UBS' George Magnus Asks "Why Are The European Streets Relatively Quiet?"

Tyler Durden's picture

The wave of social unrest that rumbled across Europe between 2008 and 2011 has become less intense. This has come as a cause for relief in financial markets, as it has helped to underpin the marginalization of ‘tail risk’ already addressed by the ECB and the Greek debt restructuring. And yet the latest crisis over the Cyprus bail-out/bail-in not only shoots an arrow into the heart of the principles of an acceptable banking union arrangement, if it could ever be agreed, but also signifies the deep malaise in the complex and fragile trust relationships between European citizens and their governments and institutions. Some people argue that protest, nationalist and separatist movements are just ‘noise’, that the business of ‘fixing Europe’ is proceeding regardless, and that citizens are resigned to the pain of keeping the Euro system together. UBS' George Magnus is not convinced, even if public anger is less acute now than in the past, it is far from dormant, and its expression is mostly unpredictable. So is the current lull in social unrest a signal that the social fabric of Europe is more robust than we thought, or (as we suggested 14 months ago) is the calm deceptive?

Another systemic problem

Social unrest is a systemic phenomenon, which, according to an OECD report, meets two principal criteria. It is highly uncertain, complex and ambiguous; and it is highly likely to generate ripple effects into other sectors of the economy and society, possibly leading to the toppling of governments, or even political systems. Although European social unrest since the crisis in Greece began has claimed a small number of fatalities and considerable damage to property, it has been notable more for the public expression of lack of trust in the institutions of government, including in Brussels. If a rising number of people give up on the willingness and ability of their institutions to address grievances, then the lull is most likely deceptive.

We have been here before. The economic and political context of the 1930s was, of course, different. Then there was much historical and unresolved geo-political baggage, and a rupture of the political centre as two radically different ideological veins erupted from the backlash against free trade and the gold standard. One championed radical social reform, the other what may be euphemistically called ‘nation-building’ 5 . And there was no EU. But the problem today, as then, is the same, namely the inadequacy of mainstream, political channels to address rising public concern about the loss of economic security, social stability and, yes, cultural identity6. How else to explain both the rise of Spain’s indignados, and other similar national protest movements in Europe, and the increase in nationalist, populist and separatist sentiment, and representation in national parliaments from Greece, France, and Spain to Finland and the Netherlands, and now Italy?

Via George Magnus, UBS:



Still an austerity zone


Even though the financial crisis in Europe has faded, for the time being at least, the economic stress nurturing protest movements hasn’t. The best that can be said is that the incidence of austerity may not be as significant as it was in 2010-11




Backlash link to austerity


Let’s assume nothing changes, and that while European elites debate how – or if – they can build strong European banking, fiscal and economic institutions, with the required transfer mechanisms between creditors and debtors, the economic lot of European citizens, an unhappy one for five years now, shows no improvement. This seems a decent assumption.




The principal economic lesson is that an austerity regime with recurring reductions in public outlays won’t work a) when the private sector is trying to delever and shrink liabilities at the same time b) when it is a generic phenomenon and c) when its principal impact is to depress the level of money GDP and sustain the economy in a liquidity trap. But thanks to some interesting empirical work, another lesson concerns the corrosive and dangerous effects of large and sustained austerity in creating a social backlash that results in greater uncertainty, and therefore inertia, when it comes to corporate hiring and capital spending. As a result, output and public sector tax revenues suffer, reinforcing the negative dynamic between debt and the economy.




when expenditure cuts, specifically, rise to more than 2% of GDP, and particularly when they rise towards or over 5% of GDP, the number and the severity of incidents of unrest rise sharply.




Self-evidently, there have been heightened levels of social unrest and shocks to the political system in Greece, Spain, Portugal and Italy, but not in the UK or Ireland, or in the US, for that matter, though neither the US nor the UK, for example, have been immune to social unrest, sometimes requiring the force of the state to suppress it.12. But the main difference between many incidents of social unrest and the ones that damage the social fabric and the economic environment is the impact (sometimes more perceived than real, perhaps) of highly restrictive budgetary measures. Some governments may be better able to implement and absorb them, and sustain the trust or belief in citizens in perseverance. Mostly, this comes down to the robustness of local institutions, and the performance of leaders, as well as culture and history.


The most fundamental manifestation of this damage is, of course, unemployment. But this is only the most visible sign of the upheaval in Europe’s famed social model, and overlooks other important social and economic fault lines, including stagnant or declining real wages, rising income inequality, levels of youth unemployment of between 25% and 50%, and the rise in the numbers of long-term unemployed.


These phenomena didn’t begin with the financial and Euro crises, of course, but they have certainly been exacerbated by it and by the response of governments, and citizens are certainly making the connection, regardless.

So why are the streets relatively quiet?

The short answer is we don’t know. None of the reasons we can think of add up to much, but judge for yourself. It could have something to do with Europe’s rapid ageing demographic transition. The proportion of young adults, aged 15-24 has already been falling from peak levels seen in the mid 1980s, and is on track to decline further in the next 20 years. The proportion of 15-59 year olds, or what we might imagine as the part of the population most likely to express non-voting anger, is peaking now, but a significant decline is predicted. Perhaps the baby boomers have expended their protest energy!


Rapid growth in, and a rising proportion of, the numbers of young people, say aged 15-29, certainly feed the potential for social protest and upheaval. But they also need a catalyst, which could be the emergence of high inflation.

Empirically, there is an unequivocal association, but this is best applied, in contemporary times at least, to the experience of emerging and developing countries, for example, as in the Arab Spring. Although the European upheavals in the 1960s and 1970s were set against a backdrop of rising inflation, those in the 1930s and today are the product of depression and awkward questions of self-determination, not inflation.

Perhaps the relative calm in Europe has something to do with European family structures. The Bank Credit Analyst recently published a chart, emphasizing the role of the family as a shock absorber. The authors suggest that the countries with the highest youth unemployment rates are also those with the highest proportion of young adults living with their parents, who fulfill the role of effecting transfers and economic and social support.

We are not sure about this one either, although having an extended family structure on which to rely is clearly a mitigating factor against poverty and social exclusion. But the two variables may simply be spuriously correlated since both represent symptoms of a depressed economy. In any event, those countries with the highest youth unemployment and numbers living at home have already claimed the bragging rights for anti-austerity protest, while six of the other eight countries have been characterized by fallen or weakened governments, and the rise of nationalist and anti-immigrant political parties and policies.

A conclusion to this discussion is not possible.


In a benign outcome, the potential for social disorder will be defused by a new approach to economic burden-sharing, a re-sequencing of the pursuit of austerity and growth objectives, and steady progress towards the establishment of credible and trusted European banking, economic and political institutions, including financial transfer mechanisms. Motherhood, to be sure, and this has at least two vital caveats, namely the willingness of Germany and other northern European countries to accept significant sovereignty compromises, and the implications for the EU project, if this level of integration proves a bridge too far for UK voters in the promised 2017 referendum.

Social and political upheavals would doubtless haunt the worst-case outcome, where muddling through leads nevertheless to a fragmentation of the Eurozone, or, in extremis, a collapse, in spite of OMTs and the like. The possible consequences, including for the social fabric of Europe, have been well aired in the last couple of years.

The middle way, so to speak, is a muddling through that never scales the successful outcome hurdles, but carries on regardless. Political bonds, maybe fear, sustain the Euro system, but European leaders are unable to reach an agreed and acceptable framework for durable economic recovery and full integration. This outcome describes the status quo, and is the base case for most people. But it is also about stagnant, low growth, persistent high unemployment, retreating targets for debt sustainability, more bail-outs and bail-ins, latent financial instability, and likely sovereign default. The current Eurozone news could not be more apt, and doesn’t seem like the ideal scenario in which to expect European social unrest and political turbulence to fade away.

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icanhasbailout's picture

It takes time to boil rope properly.

Supernova Born's picture

Fiat currency still adequately conceals the truth and the magnitude of the danger.

THX 1178's picture

When you say rope you mean frogs right?

markmotive's picture

The one-percent isn't just a US phenom.

Europe's aristocracy is holding their breath hoping the masses don't revolt.

newengland's picture

Orwell was ahead of his time.

Malcolm X was ahead of his time.

The time is now.

We the people have been 'had', 'cheated', 'looted', 'bombed' raped and robbed by the two faced lying politicial elite and their gangster banksters.

Even now, it is not enough to satiate the blood lust of the money brokers.

$16 trillion to pay for Iraq, and now Syria and Iran are the next targets.

All wrong.

How many more people must die for the freak zionist CONgress to get paid its money while it hates the Constitution, Bill of Rights and Declaration of Independence...and its idiot wage slave fans do nothing to stop these freaks.

ebworthen's picture

The elites are boiling themselves, they just don't realize it.

Sooner or later the house of cards will come down on their heads; just like through all history.

Rip van Wrinkle's picture

Correction. It will come down on our heads. Have you learned nothing?

Silenus's picture

It will come down on everyone's head and the mad scramble will begin. Though it will be terrifying and many will die and suffer, including many of our loved ones, I welcome the downfall of the system. There comes a point when the present way of things is intolerable and must end, damn the consequences. 

Witnessing those who were previously complacent and smug shake with terror at the calamity unfolding all around them, and which will swallow them up, is worth any cost to oneself and to others. 

If you fear this eventuality, just give it time. The truth will dawn upon you as it has for so many others: that death is better than a life of slavery, for yourself and for others. So in witnessing others perish and in facing death yourself, you need not feel bad.

akarc's picture

Through out history people have willingly been ruled, willingly committed atrocities, willingly marched of to give their lives in meaningless wars that only enriched those who ruled them and allowed themselves to become desensitized to slavery and poverty.

Even in the formation of our own "free" country we were only willing to grant freedom to a privileged few, i.e. white men. Most in our own formation wanted nothing to do with going against the King.

High crimes and treason listed in the Declaration of Independence continue to occur, only now at a faster pace. During the last depression the ruled stood in lines for soup and bread while banksters and government continued to plan on how manipulate the system in such a manner as to insure their continued to rule.

America's history has been one of theft and oppression. Ask the indians. Ask the slaves. Ask women. Ask chinese workers crippled by the age of thirty by repetitive injury incurred making Iphones for the I U.S.

During a talk at an Occupy rally I posited that if you are going to be true to your movement you may have to give up your Iphones as they are the perfect symbol of profit over people. Well you can imagine how that was received. And I walked away.

Because it is as it has always been.  



Silenus's picture

I say the elites not only need to be killed, but their families as well. Here's how I think of it. These crooks loot and pillage their own countrymen and the rest of the world for the sake of their legacy - so they can pass their ill-gotten wealth and status to their offspring and so construct feudal dynasties. 

By wiping out their offspring, their legacy is cancelled, all their effort is for naught, and the meaning of their lives is negated. It's the ultimate punishment, rendering their existence a total waste. 

Silenus's picture

A hungry man is an angry man.

Strut's picture


It's no different than Occupy... Its too damn cold to protest in most of Europe. Give it another 4-6 weeks and we'll see the White-boy spring.

akarc's picture

Fortunately Wasington used the cold to his advantage

Larry Dallas's picture

I remember reading an article once (Rolling Stone) how Italian young men can't afford their own place so they fuck in their Fiats.

Pathetic as it sounds, humans will only change when they feel too much pain to stay the same. That is when change happens.

Obviously, living at home at 32 with Mom and Pop and sneaking to the hills to get a piece of ass in a small compact isn't enough pain for them to psychologically bear.



Strut's picture

I own a 3000' home with 60 acres, and still like to fuck in my car. I don't see your point.

NoDebt's picture

I'm married XX years so I don't fuck anymore, ever, anywhere.  I have vague recollections of fucking.  I'm pretty sure I enjoyed it a long time ago.  Quite certain I did, actually. 

Well, off to the kid's soccer practice.

Strut's picture

Well played sir. I feel for you, and will make her say your name.

StychoKiller's picture

Yer avatar never fails to get a smirk outa me! :>D

cynicalskeptic's picture

You've got it all wrong... time to screw your brains out WHEN they're at practice   got to take advantage of empty house time    side benefit is that when they're teenagers they tend to hold off irresponsible sex when their parents are doing it

Lost My Shorts's picture

That's brilliant -- I will remember that last part.  Nothing takes the allure out of sex quite like picturing your 50ish parents doing 69.  But if you only screw while they are out, how do you make sure the teenager knows you are doing it, and has the image vividly in mind?

Harbanger's picture

Next time you drive her in the Subaru, play her Beyonce's Bow down bitches song.

Go Tribe's picture

Fuck under the stands.

MSimon's picture

I'm lucky. My great grandfater was making kids into his late 60s. Evidently his genes got passed on to me.


I'm thinking of getting a 20 something for a little extra fun if the first mate approves. Well she han't said no yet. I have asked. Hope springs eternal.

akarc's picture

Im married 20 years and if I wanna fuck I still have to sneak off. Just wish I had a Fiat. Getting a little old to keep falling off the motorcycle

cynicalskeptic's picture

Re; Italian 20 somethings.....   good friend goes back regularly.   The 'men' ARE  spoiled children pampered by their mothers so htey don't want to leave home unless they get a wife who replaces their mother.  BUT the women have NO interst in marrying the mother spoiled Italian males and are more than happy to work instead of playing housewife.  Most of the working women are NOT going to settle for sex in a FIat.     so... plumeting marriage and birth rates 

babylon15's picture

If by working you women, you're referring to the ones that go and have sex with Berlusconi and other Italian mafia, then yes, they aren't going to settle for anyone with honest money.


Unfortunately that's all women I guess, so the non-mafia men have simply given up and don't care anymore.

ebworthen's picture

lol...the Women on here may hate me for it but you have a point.

francis_sawyer's picture

Why do you think soccer is so popular?

L G Butz PhD's picture

there be women here?


JimmyCDN's picture

Someone once told me that marrying an Italian woman was the same as pulling a rip cord on an inflatable life raft.

wee-weed up's picture

European streets are relatively quiet...

for the same reason the US stock market is making new all-time highs... reality disconnect!

ATM's picture

It's the printing. It covers up so many sins until it doesn't.

It's a cloaking device that eventually disengages to reveal the horrible truth. The telltale event is always the pick up in velocty of money. That will tell you the people are figuring it out. Once that reaches critical mass it's over.

Silenus's picture

You can hang them without boiling the rope properly. It just takes longer for them to strangle - wholesome entertainment for the whole family!

Paul Bogdanich's picture

It is hard gauge whether the questions the author posts are rhectorical or if he is really that blind to others thinking.  The objective answer is obvious.  Eurpoeans do not accept that neo-liberal capitalist ideas or ways are an infalable system or even the best system in the world.  Americans blindy accept that assumption and have been trained to express violent emotion when the assumption is even questioned.  Germany has learned how to game that ideology through the inherent inefficiencies and the Russians vote their pocketbook.  That said the people don't believe it and have not since at least 1940.  Hitler used to rail against capitalist ineffeciencies and how they could not be tolerated by anyone who supported the "volk" (common people - of Germanic blood in that circumstance) under the tag line "International Jewery" which is how he chaged the German system in 1934 through 1939.  Then of course his inherent evil glimpsed what he saw as his own divinity and the predictable consequences followed.  For everyone I might add.  That said when the researchers asked ordinary Germans in 1936, 1937, 1938 and 1939 why the German people put up with the loss of freedoms incurred under the National Socialists (Nazi's) they used to uniformly respond that the restricted frredoms in Germany did not include the freedom to starve to death as under capitalism.  Recognition of this fact is what kept Roosevelt and others from acting  against the early Nazi provocations particularly in Spain.  By 1939 it was too late.  Anyway the story is the same this time.  The leader over there that will ultimately take control is the one who raises the banner "First give us bread and then ask for virtue."  Over here I believe the tag line was "two chickens in every pot."  Being ignorant of basic history is a tragic individual failing when if enough people share the defect it often leads to tragic results on a grand scale.  The current wealth disparity and the allocation of all productivity gains to the top 1% (the stockholders) is the root problem.  Everyone of any education knosw it and its going to cause massive unrest if it is allowed to continue unchecked.            

Freddie's picture

As bad as Europe is - at least they do not have the Chicago Indonesian muslim.

francis_sawyer's picture

The chemtrails are finally kicking in... Soon you'll feel nothing but a mellow buzz [except for that slight 'trigger' that goes off every morning signaling you you to dress up and go get on the treadmill]...

IridiumRebel's picture

Act like a Bitchass, get treated like a Bitchass.

lolmao500's picture

Europeans love being slaves.

newengland's picture

It is their tradition, and why they hate the USA.

francis_sawyer's picture

They hate us for our 'fifedoms'


A few centuries back, European peasants, seeking to escape persecution & oppression of fifedoms, built ships & sailed across the ocean blue... and created... A NEW FIFEDOM...

newengland's picture

Bull$hit, pet. Game on. Your sort lose.

You may think that the world is terrible, and that your pain is unique.

It is not. Choose what to believe in, and defend it. Your position is not unique. It is universal.

I choose the 1620 and all that, and I respect Putin for being a patriot to his country regardless of the thieves in the oligarchy. The oligarch thieves in the USA are YOUR problem. Not mine, pet.

Mind your tone if you wish to communicate.

When hippies were rolling in mud, plain poor boys fought in Vietnam. When oligarchs were robbing Russia, Putin and his men were trying to save their beloved homeland.

Politicians talk. Soldiers do. Voters whine. Pet.