Complex Made Simple

Lebanon hinges its hope on 2018- Part II of III

In Part I of this article, we discussed the dire finances of Lebanon but also the strong performance of banks in the face of crisis.

But Banks have not seen the last of it

Read related: Lebanon hinges its hopes on 2018- Part I of III

Growing frustration

Amidst all this, there is growing frustration within the banking sector at the government’s failure to mend its ways, especially over the deficit. “The government has recruited 26,000 employees over the past three years,” notes Ghobril. “That’s more than the entire staff of the banking sector.”

Many bankers feel the politicians see the banks as a milch cow that will forever bail it out, a short-sightedness that poses a threat not just to the banks, but to Lebanon’s entire economy. “The banking sector is facing challenges,” Ghobril explains. “The first is the decline in lending opportunities in the private sector, due to the expansion of the public sector. Secondly, there are the continuing high, elevated fiscal deficit and borrowing needs of the government.”

“While the banking system — the Central Bank and the commercial banks —finances the deficit, we see no political will to reduce the fiscal deficit and implement reforms,” he continues. “Instead, the government keeps imposing taxes on the banks to increase its revenues.”

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Some Lebanese place great hope in parliamentary elections due on May 6, which will be the first for nine years after repeated postponement due to wrangling between the sect-based parties, whose rivalries have also been exacerbated by the seven-year war in Syria. In fighting for Syrian President Bashar al-Assad, Hezbollah has lost nearly 1,800  fighters, a number bigger than those that died fighting Israel up to its 2000 withdrawal from south Lebanon; meanwhile, Sunni groups, including Hariri’s Mustaqbal (‘Future’) movement, sympathize with the rebels.

Fears that the Syrian conflict would spread over the border have only occasionally been realized, despite the presence of at least 1.5 million Syrian refugees in a country of only 4.5 million. The added strain on Lebanon’s poor infrastructure — especially water and electricity supplies — has led to increasing demands on international donors.

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Refurbishing infrastructure

After the Geneva conference in late February, which focused on raising support for security and military services, the Paris IV Conference is set to take place in March. At the summit, the government aims officially at raising $16 billion for a ten-year infrastructure renewal. Then in April, a Brussels summit aims to assemble more than 70 countries and international organizations to “reconfirm existing pledges and identify additional support to Syrians inside Syria and in the neighboring countries.”

It seems likely that the bulk of the $7.6 billion pledged at the Paris III Conference of 2007 will not be delivered, with Lebanon arguing it has been left to cope with an international humanitarian crisis. But donors in turn express concern over corruption. Lebanon’s friends abroad — and much of its people fed up with nepotism, high prices and poor public services — look with hope, if not desperation, to some new blood in parliament and government.

“After several postponements, it’s essential that elections go forward this May,” Chibli Mallat, Beirut-based author and human rights lawyer, tells TRENDS. “A reformed electoral system, with a measure of proportional representation, might produce new faces in Parliament. But a meaningful change is unlikely so long as a wide oppositional front is not created and there are yet no signs of it, despite the overwhelming upset of ordinary citizens with the political class.”

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Lebanese journalist and writer Michael Young is also skeptical. “The parliamentary elections,” he tells TRENDS, “are important inasmuch as they will determine the makeup of parliament at a crucial time for Lebanon, as the Syrian conflict winds down and the region sees heightened tension between the United States and Israel on the one side and Iran, as well as Russia, on the other.”

Young senses that, while regional pressures, brought into Lebanon’s core by politicians’ links to regional powers, are hardly new, the coming period appears particularly dangerous. “The way Lebanon reacts to the forthcoming changes will be partly determined by the behavior of parliament and the balance of forces in it,” he explains. “So, in that sense, there is a potential for change, though not necessarily for the better.”

Young was an active participant in the 2005 ‘Cedar Revolution’ against Syrian dominance in Lebanon and was a friend of fellow-writer Samir Kassir, murdered in 2005. He therefore commands attention in rejecting simplistic approaches on the right of US politics that Lebanon should be punished for the strength of Hezbollah. In a calm, impassioned piece recently published by the Carnegie Middle East Centre in Beirut, Young shreds to pieces the arguments in Washington that funding to the Lebanese army should be cut because it is subservient to Hezbollah.

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He points out that the largest group in the army are Sunni conscripts and that many Christian officers, broadly followers of President Aoun, have co-operated with Hezbollah because Aoun’s Free Patriotic Movement has been allied to the Shia group.

“Terminating aid to the military, thereby casting doubt on the intentions of the Lebanese state itself…will not weaken Hezbollah,” he writes. “On the contrary, anything that undercuts the state can only benefit the party. Were the state to become the object of international opprobrium, how would Hezbollah suffer? When has the party, or Iran, ever done poorly in dysfunctional Arab societies or collapsing Arab countries – whether Gaza, Iraq, Syria, or Yemen? Those environments are precisely ones in which Hezbollah and Iran see opportunities to thrive.”