The current situation is this - we have a financial crisis set off by the collapse of the US housing market (the biggest single market in the world). Because of the financial instruments involved in financing US mortgages from 2002 - 2008 it's difficult for banks to tell how much any of their investments are indeed toxic debt, which means they don't know if they are solvent or not. Furthermore, they know all other banks are in the same situation, which means they are hesitant to lend to other banks, let alone consumers.
So, we have a stagnant world economy even though we have production capacity and we have people in need of goods and services, because the money supply is essentially being hoarded by the financial institutions. In this situation the government is the only source of demand left. It could create this demand by investing smartly into infrastructure or paying someone to dig a whole and another person to fill it up. One is clearly better than the other, but in the short term they're both better than austerity.
I hope I wasn't unclear. I think it's important that everybody realize this. These people might not have sophisticated reasons to protest austerity, but they are actually correct.
EDIT: I hate to bitch about being down-voted. Please don't think this is about the karma, but it is disappointing. I think what I wrote clearly adds to the discussion. I suppose it's okay to vote down if you simply disagree, but I spent time constructing a thought-out response and I think at least a discussion of where I got it wrong is in order...