Protests that began in France a few weeks ago over poor school conditions have escalated into clashes with police, looting, and arson amid rising fuel prices and the cost of living. The problem is that France’s budget deficit reached 5.1% of GDP in 2025, while public debt approached 120%, leaving the government with little room to support households. Actually, it is now pushing for €54 billion in spending cuts in its 2027 budget, as the fiscal outlook could otherwise deteriorate further, but getting them through amid social unrest won’t be easy. Demonstrations also took place in Liège, Belgium, in early October before spreading to other cities across Wallonia and Brussels, as well as Ireland, Spain, Italy, Germany, Greece, and Austria.While largely peaceful, the unrest is putting pressure on European bond markets and the EUR/USD currency pair.In France, for example, long-term government bond yields have reached 5.5%, surpassing US yields for the first time since 2013. The cost of insuring against a French default has also climbed to its highest level since 2013.European equities are also under pressure, with rising energy prices amid the war in the Middle East, Ukrainian strikes on Russian refineries, and concerns over returns on AI investments adding to the strain and further weighing on sentiment. What could calm the markets? A strong earnings season.And the good news is that consensus estimates point to 20.7% earnings growth for the STOXX Europe 600, driven by energy, technology, and industrials. Higher gas and oil prices are boosting energy profits, while the AI investment boom is driving demand for European equipment and industrial solutions.According to Reuters, tech earnings could rise by nearly 33%, while industrial profits could grow by 11%. Banks could provide an additional boost.Of course, much will depend on companies’ outlooks for Q4 and 2027, how well they protect margins, and whether they can turn revenue growth into cash flow. It is also worth considering that earnings estimates have also been revised up for Q3, so beating expectations may be harder.But even if they do, the relief may be short-lived, as Europe’s underlying fiscal problems remain unresolved. Inflation risks are also still there, meaning central banks may have to stay hawkish, which is hardly good news for the economy or financial markets. This article was written by IL Contributors at investinglive.com.