Lebanon has been grappling with one of the. What makes its case even more difficult is the overlap of fiscal, economic, political, environmental and health crises, all of which are being handled by a notoriously incompetent sectarian elite.
The ruling sectarian entourage has continued to prioritise a self-serving consensual model of governance over effective policymaking. Instead of containing the crisis, they coordinated with crooked bankers to make the lower and middle classes pay the lion's share for the losses. Billions of dollars were funnelled out of the country. Billions more were turned into profits for monopolies feeding on resource scarcity, currency collapse and economic depression.
In the process, people's savings have evaporated. Tens of thousands of jobs have been lost. Tens of thousands have been pushed to leave the country and thousands more are preparing to leave. The alone has already lost over half of its staff. Similar rates can be seen in the educational sector.
These layers of economic difficulties endured by the Lebanese people over the past two years ensured their passivity when the wolves emerged from the bushes. Two years into the crisis, and one year after the last one resigned, a new government was formed, led by one of the billionaires striving on monopolies around the world, Najib Mikati, with key seats handed to the financial and banking entourage.
Right after the announcement, international creditors whose loans were defaulted on by the previous government suddenly appeared in, ready and willing to renegotiate on whatever is left of Lebanon's future.
The creditors include the heavyweight funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T-Rowe Price, as well as a group of smaller hedge funds. It is estimated that, between them, they hold a "blocking stake" of more than 25% in 40% of Lebanon's various bond series, making their bloc a critical player in any future restructuring. The bulk of the remaining bonds are held by domestic commercial banks or the Lebanese central bank, both of whom are now well-represented in the new government.
The Lebanese people, largely in shock or denial, are either planning their way out of the country or are desperately hanging on to the false hope which came with the new government, that some semblance of prosperity will be felt again if "everyone tightens their belts" for an unspecified period, as said by the new Prime Minister.
And so the situation is now ripe for the internal and external wolves to encroach on what is left of society, after lying low earlier in the process of social destruction. In the background, some nascent political opposition is trying to fight the fight on behalf of a shocked and injured society.
The non-sectarian progressive opposition is mobilizing against the above scenario, putting the protection of people's pensions and social security funds at the centre of their fight for a fairer distribution of losses. They believe that the necessary and indispensable role of the banking system in Lebanon is opposite to the one it has played to date.
Thus the "restructuring" of the banking system, or better, the establishment of a real banking system that performs the necessary and essential functions of financing the productive economic activity of the country, is a fundamental task that the ablest opposition is raising. Such foundational restructuring is a top priority before any negotiations resume with creditors, euro-bond holders and the banks themselves, as well as with citizens regarding their social rights.
Private deposits and short-term savings should be used towards relatively short-term commitments such as financing of corporate working capital and households' consumer loans, while longer-term resources such as those of the National Social Security Fund, or the health and retirement funds of the professions unions as well as the funds of the teachers' union, which would be merged into a general pension scheme, should be used towards longer investments like infrastructure, housing, and transport.
Failing to make these choices will create a context of fait accompli, making it difficult, if not impossible, to set up a credible banking system that Lebanon so badly needs.
Other fronts of contestation are anticipated. This month, the lawyers will elect a new president for the Bar Association in Beirut. The non-sectarian opposition is mobilizing behind Moussa Khoury, a veteran in the field and a trusted political activist. This particular contest is more significant than ever, as it coincides with a over the investigation of the Beirut Port explosion, which has become an existential challenge to key figures in the establishment.
In the meantime, everyone seems to be preparing for the parliamentary elections, which are provisionally scheduled to take place in March 2022. There are signs the sectarian elites will narrow the scope of competition through electoral law and restrictions on diaspora vote, or even postpone the elections altogether as they did several times in the past.
Whilst the opposition prepares to fight on these fronts, the new government continues to have the upper hand, because, as ever, sectarian parties are betting on a new regional arrangement that will likely warm up to the old guards of Lebanon. If so, the outcome will be inconceivable and irreversible destruction of another society in the Middle East.
Dr. Ibrahim Halawi is a Teaching Fellow in International Relations at Royal Holloway, University of London, and a Fellow at Sectarianism, Proxies, and De-sectarianisation (SEPAD) Project at Lancaster University’s Richardson Institute.
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