Politically speaking, austerity is a challenge. While we would expect that governments imposing spending cuts on their voting public may face electability issues, in fact, a recent paper from the Center for Economic Policy Research  finds that there is no empirical evidence to confirm this - i.e. a budget-cutting government is no less likely to be re-relected than a spend-heavy government. However, what the CEPR paper does find as a factor in delaying austerity is much more worrisome - a fear of instability and unrest. The authors found a very clear relationship between CHAOS (their variable name for demonstrations, riots, strikes and worse) and expenditure cuts. As JPMorgan notes, austerity sounds straightforward as a policy, until the consequences bite. It remains unclear that the road Europe is taking is less costly in the long run, in economic, political and social terms. The history of Europe over the last 100 years shows that austerity can have severe consequences and outcomes and perhaps most notably, the independent variable that did result in more unrest: higher levels of government debt in the first place.
The passage through time of the author's CHAOS factor shows that since 1994 we have had relative stability but given the ongoing austerity that is being forced (rightfully) upon the most indebted nations in Europe, it is perhaps no longer an issue of electability as technocrats roam freely and much more one of central stability and fear of the empirical link between austerity and anarchy.
JPMorgan recently noted this study:
The authors tested to see if results varied with ethnic fragmentation, inflation, penetration of mass media and the quality of government institutions; they did not. Results are also consistent across time, covering interwar and postwar periods.
The independent variable that did result in more unrest: higher levels of government debt in the first place.
Compounding the problem is the way some decisions are being taken, which may reinforce perceptions of a "democratic deficit" at the EU level, an issue highlighted by Germany’s Constitutional Court. It remains to be seen if Europe can sustain cohesion around its path of most resistance. One sign of rising tensions: the following (staggering) comment by the head of the Bank of France: "A downgrade does not appear to me to be justified when considering economic fundamentals," Noyer said. "Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping." At a time of increasing budgetary pressures and declining growth, I suppose there are limits to European solidarity.
The full paper can be found below: