Foreign and Defense Policy, Europe and Russia

The EU’s economic malaise could lead to a ‘European Spring’

2.22.13 Fuel for Social Unrest in Europe

In early 2011, the world was taken by surprise by the Arab Spring of social and political unrest that swept through a number of Middle-Eastern countries including Egypt, Libya, and Syria. This has to raise questions as to whether something similar might not occur later this year across the European peripheral countries including Greece, Italy, Portugal, and Spain. For a number of the same underlying conditions that triggered the Arab Spring appear to be in place in the European periphery.

A principal factor heightening the risk of a real bout of European political and social instability is Europe’s present economic malaise. It is not only countries like Greece, Ireland, and Portugal that are in very deep economic recessions. Indeed, the overall European economy has now been in recession for the past three quarters, while important countries like Italy and Spain have been in recession for six consecutive quarters. The GDP of these latter countries is now some 7% below their 2008 peak.

Compounding matters is the very bleak European economic outlook that has to sap the hope of those suffering from the recession for an early economic recovery. With countries in the European periphery still required by Europe’s fiscal pact to reduce their budget deficits in 2013 by between 1 ½ to 2 percentage points of GDP, within a Euro straitjacket that precludes devaluation, there is every prospect that Europe’s economic recession will further deepen in 2013. This is all the more so the case given that the prospective fiscal tightening is to occur at a time that Europe’s banks remain in the grip of a credit crunch and that Europe’s external economic environment has weakened.

If a poor economic outlook is politically problematical, the real danger to European social and political stability is the sad fact that it is the young who are bearing the main burden of the economic recession. Youth unemployment in Greece and Spain is now in the staggering region of 60%, while in Italy and Portugal it is now around 40%. If the Arab experience is anything to go by, such rates of youth unemployment would appear to be a ticking time bomb, especially in an age of social networking on Facebook.

A further disturbing factor for the European periphery’s political outlook is how discredited the established political parties in that region have become. A shaky Greek government is being gripped by a scandal surrounding the disappearance of the so called Lagarde list of Greek tax evaders which included the names of prominent Greek families and politicians; the Italian government and Pier Luigi Bersani, the prospective winner of next week’s Italian election, have been seriously tarnished by a scandal surrounding Monte dei Paschi di Siena, Italy’s oldest bank; and the Spanish government has lost considerable credibility as a result of a scandal involving unreported payment to senior members of the governing political party.

Hopefully this toxic mix of weak economic growth, high youth unemployment, and discredited governments will not lead to a political and social explosion in Europe. However, judging by the Arab Spring as well as by Europe’s own inter-war experience, European governments would be making a grave mistake to underestimate the urgent need for economic policies that might promote economic growth. For it is only by quickly revitalizing economic growth and employment that they might hope to defuse a rapidly deteriorating political and social picture.

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