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No More Morsi

A coup in ungovernable Egypt

Jul 22, 2013, Vol. 18, No. 42 • By LEE SMITH
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Morsi found himself in a similar situation with the $4.8 billion loan that the IMF arranged for Egypt last year. The package was important less for the money itself​—​a drop in the bucket for an economy hemorrhaging foreign currency reserves​—​than for the signal to donors, lenders, and investors that Cairo was taking steps to get its house in order. But Morsi did not dare implement the austerity measures required by the IMF because this would have caused more civic unrest. Note that none of the protesters interviewed by U.S. reporters are clamoring for economic liberalization or, for that matter, faulting Morsi for raising public sector wages and other big-government spending policies that burden the economy and crush the entrepreneurial spirit of ordinary Egyptians. The liberals, as the press typically characterizes the Tamarrod activists, do not believe in liberal, free-market economic policies. Many middle-class Egyptians expect the government to provide subsidies for virtually every staple, from bread and rice to fuel, which they would not be able to easily afford on the low salaries from the lifetime jobs in the public sector that they expect the government to provide them with after they’ve graduated from college.

Even had Morsi tried, it is hard to see how he could have gotten other parties to buy into belt-tightening measures. Many had no interest in cooperating with Morsi in the first place. Any who might have been more pliable knew that backing an initiative to slash subsidies would have been tantamount to political, or actual, suicide. As strange as it may sound, political figures and military officials across the political spectrum have been terrified of the Tamarrod group for more than two years. After all, when they brought down president for life Hosni Mubarak, they toppled a pharaoh. Who knew who they might target next? Advocating economic reform would have exposed political figures to the populist demagogues in Tahrir Square who, more than the army and more than the Islamists, have set the political dialogue the last two and a half years. The single most important reason that the Egyptian economy has tanked is the revolution. The people who filled the streets to topple Mubarak and later Morsi have engineered their own prospective famine, and no Egyptian leader dares save them from starvation.

Tourism was long Egypt’s big cash earner, but with Cairo in flames, foreigners robbed, raped, and murdered, and a political situation showing little sign of stabilizing, it will be years before Western tourists, the industry’s big spenders, return en masse. Even the Russian and Eastern European budget tour groups who fill second- and third-rate Sinai resorts will soon come to rethink their travel plans as the Sinai becomes more dangerous with the proliferation of jihadist groups.

The one upside to date is that Kuwait, the United Arab Emirates, and Saudi Arabia are stepping up to help stop the bleeding. Billions of dollars of post-coup pledges of assistance from the Gulf states, led by Riyadh’s $5 billion, will augment Qatar’s continued contributions totaling to date some $8 billion. The cash will ensure a relatively happy Ramadan season, and likely delay any confrontation between the newly named prime minister, Hazem el-Beblawi, and the Tamarrod activists.

Beblawi has correctly identified the core problem: “We must create a clear understanding for the public that the level of subsidies in Egypt is unsustainable, and the situation is critical,” he said in an interview before he was tapped for the position. In office, he’s going to find it much more difficult to practice what he preaches. What’s music to the IMF will sound to many Egyptians, especially the 40 percent who live on less than $2 a day, like the gates of hell opening.

Even assuming the Gulf states honor their pledges​—​and they have frequently reneged on similar promises to the Palestinians​—​Egypt is too big and too hungry for its resource-rich cousins to carry it indefinitely. It is difficult to see anything that would brighten Egypt’s bleak economic picture except a long period of stability.

 The defense minister named as interim president Adli Mansour, a former chief justice who is leading negotiations to form a caretaker government and set out a road map for new elections. The problem is that much of the population will consider such elections a farce. The party that won the last presidential election, and with its Islamist allies 70 percent of the seats in parliament, has been humiliated.



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