Following Greece? A prolonged period of deflation could also spark unrest in Ireland, according to respected analyst Albert Edwards

IRELAND and other struggling European countries may see "civil unrest" as they tackle their spiralling budget deficits. Along with the other so-called PIGS nations (Portugal, Ireland, Greece Spain), Ireland may face years of weak economic growth, Société Générale strategy analyst Albert Edwards said in a research note, as governments slash public spending to cut deficits.

"In my opinion this will not be tolerated by the electorates in these countries. Unlike Japan or the US, Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain. Consigning the PIGS to a prolonged period of deflation is most likely to impose too severe a test on these nations," Edwards said.

He blamed the crisis on "years of inappropriately low interest rates resulting in overheating and rapid inflation... Economic prosperity over the past decade has been a sham: a totally unsustainable Ponzi scheme built on a mountain of private-sector debt".

Though he praised Ireland for taking action to correct public finances, he said there was no appetite across Europe for the measures necessary to restore confidence that deficits can be controlled.

"My own view is that there is little help that can be offered by the other eurozone nations other than temporary confidence-giving sticking plasters before the ultimate denouement: the break-up of the eurozone," he said.