The scale and causes of the protests vary from country to country. Not all demonstrations are equally connected to the pan‑European wave of discontent.

How protests affect the euro

For the currency market the key risk is that prolonged social unrest could complicate the economic and fiscal situation in Europe. Especially sensitive for investors is the situation in France — the second‑largest economy in the eurozone, which is facing problems of public debt and budget deficit.

In trading on 19 October the euro fell by about 0.1% to 1.1225 dollars, amid stronger demand for the US currency and reports of unrest in France. Market analysts focused primarily on the possible impact of instability on French government bonds and borrowing costs.

At the same time, the protests in Greece should not yet be viewed as an independent factor capable of determining the direction of the euro. For the EUR/USD currency pair, the combination of events will be more important: further developments in France, the dynamics of European bond yields, economic statistics and expectations regarding the decisions of the European Central Bank and the US Federal Reserve.

What to expect next

In the near term the euro may remain sensitive to news about the spread of protests and a possible increase in political tension. If the demonstrations lead to prolonged disruptions in the operation of businesses and transport or force governments to increase spending, this could heighten investor concerns about economic growth and fiscal sustainability in Europe.

However, much will also depend on the American side of the currency pair. A stronger dollar amid expectations about Fed policy could put additional pressure on EUR/USD, while reduced demand for safe‑haven assets and improved market sentiment could support the European currency.

Thus, Greece joining the wave of demonstrations expands the geography of public discontent in Europe, but for the euro’s future direction the decisive factors will remain the development of events in France, the state of the European economy and the difference in expectations regarding the monetary policy of the ECB and the Fed.