The good, the bad, and the ugly in Egypt

1. Good News: Mubarak is still around.
This means that the army is strong enough, and coherent enough, to anchor the transition to democracy.

2. Bad News: Mubarak is still around.
He still does not get the message, and things may need to get worse before they get better.

3. Ugly News: Mubarak is still around.

Reading the Mikati leaves

In a previous post, I argued that a Hizbollah-inspired government will have to try harder than a Hariri-led government on the economic front. This is because they have no track record, and because some of their views on economic issues have been worrisome (especially those of the Aoun clan).

Furthermore, if the new government were were to flaunt UN resolutions, they will also kill the possibility of international financial support. This raises the stakes on the economic front in a country where most of the debt is of very short maturities.

All of this implies there is no room for waffling.  It is time to take a close look at Mikati's platform.  His website spells out his views under the "Beirut Pact" section, which was put together for his brief stint as PM in 2005. Below is what the website says, with my  comments in bold italics.

"Najib Mikati and his team of economists gave a brief summary of their “Road to Beirut Pact”, a document covering all available options aimed at boosting the country’s national economy."

Given the circumstances under which he was appointed as Prime Minister, "Road to Beirut Pact"is a title that recalls Friedrich von Hayek's Road to Serfdom.

"The Pact is not, as the tam [sic] puts it, ‘sacred’, but could be revised and amended in order to make it a source of agreement between various political and economic bodies."

Some flexibility is good, but suggesting flexibility without clearly spelling out principles to anchor the discussion means that this plan is best titled Road to Nowhere.   

"Experts from the World Bank and the International Monetary Fund have already discussed and debated The Pact, later presented to the Council of Ministers and all representatives of various economic commissions."


Experts from the IMF and World Bank have discussed a lot of things. For example, they have discussed Myanmar's interest rate policy.  What is more interesting is to know what they had to say. 


"Premier Mikati reiterated that The Pact will be available online to all Lebanese should they wish to read it and voice an opinion. All interested parties will receive a copy of The Pact in preparation of a final document to be presented to the international committee to rally support."

There are some bullet points available in Arabic, but where is the detailed pact? Is that it? 

"Premier Mikati summed up the broad headlines of The Pact:

• Lebanon’s economy to be perceived as based on long term growth strategies, providing equal job opportunities to improve the standards of living"

Right. I have yet to hear any policymaker say the opposite. 

• "Major economic and social challenges to be addressed with their various options and conclusions
• A methodology of work to comprise various work commissions implementing detailed reforms, to be later compiled in a comprehensive socio-economic program"

What does this mean? Seriously! Priorities like growth and employment are fine, but vacuous. Everyone wants them. What are the policies that you think will achieve that? 

"Premier Mikati indicated that in order to achieve economic growth, concessions must be made to Cabinet by all political, economic, and social parties on a series of interrelated policies, on legislations, and on various reform measures.

He said this should encourage Cabinet to move forward, as the moment is propitious for Lebanon, with the ongoing support of the international community, following the democratic drive of the Lebanese. This would achieve long-lasting results, averting the various pressures presently exerted on Lebanon.

Lebanon, says Premier Mikati, and since the Taef Agreement, has always been subjected to calls for economic reforms. Some of these reforms were only partly implemented, with no fruitful results, while other major achievements were made in other fields. One of the major causes of not promoting drastic economic reforms was political bickering. This resulted in some economic reforms being implemented while others have not, and all for political benefits."

I still can't understand what reforms Mikati likes and what he doesn't like!  For example, the Arabic section of the text mentions "assessing privatisation" (تقييم فرصة خصخصة)  - but does this mean he is for or against privatisation?  You can't be neutral on this one. 


"Premier Miakti [sic] concluded by saying that the “Beirut Pact” should be legalized, becoming a binding agreement after ‘all partners of Lebanon and with no exception’ agree on all its points. This “Pact’ is a not measure imposed on Lebanon by a regional or an international party but a global contract, reached by consensus between all Lebanese parties. It could be labeled as ‘The Taef Accord for Economy and Growth’."

If he expects everyone to agree on all policies you can be sure that all he will achieve is meaningless. You can't run financial policy by consensus. All you can create is a series of regulatory and financial loopholes.   


Everyone wants to fight corruption, and everyone wants to see economic growth, but there are differences between the parties on the nature of the policies to reach these goals. You need to take a stand, and take a side. You can't be neutral on this one too.

What's Mikati thinking?

There is a lot of excellent analysis around about Hizbollah's (mis)calculations. What baffles me, though, is what is Mikati thinking?

Mikati is not a stupid man. He could not have achieved his success in business without a generous endowment of grey matter.

He is also not a man desperate for publicity. He can afford to spend his way into having a lot more publicity than he does now.

So, why does he accept to be Hizbollah's Man at the Serail? His decision is very puzzling. Here are a few thoughts on the possibilities:

1. A power trip
This is possible, but it can't fully explain his decision. He can't be seriously expecting to have much power when he does not have the support of his "constituency", the Sunnis. Power will rest with  Nasrallah's armed gangs, and he will be seen as the man who sold out his own sect.

2. A belief that he can do some good
This is also possible, but this also means that he must have an agenda. He has not been very vocal about a particular agenda. He was also thrust into this position rather suddenly, and all we've heard from him is some mushy boilerplate about extending his hand to everyone. He also outrageously said that his nomination does not  commit him to "anything other than protecting the Resistance."

3. He is forcibly taking the position
This is a possibility because of his alleged ties to Rami Makhluf, the profitable arm of Syria's regime. This explanation fits well with idea that there has been some sort of "regional" deal.

4. He does not expect to become Prime Minister
It is possible that he does not expect to actually become PM, but does not want to burn bridges with March 8. He can accept the nomination and then withdraw after meeting Hariri, on the grounds that he does not feel he will have enough support. In this way, he can stay "independent" without taking sides.

5.  He is having a mental breakdown
Shit happens to some of the best and smartest.

Hassan Nasrallah, lest anyone forget

If this link is slow, you can see it on youtube here.

Lebanon's $18,000,000,000 Question

Whoever becomes Prime Minister and Finance Minister in Lebanon in the next government will face the same challenge that every previous Cabinet faced: how do you manage Lebanon's debt? The answer depends to a large extent on the degree of confidence they can instil in the markets.

The chart below shows the maturity profile of Lebanon's debt obligations. Most of Lebanon's debt is due within the next 24 months, of which $18 billion is due this year. Before anyone starts pointing fingers and blaming anyone, you should recall that this maturity profile is NOT unusual. Brazil, Turkey and other successful developing countries have similar maturity profiles. This is because countries without a long history of economic or political stability cannot issue long-term debt easily, unless they are prepared to pay very high interest rates.

Importantly, most of Lebanon's debt is not owed to any foreign government or entity. Most of this debt (85%) is owned locally.  Under the circumstances, the success or failure of Lebanon's economy and currency hinges to a large extent on the ability of the government to maintain the confidence of Lebanese citizens who have - either directly or indirectly - financed this borrowing.  Hariri and his team were able to instil this confidence. Can Hizbollah and their allies do the same?

The maturity profile of Lebanon's debt can lead to self-fullfilling virtuous or vicious cycles very quickly.  As long as there is confidence in the system, the government will be able to roll-over the debt at reasonable interest rates.  If confidence is shaken, interest rates will rise. Refinancing debt at higher interest rates will send the debt dynamics on an explosive path.

Who is in a position to help Lebanon with emergency financing if there is a shock to confidence? We have seen the international community deliver generously during previous crises. But will they deliver to an Iranian-Syrian backed government, whose raison d'être is to flaunt UN resolutions? Assistance cannot come from cash-strapped Syria or an Iran reeling under international economic sanctions.

I am not suggesting that Lebanon will necessarily have an economic crisis. This is because most of the debt is owned locally and the Central Bank has a healthy reserve cushion. But a Hizbollah-inspired government will have to try harder than a Hariri-led government to instil the confidence needed. This is in part because they have no track record in government, and in part because their past pronouncements on economic issues are reckless, especially those of the Aoun-clan.  All of this means that Aoun and his prodigies, like Gibran Bassil and the economist manqué Charbel Nahhas, need to have their mouths shut for a while. A few misplaced words of their wisdom can send the country to hell.

Now is the time for March 8 to move beyond their usual "it's a Zionist conspiracy" fetish and come up with a coherent outline of their economic plans and priorities. The country needs to see this very very very soon.

Is a kinky government next?

“In a country that has [someone like] Samir Geagea, I should carry a whip and use it on him every day,” Wi'am Wahhab told New TV.

....and does he need some of this?

We should be happy the Syria-Saudi mediation failed

An-Nahar published the text of the document that Jumblatt said constituted the Syria-Saudi settlement.  An English translation is available at YaLibnan.com.  As widely reported, Hariri would have been expected to abolish cooperation with the STL, stop further funding, and withdraw the Lebanese judges. In return, Hariri would have expected a few concessions that include:

1. An end to the "false witnesses" witch-hunt and withdrawal of the Syrian arrest warrant. Promises not to attack Hariri's team.

2. Disarming of Palestinians who live outside the camps

and.....hold your breath for this one ..

3. Implementation the Taif accord.

What sort of concessions are these? Didn't we agree to implement the Taif accord 20 years ago? Wasn't the issue of Palestinian arms agreed in 2006?  The new concession that Hizbollah would be making is not to pursue a legally invalid witch-hunt, and not to harass Hariri's team....and we all know how they stick to their promises.

If this is indeed the outline of the settlement proposed, it is reassuring that Hariri and his allies refused it.  It speaks well of them.

The only "grand bargain" that is worth contemplating is to find a way to suspend cooperation with the STL in return for a complete and verifiable disarmament of Hizbollah. They won't accept that, of course, but neither can Lebanon afford contemplating anything short of full cooperation with the STL.

I have been critical of Hariri in the past, but this episode is making me warm up to him again.

Jumblatt's inelegant political sunset

To follow up from my previous post, Jumblatt finally spoke today.  He waffled. He spewed some pro-Hizbollah hot air, and said that his party, the PSP, will stand by Syria and Hizbollah.

This does not mean that his "Democratic Gathering" parliamentary block will support Hizbollah. In fact, what he said is meaningless. If we are to believe some  press reports since his press conference, it is possible that 6 out of 11 members of his parliamentary block will support Hariri.  Other reports suggest that 7 out of the 11 members will support Hizbollah.

It does not matter whether 5 or 7 members of the Democratic Gathering support Hizbollah. What matters is that the Democratic Gathering has split. Jumblatt's parliamentary base has crumbled.

After years of trying to be too clever by half, Jumblatt chose a path bound to displease both sides in Lebanon.  Now the chicken will come home to roost.

Jumblatt is digging his own political grave

Whatever the outcome of the current political standoff in Lebanon, one thing is certain: things will never be the same for Jumblatt.

I remember his speech of 14 March 2006 very well.  Who would have thought that it was conceivable that Jumblatt could make a u-turn from those words?  He did. It took a lot of grovelling and pleading for forgiveness. Assad made sure Jumblatt is duly humiliated.  

Now, however you look at the parliamentary arithmetics, Jumblatt is kingmaker. For a normal politician in a normal country, this is a great position.  But Jumblatt is not a normal politician and Lebanon is not a normal country. Jumblatt needs to follow the trend that is least costly to his community, not make decisions that will impact other communities.

There is much anticipation over what he would say this afternoon. Will he support Hizbollah or Hariri?  He  is reported to have told the New York Times:

“I’ve been able to slowly regain the confidence of Hezbollah and Bashar ... I’m not going to commit any more blunders. I cannot afford to.”

That's exactly right. He can't afford any more blunders. He can't afford to anger Syria or Hizbollah.  But can he afford to anger the overwhelming majority of Sunnis and a large portion of the Christians?

Whatever Jumblatt does today he is bound to anger half the Lebanese population. This is not a comfortable position for a small community like the Druze. He is damned if he supports Hariri, and he is damned if he does not support Hariri.  

Lebanon needs Czech assistance, not Saudi mediation

The failure of Saudi mediation is hardly a surprise.  It was a futile exercise from the start.

Hizbollah's track record is hardly one of compromise, and there is no reason to believe that Nasrallah will start compromising now.  This is an organisation that believes it is on a divine mission, and despite having less than half the number of parliamentary seats as Hariri, expects everything to go its way.

AK wrote an excellent analysis of Hizbollah's recent moves.  The best that Hizbollah can achieve is protracted civil conflict. They cannot control Lebanon.

What are the options? Another civil war would be the worst possible outcome.  We've been there. It cost a lot of lives, and achieved nothing.

A division of Lebanon into cantons, under some form of confederation, would not only be less costly, but would lay the foundations of a more stable and prosperous country.  I disagree with Mustapha at BeirutSpring  that Lebanon can't be partitioned.  The very fact that he is able to produce a map showing areas with majorities of different sects demonstrates that it can be partitioned.  I would go further and argue that we need even more cantons than his map implies. The more cantons the better, because it means even smaller local governments with a greater need to be competitive.

What Lebanon needs is not Saudi mediators looking to maintain the status quo at any cost. We need the assistance of people with experience is splitting a country without spilling blood.

Wishing its adieu, not another au revoir

Good riddance was my first thought at the resignation of Hizbollah’s clowns and their fashion accessories from government.

The past few years have demonstrated that it is impossible to have a functioning government that includes Hizbollah.  In turn, it is also impossible for Hizbollah to function as part of a democracy or quasi-democracy.  Something different needs to happen.

Lebanon’s continuous political failures, in my view, are because we exist as a nation based on a negative proposition. We are stick together, it seems, because we dislike the neighbors more than we dislike one another. We are not a nation because we share common goals and objectives. This is the worst possible premise on which to build a country.

 In an ideal world, we can split up the country into cantons, and let every voter live by the consequences of his or her decision.  Those that like Nasrallah should by all means live under his rule. Those that like Aoun deserve to have him.  The more cantons the better! This should not create a Sunnistan, Roumistan, Marounistan, and Shiitestan. We need several of each.  In my sweetest dreams, Hamra can be carved out as a hangout for Atheists.  Confederations created peace and prosperity elsewhere, and I see no reason why it would not do the same in Lebanon.

Competition is a force for progress.  Let cantons compete, and they will move forward. Forcibly making Lebanon stick together is only making us move to the lowest, and worst, common denominator.

Unfortunately, I think we will stick together. In a few months, we will have most of the idiots that resigned today back in another rotation of cabinet chairs. Nasrallah will still be holding press conferences to wag the same finger he uses to pick his nose.

We will see them again, and all I can think of is the last scene from Dr. Strangelove.