Sanctions could force Lebanese politicians to rule
No one knows when Lebanon’s financial, fiscal, debt, banking and economic crisis, described by the World Bank this month as one of the world’s three worst depressions since the mid-19th century, will finally hit the world. background.
After the coronavirus pandemic and the cataclysmic explosion of last August in Beirut, moreover, few Lebanese seem to think it will make much of a difference, given the reluctance of corrupt dynastic elites to agree on the formation of a government, let alone adopt vital reforms.
“It is clear that the political class has no incentive to cooperate and put their country first,” a senior observer from Lebanon said in Washington. âThey have strangled the economy.
The sectarian mafias that rule Lebanon are protected by their billions of ill-gotten wealth from the misery and hunger suffered by the poor, or by the declining middle class whose bank deposits they have confiscated for practical purposes.
The local currency has lost 90% of its value since October 2019. Dollar depositors are stranded in their accounts by an insolvent banking system that has loaned their currencies to a failed state and central bank that cannot repay. The size of the economy has grown from $ 55 billion in 2018 to $ 33 billion last year, according to the World Bank, which estimates that 55% of the population is below the poverty line. Production could contract an additional 10 percent this year, but the economy is contracting too quickly to know it.
Many depositors lost their savings in a zombie banking system that has been closed to them since October 2019, when a civic uprising began against the entire political system, toppling a government. Another was toppled after the explosion last summer, which destroyed entire neighborhoods in central Beirut.
Bankers and politicians entangled in nearly every major bank have grown immensely wealthy with double-digit interest rates, thanks to a compliant central bank. As the banking world elsewhere tried to sidestep negative interest rates, Lebanese bankers were ducking dubious unexpected profits. After loaning 70% of their assets to a failed state – leaving a hole in the banking system the government calculated last year at $ 83 billion – they still claim to be creditworthy.
International estimates further indicate that $ 17 billion left Lebanon in 2020, while Lebanese officials say around $ 16 billion left in the second half of 2019 – despite de facto capital controls on most of the world. deposits.
The daily political stalemate in Lebanon – without a government since the port of Beirut erupted in a mushroom cloud 11 months ago – is the latest chapter in the sectarian quest for advantage by Sunni and Shia Muslims, the Christians and Druze among the 18 recognized in the country. sects and their myriads of parties.
Above it all is Hezbollah, the Iranian-backed Shiite paramilitary movement. It has allied itself with Amal, the former militia that has become a Shiite mass movement, and the Free Christian Patriotic Movement, whose figurehead, former General Michel Aoun, holds the presidency. Hezbollah is also firmly entrenched in the security forces and the military, controls the majority in parliament and has a veto on cabinet appointments. Determined not to risk his precious Christian alliance, he now serves as a shield for the kleptocracy which has brought Lebanon to its knees.
These political and financial clans claim to cooperate with international donors and the IMF while trying to deleverage Lebanon and their banks, at the cost of impoverishing all Lebanese except the rich. In April last year, the government presented a bailout that would have protected 90% of depositors, according to local and international officials. This was dismissed by bankers, politicians and central bank governor Riad Salame, in what a World Bank report in December called a “deliberate depression”.
Diplomats and insiders say there is now almost no discussion of the crisis, with all factions obsessed with the upcoming election and extending their rule.
There is a growing belief inside and outside Lebanon that elites will only start negotiating if their bank accounts and real estate (mostly held abroad) are affected and they are prevented from traveling. . Europeans are now preparing sanctions against those who obstruct the formation of a government and engage in corrupt practices.
The EU as a body can be hampered by, say, Viktor Orban’s Hungary. But nothing prevents the various European states from acting. France is already investigating SalamÃ©, which is at the heart of the collapse. It can be tracked by non-EU Switzerland and possibly UK.
The United States is divided over the central bank governor, long regarded as a pillar of stability. âWe don’t know if he’s the safety pin or the grenade on the table,â an official said. But Washington started targeting key politicians last year. Nothing else has worked and Lebanon is on the verge of bottoming out.