Lebanon can breathe once again. On January 31, after nine agonizing months of not having a formal government agreed upon, since parliamentary elections in early 2018 gave Hezbollah and its allies slightly more seats, finally, a cabinet of ministers has been formed.
On the face of it, this is good news, least of all for the heat it will take off the central bank to devalue the country’s currency, as Lebanon’s $5 billion annual budget deficit shows no signs of magically healing itself and now the new government can turn to donors in Paris who had presented a rescue package of $11 billion as a shot in the arm to ameliorate the country’s crisis.
Importantly, the $11 billion is not aid, but soft loans and a package of reforms that need to be delivered on the side of Saad Hariri’s government. The West is weary of handing cash over to Lebanon’s elite, which it regards as a homeless alcoholic who sits on the pavement in front of a liquor store, asking for your spare change.
Lebanon’s economy is a black hole which shows remarkable, if not stoic resolve at swallowing up money and having little to show for it.
Lebanon’s economy is a black hole which shows remarkable, if not stoic resolve at swallowing up money and having little to show for it. The mess that this present generation of politicians has created has left the economy breaking records about the level of debt it has against what the economy is actually earning; those same politicians refuse point blank to fill that gap by reducing the wild frenzy of public spending on military, civil servants’ salaries, inflated pensions, or plugging the hemorrhage of the state’s electricity company—or for that matter simply installing law and order on the roads.
Instead, the Lebanese elite is institutionalizing corruption and presenting to the West mere window dressing of a country whose problems can only be fixed with more cash. There is actually a distinct and orchestrated attempt to prevent the country from repairing its dilapidated state and cleaning up the results of out-of-control corruption, so that fast, aid money can flow, or—in the worst case scenario—soft loans.
The problem with soft loans though is that they simply exacerbate the problem. The dire situation has come about from the government constantly borrowing increasing amounts of money simply to pay for the running of the state, and that level of borrowing has reached a breaking point. And so the West’s solution, to lend Lebanon more, seems banal, if not inattentive, but it is nevertheless a message in itself, at least, to those holding out for no-strings-attached aid: those days are behind you.
Borrowing from Peter to pay Paul hardly seems like a triumph of innovation, but this is what is being hailed as a great success, although leading economists and politicos secretly know that the time bomb is still ticking and there are many economic problems ahead which the Paris deal will not resolve, not least of all the government’s ailing eurobonds.
But geopolitics is also going to rear its ugly head. The newly formed government gave more cabinet posts to Hezbollah, and no one is kidding himself in Lebanon that Hezbollah is preparing to beef up its power in this tiny country to counter President Trump’s bellicose campaign against Iran. The appointment of a health minister, who, the party claims, is a non-Hezbollah supporting Shia, will not sit well with Washington, which is tightening down on sanctions against the Iranian-backed group and might well see free health care in state hospitals given to fighters returning from the Syrian battlefield as a breach of its sanctions.
There are divided feelings in Lebanon about the appointment, with some confident that Jamil Jabak’s appointment as health minister will not anger the U.S., as he is known not to be part of Hezbollah; others believe this is naïve and that a fuse is about to blow in Washington when D.C. reads reports that Jabak is a former physician of the Hezbollah leader and has a picture of him hanging on the wall of his office.
Saad Hariri, by accepting this set up, is skating on very thin ice and cranking up the tension.
Saad Hariri, by accepting this set up, is skating on very thin ice and cranking up the tension. The new government’s vigor will be hard to ignore both by Israel and Saudi Arabia. It will not only be interesting to see how long stability can prevail when Lebanon wakes up and realizes it is now an Iranian proxy, but how much longer Riyadh will stand by its power broker in Beirut. The move might bring the Saudis back to Lebanon with investment which would be a good move to calm new tensions which are inevitably going to be felt in the region, as Hezbollah, once more, ratchets up power in its favour, just days after its leader warned that it might well fire a precision missile at Tel Aviv as a retaliation to Israeli strikes against its fighters in Syria.
Lebanon should not celebrate its new government, which, comically, is made up of ministers who have no experience or credibility in their new fields. It just took two steps forward and is now bracing itself for the three it must take back.