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Saturday, July 16, 2011

Column One: Caution: Storm approaching

By CAROLINE B. GLICK


No doubt millions of Arabs are upset about freedom deficit in Arab lands. But the fact is that economics has played a decisive role

It was seven months ago that Mohammed Bouazizi, a vegetable peddler in Tunisia, set himself and the Arab world on fire. The 26- year-old staged his suicidal protest on the steps of the local city hall after a municipal inspector took away his unlicensed vegetable cart, thus denying him the ability to feed his family of eight.

Most depictions of the Arab revolutions that followed his act have cast them as struggles for freedom and good government. These depictions miss the main cause of these political upheavals. No doubt millions of Arabs are upset about the freedom deficit in Arab lands. But the fact is that economics has played a decisive role in all of them.

In Bouazizi’s case, his self-immolation was provoked by financial desperation. And if current trends continue, the revolutionary ferment we have seen so far is only the tip of the iceberg.

Moreover, the political whirlwind will not be contained in the Middle East.

Most of the news coming out about Egypt today emanates from Cairo’s Tahrir Square. There the protesters continue to demand ousted president Hosni Mubarak’s head on a platter alongside the skulls of his sons, business associates, advisors and everyone else who prospered under his rule. While the supposedly liberal democratic protesters’ swift descent into bloodlust is no doubt worth noting, the main reason these protesters continue to gain so much international attention is because they are easy to find. A reporter looking for a story’s failsafe option is to mosey on over to the square and put a microphone into the crowd.

But while easily accessible, the action at Tahrir Square is not Egypt’s most important story. The most important, strategically consequential story is that Egypt is rapidly going broke. By the end of the year, the military dictatorship will likely not only default on Egypt’s loans. Field Marshal Tantawi and his deputies will almost certainly be unable to feed the Egyptian people.

Some raw statistics are in order here.

Among Egypt’s population of 80 million, some 32 million are illiterate. They engage in subsistence farming that is too inefficient to support them. Egypt needs to import half of its food.

As David Goldman, (aka Spengler), reported in Asia Times Online, in May the International Monetary Fund warned of the impending economic collapse of non-oil exporting Arab countries saying, “In the current baseline scenario the external financing needs of the region’s oil importers is projected to exceed $160 billion during 2011-13.” Goldman noted, “That’s almost three years’ worth of Egypt’s total annual imports as of 2010.”

Since Mubarak was overthrown in February, Egypt’s foreign currency reserves have plummeted from $36b. to $25b.-28b. Last month, Tantawi rejected an IMF loan offer of $3b., claiming he would not accept any conditions on the loans. Instead he accepted $4b. in loans from Saudi Arabia and another $2.34b. from the Gulf states.

And still, Egypt’s foreign currency reserves are being washed away. As Goldman explained, the problem is capital flight. Due in no small part to the protesters in Tahrir Square calling for the arrest of all those who did business with the former regime, Egypt’s wealthy and foreign investors are taking their money out of the country.

At the Arab Banking Summit in Rome last month, Jordan’s Finance Minister Mohammed Abu Hammour warned, “There is capital flight and $500 million a week is leaving the Arab world.”

According to Goldman, “Although Hammour did not mention countries in his talk... most of the capital flight is coming from Egypt, and at an annual rate roughly equal to Egypt’s remaining reserves.”

What this means is that in a few short months, Egypt will be unable to pay for its imports. And consequently, it will be unable to feed its people.


Continue reading: http://www.jpost.com/Opinion/Columnists/Article.aspx?id=229458 

Its getting more clear everyday, that not only Europe and US economy is in the tank, but much of the world. But don't worry, Obama will rescues everyone when he gets back from his trip to the links. We should thank Obama for his support of the protestors as we now see what Democracy looks like in the middle east. Not so nice is it.

So who will bail out Egypt and Syria when they both go broke?