By International Crisis Group
Austerity measures have triggered countrywide unrest in Lebanon. In this Q&A, Crisis Group expert Heiko Wimmen says the prime minister’s emergency measures may be too little, too late. Most protesters appear bent on the government’s resignation if not the political system‘s complete overhaul.
What are the drivers of Lebanon’s mass unrest?
Lebanese have suffered for years from failing public services and state negligence, most visibly dismal electricity supply, massive pollution and the breakdown of garbage disposal, all apparently connected to deeply engrained clientelism and graft. Political polarisation has compounded the problem by repeatedly paralysing government institutions. The cost of living has ballooned, salaries have stagnated and unemployment rates have risen, prompting a significant proportion of the country’s well-educated youth to emigrate. A planned tax on free phone calls over popular social media applications, announced on 17 October along with other austerity measures, was the straw that broke the camel’s back.
Immediately before it announced the new taxes, the state put the failure of its institutions on display when firefighters were unable to control raging bush and forest fires. Their equipment had not been maintained and was unusable. On the evening of 17 October, groups of youths – apparently coordinating among each other over spontaneously formed networks on social media – took to the streets and closed major intersections in and around Beirut with burning tires. On 18 October, the phenomenon spread to other areas, bringing most of the country to a standstill.
What is new about these protests? How do they relate to other recent protests in the region, for instance in Iraq?
Lebanon has seen recurrent waves of mostly youth-led mass protest since 2005, when the so-called Beirut spring forced the departure of Syrian troops that had occupied the country for nearly 30 years. In the past, the country’s traditional leaders have typically co-opted the movements to draw the youth into their respective political camps. Sometimes these leaders have even initiated the movements. The leaders present themselves as the defenders of the numerous sectarian communities around which the Lebanese political system has been built since 1923.
The current protests, however, are so far free of sectarian undertones. In fact, protests have been marked by expressions of solidarity between localities and communities supposedly on opposite sides of the country’s political/sectarian divides. Protesters have voiced rejection of the ruling political elites of all sects, often, explicitly, their own. This rejection of incumbent leaders viewed as inept and corrupt is something the Lebanese protests share with the wave of demonstrations that engulfed Iraq earlier this month. Both countries have experienced rending sectarian conflict, and while in Iraq the scars are still fresh, protests there, as in other parts of the region, now also focus on the increasing alienation of people – underemployed youth, in particular – from political leaders and systems that seem unable to promise them a better future.
How serious is the economic and fiscal crisis?
Lebanese governments have for years relied on deficit spending and borrowing, with the budget deficit peaking at 11.5 per cent of GDP in 2018, running what some have called a state-sponsored “pyramid scheme”. Much of Lebanon’s public debt is held by the country’s private commercial banks; many of those banks are, in turn, owned by the country’s politicians and their relatives. Public debt now exceeds 150 per cent of GDP and debt service consumes around 50 per cent of state revenues. Major rating agencies have graded Lebanese sovereign bonds as “junk”, ie, coming with a serious risk of default, driving the interest rates the state must pay to attract fresh money up to 15 per cent. These high interest rates suck liquidity out of the economy and stifle incentive to invest in businesses that could create economic growth (which turned negative this year) or gainful employment. Shortly before the protests, an acute shortage of U.S. dollars threatened to disrupt supplies of imported gasoline, medicine and food, and suggested that devaluation of the local currency could be imminent – and with it, a significant loss of income for lower social strata in particular.
How have political parties reacted to the protests? And the security forces?
Even as protesters curse the country’s political parties, those same parties claim to support the protests. But protesters are not fooled: attempts by parties and leaders to assume an active role by calling on their supporters to join or even lead the movement in areas they dominate have largely fallen flat. In some areas of the south, armed thugs allegedly affiliated with the Shiite Amal Movement led by Speaker of Parliament Nabih Berri attacked protesters and attempted to clear blocked roads by force on 19 and 20 October. These gunmen were apparently subsequently withdrawn, and the movement distanced itself from “undisciplined elements”.
On the evening of 18 October, an escalation appeared possible. Protesters vandalised businesses in downtown Beirut and security forces used tear gas and water cannons to clear Riyadh Solh Square, a centre of protest in the immediate vicinity of parliament and the government palace. According to a General Security statement, 52 members of the security forces sustained mostly light injuries that evening and the authorities arrested 70 protesters. But the escalation seems to have been averted for now: on 19 October, increasingly massive throngs congregated in downtown Beirut, including a growing number of families; security forces adopted a conciliatory posture; and crowds quickly surrounded and dissuaded protesters who displayed aggressive attitudes. On 20 October, the demonstrations took on the air of a national celebration, with no violence recorded.
At least four casualties have been reported since the start of the protests; two were related to confrontations and accidents around roadblocks, while two Syrian workers died in a building accidentally set on fire the first night.
Where do we go from here? Will the government resign?
So far, only the Christian Lebanese Forces led by Samir Geagea have withdrawn their four ministers from the national unity government, citing a “lack of will to reform”. (The cabinet has 30 ministers in total.) The Christian Free Patriotic Movement (FPM) headed by Foreign Minister Jibran Bassil and the Shiite movement Hizbollah led by Hassan Nasrallah want to carry on. They argue that immediate emergency measures are required to stave off a financial meltdown. Forming a new government or holding early elections is unlikely to bring significant change, they say, and will instead waste time Lebanon does not have. In his 18 October address, Prime Minister Saad Hariri, leader of the Sunni Future Movement, gave himself a 72-hour grace period to sound out his partners in government and work toward consensus on an emergency action plan – asking the Lebanese people, implicitly, to wait at least that long. Druze leader Walid Jumblatt, who initially pushed for the government’s resignation, backpedalled in the meantime and expressed support for such an emergency plan.
While genuine concern for the country’s stability may motivate these politicians, larger strategic, as well as narrow political, interests are also at stake. Both Geagea and Jumblatt have long opposed the dominant Hizbollah-FPM-Future alliance, as they reject Lebanon’s implicit alignment with Iran that flows from Hizbollah’s dominant role. Both nonetheless accepted to serve in the national unity government to preserve some political influence, but Geagea loathes the FPM’s competition in the Christian community, and Jumblatt has seen his position undermined by Druze rivals allegedly propped up by Hizbollah. The FPM, at this point, has achieved the largest representation in government ever and stands to lose from any change; party leader Bassil is capitalising on this position of strength to position himself to inherit the presidency from his father-in-law, party founder Michel Aoun, whose term expires in 2022. Hizbollah is in the comfortable position of wielding large influence in a government that represents nearly all the country’s political currents, thus partly shielding Lebanon from international pressures and, potentially, U.S. sanctions that could target a government it would form with loyal allies alone. Finally, Prime Minister Hariri found his position among Sunnis eroded in the last elections; retaining government positions that protect his constituents’ interests and taking charge of economic recovery is his best bet for holding on to his claim to leadership.
So is there a solution to the crisis?
Some six weeks ago, on 2 September, all the relevant political parties agreed on an economic action plan known as the Baabda paper. The economic plan seems to tick all the right boxes, initiating the reform measures demanded by international donors and institutions to unlock $11 billion in soft loans and grants pledged at the CEDRE donor conference in Paris in April 2018. Yet it remains vague on implementation. Differences about how and at whose expense budget cuts would be executed and additional revenue raised have stalled budget negotiations and may have led the government to see the new taxes and cuts to salaries and pensions as the easiest way out, prompting the current uproar.
After announcing his 72-hour grace period, Prime Minister Hariri undertook intense deliberations with relevant political forces, leading up to a cabinet session on 21 October. In the afternoon of the same day, the prime minister announced that the 2020 budget would bring down the deficit to 0.6 per cent of GDP, provide $160 million for subsidised housing loans and $16 million in assistance to underprivileged families, and forge ahead with new power plants, all without raising taxes on average Lebanese. To finance these steps, two special government funds (for the south and the civil war displaced) widely seen as vehicles for clientelism would see their budgets slashed by 70 per cent, the salaries of ministers and members of parliament would be cut in half, and unnecessary spending would be ended.
Most significantly, Lebanese banks are supposed to contribute $3.4 billion to resolving the crisis. This contribution may take the form of taxes on bank profits and interest payments, or a restructuring of public debt, which is mostly held by local Lebanese banks. In other words, the Lebanese banking sector, which has realised solid profits by financing deficit spending for nearly three decades, will be asked to contribute to a bailout to avoid the much larger losses it would incur if the state were to default on its obligations.
Will this be enough to mollify the people in the streets?
These mostly technical solutions may put the country on a sounder fiscal footing, but they appear inadequate to the challenge of the protests, which now demand broader, systemic change. Hariri’s statement on Monday afternoon met largely with rejection in the streets; the overwhelming sentiment appears to be to throw out the political elite as a whole. Numerous manifestoes of demands are circulating, which appear to converge on the government’s immediate resignation in favour of a new one that would be independent of the political parties. That new government would then address the economic crisis and perhaps prepare for new elections.
If this mood prevails and protests continue at the current pace and scale, the country may be in for a prolonged period of unrest. No alternative political leadership or real opposition to the ruling parties exists. Earlier rounds of spontaneous movements, such as the 2015 protests against the collapse of garbage collection under the label “You Stink”, have spawned attempts to form anti-establishment platforms that achieved minor successes in recent municipal and national elections. Yet it is unclear if these groups are ready to participate meaningfully in political change, let alone shape a radical reform of political institutions. If sizeable numbers of protesters stay in the streets and continue to block circulation, businesses and public institutions that have been on lockdown since 18 October will remain paralysed. Attempts to restore order, for instance by deploying the army, may lead to another flare-up of violence.
Republished, with permission, from the International Crisis Group.