As the government of Romania falls as another victim of the economic crisis, the global political risk factor continue to rise and the odds of even more social unrest gains a few more percentage points. EconoTwist’s and many bloggers , analysts and researchers, have been warning about this for years. But perhaps it’s time for another warning?
“With people already questioning a model of society prone to generate inequalities, civil unrest in one country would rapidly spark political turmoil and social dissatisfaction across Europe. Foreign investors would fly away from Euro-denominated assets, scared by a spiral of riots, selective defaults, and low GDP that would eventually lead the Euro to collapse.”
Romanian Prime Minister Emil Boc on Monday announced his resignation after three weeks of anti-government protests in the country, following in the footsteps of Giorgio Papandreou and Silvio Berlusconi.
He said he took this decision in order to calm “social tensions” and so the “economic stability of the country” is not affected.
Well, the resigning of the PM’s in Greece and Italy doesn’t seem to have helped much in that matter.
It seems more like political leaders fleeing from their responsibility.
And if someone don’t claim that responsibility soon, and start doing something about it, we may very well find ourselves in a helluva lot more trouble than we’re already in.
The Social Consequences of the Euro Crisis
About a year ago the Arab spring taught the world an important, predictable lesson. When young people cease to be the engine of the economy and are excluded from the decision-making process, long-run economic growth is endangered and political stability undermined.
This lesson holds true for dictatorial regimes as well as for long-established democracies.
In Europe, a deteriorating youth marginalization is creating the preconditions for a social earthquake capable of shaking the old continent and impairing the survival of the Euro.
Until now, safety nets and intra-family transfers have prevented peaceful Indignados-style protests from turning into violent Arab-ones.
However, the shortfall of resources due to a new imminent recession, along with fiscal austerity measures, will impair this channel, whereas frustration and social resentment will keep growing
The figures are already alarming.
According to a report recently released by the European Commission, one in five young people is at risk of falling into poverty or social exclusion, only one third of young people are employed, and one in three has been out of work for over one year.
Moreover, 40 per cent of the unemployed are under 30, to the amount of 9 million people. On the other extreme of the age scale, the trend is reversed.
The employment rate for people aged 60-64 increased from 23% in 2000 to 34% in 2010.
In peripheral countries the situation is extremely acute.
The Portuguese government urged its young unemployed to leave Europe for better opportunities elsewhere, in Italy almost 120.000 young talents left the country last year, and in Spain thousands of people are pouring into former colonies in South America.
Across Europe, and even in Germany or Sweden, young workers are experiencing in-work poverty due to what economists call labor market dualism.
Unlike their older colleagues, they just have access to temporary contracts, which pays on average 14% less than permanent contracts and are more vulnerable to sudden layoffs.
The medium-term economic and social consequences of such youth marginalization are huge.
- First, an economy that is not nourished by fresh ideas loses competitiveness, becomes vulnerable to interest groups, suffocates material as well as intellectual progress, and is fated to stagnation or even prolonged recessions.
- Second, high income volatility and job insecurity discourage the creation of new family units that are essential to generate social cohesion as well as inter-generational solidarity.
- Finally, economic uncertainty tends to lower fertility rates with negative spillovers on the size of tomorrow’s workforce, population ageing, and the sustainability of public finances. The political implications could even be more disastrous.
Therefore, what begs asking is whether these economic factors could contribute to the eruption of an Arab spring in Europe.
There are, of course, huge economic and political differences between North Africa and Europe. The latter, unlike the former, is graying, prosperous, and democratic. But, paradoxically, the combination of these diverging demographic trends and opposite institutional features, along with the same aspiration for a better future, could lead to an identical result.
In North Africa young people represented the demographic majority of a despotic regimes, in Europe the political minority of a democratic system.
The former fought for an economic progress they just started to savor but that was hampered by the elite in power. The latter would fight for a material wellbeing that is only benefiting their older fellow citizens at their expenses.
Either way, young people can improve their situation and gain power only through violent rather than legal channels.
What event, if any, will inflame the upheaval in Europe, which country will be the epicenter of this social earthquake, and what impact it could have on the institutional, democratic order remain uncertain.
However, it is still possible to predict part of the effects.
With people already questioning a model of society prone to generate inequalities, civil unrest in one country would rapidly spark political turmoil and social dissatisfaction across Europe. Foreign investors would fly away from Euro-denominated assets, scared by a spiral of riots, selective defaults, and low GDP that would eventually lead the Euro to collapse.
To avoid this catastrophe, European governments should start promoting the role of the youth in their societies through family friendly policies, career paths related to productivity rather than to seniority, cross-country mobility, and the eradication of dual labor markets.
Spring is approaching. European leaders should act soon.
Edoardo Campanella is economic adviser to the Italian Senate.
This article is syndicated by www.eurointelligence.com.
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- El-Erian On Markets Balance Solvency, Growth and Liquidity
- Qou Vadis, QE?
- “Euro Zone Crisis is Germany’s Fault”
- Sado Monetarism & Fiscal Bondage
- The Global Economy is about to Crash
- EU: Drifting Towards Default, Destabilization And Disaster
- In Dangerous Times
- Are We Turning a Mega Cycle?
- EU Officials Fears Second Depression And War
Other related articles:
- National News: Warning on jobless youth ‘timebomb’ (coventrytelegraph.net)
- Global protests: where does the revolution go from here? (guardian.co.uk)
- Davos: Youth unemployment ‘disaster’ (bbc.co.uk)
- Police stop and search: What about young people’s voices?* (99percentblog.org)
- Europe’s governments are running out of options (guardian.co.uk)
- Romania PM quits as financial crisis topples government (telegraph.co.uk)
- Greek church leader warns of social unrest as ‘unjust’ cuts force people to go hungry (dailymail.co.uk)