We have long-discussed the growing concerns of a rising level of social unrest in Europe. Our go-to chart has been youth unemployment - and it still reigns supreme as the scariest chart for European leaders (no matter what they publically claim). JPMorgan's Michael Cembalest shares our concern as he opines on the potential for a tear in the social fabric in Europe.
Via Michael Cembalest, CIO JPMorgan,
Over the last couple of years, we have been watching the social fabric in Europe given 18% unemployment (and rising). With little growth on the horizon, it’s not clear how jobs will improve much, and what the long-term social implications will be.
Whether it’s Europe in the 1930’s or the US during the same period (conflicts between strikers, the National Guard and armed militias), unemployment can create a powerful cocktail of unrest.
So far, European demonstrations have been fewer than what one might have expected given the situation.
Could a mitigating factor in Europe be a better starting point vs. other countries?
“Quality of life” is hard to measure. There are organizations that give it a shot: the most detailed version we have seen is from the OECD. There are clear patterns in the OECD data: on issues related to work-life balance, life expectancy, environment, personal safety, family support network and life satisfaction, the Eurozone ranks ahead of the US. However, the recession does seem to be taking its toll: fertility rates, which were finally rising in Europe during the prior decade, declined sharply in 2011; according to the UK Economic and Social Research Council, suicides have been rising in Italy and the UK due to economic stress; and in Spain, there has been an increase in observed depression, anxiety and mood disorders (as per the Red de Actividades Preventivas y Promoción de la Salud en Atención Primaria). The imposition of regressive VAT taxes has also widened income disparities in many countries. Some of the same trends are observed in other countries which experienced a large recession, like the US.
While there may be increasing cracks in the social fabric, so far, concrete political manifestations have been limited. Despite the complaints that show up in Eurobarometer surveys, Eurozone citizens appear committed to persevering with the Euro despite the hardships. With the ECB doing the heavy lifting instead of national parliaments making large fiscal transfers, the perceived costs of the regionwide bailout seem low. No political party that clearly advocates Eurozone withdrawal have done well in national elections, not in the surplus countries in the North, nor in the deficit countries in the South (the closest would be the Movimento 5 Stelle, or M5S, in Italy). We have noted in the past the modest rise of rightist parties in some countries, but so far the political status quo is holding better than I thought it would. This is particularly true in Germany, where opposition parties are also pro-Eurozone, if not moreso. I suppose there’s still a long way to go, and that the impact of a generation of disenfranchised, jobless youths will take time to appear.
In 1992, the author of the German Constitutional Court opinion on Maastricht wrote the following:
“A Europeanisation without a prior European consciousness and therefore without a European people with a concrete capability and readiness for common statehood would be, in terms of the history of thought, un-European”.
Could it be that the social fabric in Europe is stronger than many perceive it to be, and that “Europeanization” has advanced a lot since 1992? Perhaps; but I am equally tempted to believe that Europeans simply recognize the financial and economic dangers of immediate dissolution, and remember the words of Benjamin Franklin: “We must all hang together, or most assuredly we shall all hang separately!”