In a new policy paper for the European Council on Foreign Relations – “Egypt, the IMF, and European Economic Assistance” – I argue that while structural reform is important to deal with Egypt’s deep rooted economic problems, it would be short sighted for the EU and key member states not to act now. Here’s a blog post on the paper too.
Part of the inspiration for this paper came from numerous meetings with EU diplomats who have, up till now, held back most of loans and grants to Egypt because of a lack of political stability and consensus.
However, the more I spoke to Egyptian players, the more I saw this as a Catch 22 situation.
Egypt needs cash to prevent instability in the face of unemployment and economic collapse, but it can’t get the cash without signing up to reforms that would themselves cause more short term instability.
Europe must commit some money to grassroots training now to avoid this Catch 22 destroying the consolidation of democracy in Egypt.
My key arguments are as follows:
- The EU should invest in young people, with the Egyptian private sector still struggling to find qualified employees despite high unemployment levels. Donors should target vocational training programmes for young Egyptians.
- The EU is already due to sign two programmes that put millions of dollars into infrastructure projects and technical skills training. These, plus World Bank funding for small and medium enterprises, should serve as a model for smaller, targeted aid programmes.
- Europe should still stand by the IMF’s comprehensive reform programme, aimed at fixing long-term structural problems in Egypt’s economy.