Overview
In today’s Stepwise Risk Outlook, we’re introducing a new segment: Watch List. Periodically on Fridays, our analysts will cover parallel trends across multiple countries. Over the past several weeks, major protests have erupted throughout the European continent. Driven by affordability concerns and coming in advance of elections in France, Italy and Spain, the demonstrations are rocking European capitals and creating new risks for market confidence, the EU’s policy agenda and multinational operations. Read our analysts' takes on protests in France, Spain, Italy, and Albania below.
Ian Cameron, Europe analyst – France’s domestic unrest is colliding with the country’s growing economic and fiscal difficulties
Last weekend, France experienced a sudden blowup of destructive riots. These intermingled with longer-running protests that had been kicked off by student demonstrations in recent weeks, and which have grown into a society-wide movement. While the larger protests have focused on the cost of living, austerity politics and political dissatisfaction, French government figures have blamed organized ultra-left groups for much of the violence and destruction that occurred.
The riots come as France prepares for presidential elections set for April 2027. French President Emmanuel Macron is term-limited after 10 years in office, and his centrist political movement has weakened considerably over the past several years. Polling shows Marine Le Pen of the populist-right National Rally as the frontrunner with around 35%, and several candidates, including the populist-left Jean-Luc Mélenchon, are fighting for second place.
The protests are also intertwined with France’s increasingly difficult economic and fiscal position. The last two Prime Ministers’ governments collapsed over budget disputes, and Prime Minister Sébastien Lecornu’s government likewise plans unpopular spending cuts. Simultaneously, French bond yields have risen sharply, showing an eye-watering spread of 173 basis points from Germany’s 10-year bonds, as domestic unrest and concerns about France’s economy undermine confidence.
The riots caused significant damage across the country and have drawn criticism that the government failed to sufficiently respond. This could further weaken Macron and his political allies, while potentially strengthening Le Pen’s position given her focus on law and order, as well as opposition to austerity. Mélenchon could also benefit from growing opposition to austerity. The high level of political polarization heading into the election could deepen instability and potential for domestic unrest, which would have negative business implications. Moreover, both Le Pen and Mélenchon are seen as economically risky and as promoting unrealistic solutions to France’s debt conundrum that could worsen confidence in France’s debt.
Thomas Goldstein, Europe analyst: Spain's protests are focused on housing costs but sparked elections that could lead to government change
Spain’s protests are centered on cost-of-living issues, especially housing. The spark is the story of María del Carmen Abascal, an 87-year-old woman in a wheelchair, also known as “Maricarmen.” She was evicted from her central Madrid house of seven decades in a stretcher on September 23 after an investment fund owner increased her rent by 230%. After Maricarmen’s eviction, tens of thousands of Spaniards took to the streets, and about 1,000 camped on Madrid’s Puerta del Sol, a popular public area. In poor health, Maricarmen died on October 7.
To many Spaniards, the tragedy of Maricarmen embodies their frustration with a housing supply crisis. There are about 0.65 new homes constructed per new household in Spain. More than a quarter of Spaniards spend over 40% of their income on rent. And 55% of 24–29-year-olds, unable to afford rent, live with their parents.
Socialist Prime Minister Pedro Sánchez proposed an emergency bill that would have prevented evictions of vulnerable people (like Maricarmen) until 2030, automatically extend leases due to expire before 2028 by two years, and restrict “vulture fund” acquisitions of properties. The measure failed on October 2 after Junts, a pro-Catalonia party sometimes supportive of the left-wing government, rejected the measure. Madrid’s Tenants’ Union called for a general strike over the housing crisis after the failed vote. Sánchez called a snap election for November 29, gambling that protestors will back him against the center-right People’s Party (PP) and far-right Vox.
Spain reflects how cost-of-living protests can upend political stability. Sánchez’s gamble may backfire, given that his left-wing allies are divided and potentially unable to reach the parliamentary threshold. Polling suggests that PP and Vox have the clearest path to a government coalition. However, PP’s austerity agenda may inflame current protests and make government formation difficult, exacerbating political instability and market uncertainty in Spain.
Ian Cameron, Europe analyst – Economic unhappiness across Italy is putting the government under increasing pressure
Italy faced two simultaneous waves of protests over the weekend: agricultural and trucker protests in the country’s south and student protests in the north that led to clashes with police. However, both are linked to economic concerns, with students protesting high costs of living and low economic opportunities and farmers demonstrating against high fuel prices linked to the Iran war. While riots have been comparatively small, only about 2,000 in Milan, the southern protests have involved blockades causing major supply issues.
Prime Minister Giorgia Meloni, the leader of the populist right-wing Brothers of Italy party, has responded with economic relief and a security crackdown to quell the unrest. She has implemented financial support for farmers and fishermen on diesel prices, but she also announced her decision to use a security decree to break the trucker blockades in the country’s south. Regarding the student protests and violence in the country’s north, Meloni condemned the riots and expressed her solidarity with the police.
As in France, the protests are occurring with Italy’s 2027 parliamentary elections hanging in the background. Meloni’s coalition is under pressure from a new challenger to her political right, former General Roberto Vannacci’s National Future party. Vannacci’s role in shaping Italy’s public debate has grown as his party gathers support. While Meloni’s party is polling strongly and she has sharply criticized Vannacci, she could face difficult coalition arithmetic after elections if his party continues to attract voters. Protests and competition from Vannacci could shrink Meloni’s room for maneuver in Brussels at a critical moment for issues like the EU’s next budget, enlargement, trade relations with China, and support for Ukraine. Moreover, the potential prospect of continued trucker blockades in the south could create further difficulties in the local business environment.
Elton Smole, Europe and Americas analyst: Albania's anti-government protests call for political change amid push for EU membership
After a summer of mostly peaceful protests, Albania has seen an eruption of violence over the last two weeks. The movement began early this year in response to a proposed luxury resort development on a nature preserve that is home to vulnerable species, inspiring the name "Flamingo Revolution." The demonstrations grew into a broader anti-government movement over concerns around education, employment prospects, and corruption, with demonstrators insisting that Prime Minister Edi Rama resign. He has repeatedly said that he has no intention of stepping down. Rama is serving his fourth term and was reelected in May 2025. His main opponent, Sali Berisha, has sought to capitalize on the moment by expressing support for the protestors, while Rama has blamed outside agitators for the violence. However, protestors have condemned both establishment parties (who have alternated in power since the fall of communist rule in 1991) and have called for a new generation of leaders.
The protests come just as momentum for Albania's EU accession pathway builds. Montenegro and Albania are the frontrunners in the Western Balkans, and Montenegro's negotiations are anticipated to conclude next year. Rama has sought to portray his government as Albania's best hope for EU membership, and he attended the Berlin Process Leaders' Summit in Sveti Stefan, Montenegro, yesterday, where German Chancellor Friedrich Merz reiterated support for EU enlargement in the region but condemned the recent violence. In addition to the unrest in Albania, the current situation in France may also dampen the prospect of EU enlargement, which requires unanimity among member states. In contrast to Germany's pro-enlargement stance, France has historically been resistant to enlargement, and would be even more so under the leadership of either Marine Le Pen or Jean-Luc Mélenchon, who are the two main challengers to embattled President Emmanuel Macron and France’s centrist parties.
