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No matter what the outcome of Greek austerity, Irish bank bailouts, Spanish housing busts, or German export collapses will be, the broader medium-term economic outlook for Europe is clear: Lean years lie ahead for Europeans, as their governments struggle with the effects of the Great Recession and accelerating demographic decline.
As illustrated by protests on the streets of Athens and around Europe, the question for financial markets is: Which European populations can stomach their diet of fiscal stringency and cutbacks?
Fortunately, new microdata from Eurostat mapping out the exercise habits of Europeans provide a good answer to this crucial macroeconomic question. Surely how disciplined Europeans are with respect to their personal exercises will have an impact on how much discipline they demand from their governments in fiscal matters.
Indeed, as is shown in figure 1, the correlation between fiscal sustainability at the macro level in European countries (here proxied by the average Organization for Economic Cooperation and Development [OECD] structural general government budget balance over the last business cycle from 2001–08) and their personal exercise habits is very strong.
Figure 1
The micro-to-macro verdict for Europe is crystal clear—the more self-discipline European voters have, the more disciplined their elected governments' fiscal policies are. Meanwhile, the fiscal outlook for Greece—where a stunning 67 percent of the population answered "Never" to the question, "How often do you exercise or play sport?" and just 18 percent answered in the affirmative—faces a decisively more "heavy breathing" challenge.
In Europe, a healthy body is not only a temple for the soul, but also for sound fiscal policies.
