Breakfast Wrap: Ugly Financial Decisions, Morsi In Turkey For 12 Hours

The bad, the worse and the ugly 

Nothing is pretty about revolution and nothing is tidy about the consequences.  For those countries that are battling with a post-revolutionary economic crisis, difficult decisions must be made that will not be accepted universally.

Tunisia’s budget deficit should narrow to 6% next year from 6.6% of gross domestic product (GDP) expected in 2012, the central bank governor said on Friday, indicating economic recovery in the cradle of Arab Spring revolts may take longer than anticipated.

“2014 will not be the year of recovery for the Tunisian economy. It is still a year of transition that may see the premise of recovery,” said Central bank governor Chadli Ayari indicating the country may not fully recover by 2014.

But there is a silver lining.  At least the Middle East and North Africa region isn’t facing the astronomical financial woes of the Eurozone.

Spain’s debt will reach 90.5% of GDP by end 2013 after hitting 85.3% of GDP by the end of this year, the government’s budget document has showed.

Spanish prime minister Mariano Rajoy is defying thousands of protestors by vowing to cut the deficit by at least 18 billion euros ($23.2 billion) next year.  He’s struggling to convince European peers and investors that he can handle the crisis.

In this era of global economic turmoil, ugly decisions are made that often mean officials don’t meet eye to eye with the general public.

Over the weekend, President Francois Hollande’s Socialist government unveiled sharp tax hikes on business and the rich on Friday in a 2013 budget aimed at showing France has the fiscal rigour to remain at the core of the euro zone.

As Reuters put it, it’s France’s toughest single belt-tightening in 30 years.

The above paints a clear picture of the way Egypt must go: stop dithering, stop lying to us, stop pretending and do what must be done.  Perhaps start by raising fuel prices universally and target the poor with the coupon system you keep talking about.  There’s a reason why Londoners don’t use their cars all the time.  It’s too expensive and would leave most individuals bankrupt.  The impact, a more sustainable, clean-air city with a little more money in the coffers.

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But some Egyptian officials are experts at indecisiveness and opaqueness.

According to the Egyptian central bank governor Farouk Al Okdah, the value of the Egyptian pound is determined according to the rules of the market, and both the state and the central bank would not interfere by lowering its value.

“There is no intention at all to make a gradual reduction of the value of the pound against the dollar and the basket of other foreign currencies during the upcoming period.”

How do you explain the 5% drop in the value of the pound over the last year and a half then Mr Al Okdah? And how do you explain foreign currency traders telling me left, right and centre that the central bank does regularly intervene in the currency?

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All is not lost however, because President Mohammed Morsi is in Turkey today to boost business ties between the two countries, and all in 12 hours!

Despite the superficial view that Turkey is admired by Egypt as a country that is an Islamist success story, mixing a strong economy with Western ties and Islamic piety, the truth is a little more hard to stomach.

Dina Zakaria, a member of the foreign relations committee of the Muslim Brotherhood’s Freedom and Justice Party told AP that she is convinced Egyptian society would not accept Turkey’s secular constitution.

“Their constitution won’t work here in Egypt,” she said. “There are things Egyptian people won’t accept,” she added, referring mainly to the separation of religion and he state.

It is the biggest test for Egypt’s economy – how to reconcile Islamist with a modern economic framework.




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