The economic situation in Egypt seems quite dire, not to say desperate: it has a ballooning public deficit and its reserves of foreign currency have reached a critically low level. The country faces a real risk of a sharp devaluation of the Egyptian pound that may lead to a social explosion. The much feared and anticipated “revolution of the poor”. However, the political class continues obsessed with its battle for power, unable to reach any compromise in order to save the country. Are Egyptians politicians irrational? Or even delusional?
Maybe. But the economist Galal Amin, one of the most respected Egyptian intellectuals, has another possible answer: they just think Egypt is “too big too fail”. According to Amin’s theory, exposed in a recent debate hold in the American University of Cairo, politicians know that the country has been bailed out several times during this century by foreign powers. It has such a huge geostrategical value in a key region, the Middle East, that one more time the West and its wealthy neighbors will save it. If so, why to engage in the unpleasant process of designing and implementing necessary (and sometimes painful) reforms?
Egypt is like one of those huge banks that were on the brink of the abyss because of the irresponsible behavior of its leaders in 2008, at the beginning of the financial crisis. Due to their sheer size, their collapse could bring down the whole economy of a country. Or at least, this is what most economists said at the time in order to convince us to shore these banks up with public funds. By the same token, a collapse of the Egyptian economy would send shock waves to the whole Middle East, a region already inflamed by a myriad of conflicts.
John Kerry’s recent visit gives some credibility to this view. Before leaving Cairo -two hours late thanks to a road blockade by football ultras-, the new secretary of State promised 450 million $ in aid to the public budget. Almost half of it will be sent urgently.
However, it is not clear that a West going through a deep economic crisis does have enough resources to bail out a country as big as Egypt. The funds promised by Kerry are only a very short-term fix. Even the 4,8 billion $ of the IMF loan are may fall short for a country with a budget deficit of over 23 billion $. For this reason, if I were Morsi I would take very seriously the task of reaching a compromise with the opposition.
Unfortunately, I am not very optimistic about such prospect. And not only because of the nature of Egyptian politicians. Many activists and social leaders don’t show much more insight either. Instead of discussing how Egypt may meet the enormous challenges that lay ahead, the topic these days is whether the 450 million $ are a present to Mr. Morsi and whether the “rais” has replaced Mubarak as the new US puppet. Poor Egypt.