By LIZ ALDERMAN
Published: May 27, 2011
DEAUVILLE, France — Leaders of the Group of 8 wealthiest industrialized nations pledged on Friday to send billions of dollars in aid to Egypt and Tunisia, hoping to reduce the threat that economic stagnation could undermine the transition to democracy.Doug Mills/The New York Times
President Obama walks with United Nations Secretary-General Ban Ki-moon to a luncheon following a meeting in Deauville, France on Friday.Related
At a series of working sessions that lasted until the early morning hours Friday, representatives of the Group of 8 expressed concern that the democracy movement in the Arab world could be “hijacked” by Islamic radicals if the West did not help stabilize the economies of the two countries that touched off the Arab Spring, according to two European diplomats who were present during the discussions.Comparing the uprisings that are sweeping the region to the fall of the Berlin Wall, which eventually paved the way for a historic shift to democracy in Central and Eastern Europe, the group said in a communiqué that its aim was “to ensure that instability does not undermine the process of political reform.”How much aid the Western powers would ultimately provide, and how effective any aid would be during volatile political transitions in the two countries, remained uncertain. The group’s official communiqué promised $20 billion, which would be a major infusion of funds.President Nicolas Sarkozy of France, the meeting’s host, said the total could be double that. But he and other officials did not specify how much each country and international development agency would provide, and the Group of 8 countries have in the past made commitments that they did not ultimately fulfill.Even so, the incomplete transition in the Middle East was a dominant worry at the meeting. Democracy, the leaders said, could be rooted only in economic reforms that created open markets, equal opportunities and jobs to lower staggeringly high unemployment rates, especially among restless youths.“We’re seeing growth slow, budget deficits rise, in the case of Egypt, some foreign exchange reserves being lost,” said David Lipton, a senior director for international economic affairs at the National Security Council. “We and the countries both see the very high priority of keeping the countries stable so that the backdrop of democratization is one of economic stability rather than instability and chaos.”That challenge has grown acute in Egypt since the fall of President Hosni Mubarak. Revenues from tourism, a mainstay of the economy, have plummeted by 40 percent, the new military government says.Foreign investment has dried up. Factories are paralyzed by strikes. Meanwhile, prices for food and energy have surged, leaving people feeling deeply insecure ahead of crucial parliamentary and presidential elections in the fall.“We members of the G-8 strongly support the aspirations of the Arab Spring, as well as those of the Iranian people,” the leaders, who discussed the situation with the prime ministers of Egypt and Tunisia here, said in the communiqué.Officials said the aid would come from the member states of the Group of 8, which includes the United States, Japan, Canada, Britain, France, Germany, Italy and Russia, and from international organizations, including the World Bank, the International Monetary Fund and the European Investment Bank.Officials cautioned that the projected $20 billion in aid from international financial institutions would come in phases and be contingent on democratic and economic reforms. The pledge, an aide to President Obama said, was “not a blank check” but “an envelope that could be achieved in the context of suitable reform efforts.”There is a fear, shared by both the American administration and democracy activists, that plunking down large dollar pledges upfront would risk funneling money into the hands of institutions, including the Egyptian military, which could misuse or simply siphon it off.Even such a large infusion is dwarfed by the scale of the two economies — $500 billion in Egypt and $100 billion in Tunisia. Mr. Sarkozy said that he hoped the total aid package would eventually reach $40 billion, including $10 billion from Saudi Arabia, Qatar and Kuwait.Qatar is also urging its Persian Gulf partners to consider creating a Middle East development bank to help Arab states making a transition to democracy.The economies of the Middle East and North Africa have been weak for years, and per capita growth over the past three decades was only half a percent, a fraction of the average for emerging economies, according to the International Monetary Fund.Weak growth and poor job opportunities are among the major factors that prompted the outpouring of unrest among young people in Egypt and Tunisia.But political change has, if anything, brought more economic pain. In Egypt, many people are again complaining of soaring food prices, just as they did last fall before the revolution. Many are now also wrestling with exaggerated expectations about how much the revolution will lift their personal fortunes.Labor unrest has swept the country as workers everywhere demand more pay. Newspapers report rumors of vast illicit fortunes to be recovered from Mr. Mubarak and his associates that many mistakenly believe will change the Egyptian economy.Old leftist political parties are re-emerging as though they have been frozen in time for the 30 years of the Mubarak police state to demand that the government again expand its role in the economy to help the poor, even at the price of discouraging foreign investors.In Tunisia, the revolution that ousted former President Zine el-Abidine Ben Ali began in the country’s impoverished interior as a revolt against dismal economic conditions; it only later took on demands for political democracy and freedom as it reached the more affluent, educated and Westernized coast.Now many inlanders are complaining that the resulting upheaval has not brought development or opportunity.Resentment of the coastal elite runs high, and some say they feel so disappointed they have soured on participating in the democratic process.In Tunisia, too, old leftist parties are trying to come back, and parts of the country’s strong labor movement are stepping up their demands or returning to radical roots.In both countries, unrest has led to security problems that have scared away tourists, an important source of revenue. Tourist demand has fallen so much that many airlines have canceled or scaled back flights.The Group of 8 leaders want their aid to help address those issues by broadening economic opportunity and breaking down trade barriers; Egypt, seeking to protect state industries, has some of the highest in the world.The European Bank for Reconstruction and Development developed expertise in overhauling centrally planned economies in Eastern and Central Europe, which is why officials said its role would be central in the Arab world.Masood Ahmed, the Middle East director of the International Monetary Fund, said that to ensure stability Egypt needed to generate up to 10 million jobs over the next decade and Tunisia about 1 million.Turning to Libya, the Group of 8 leaders reiterated calls for its leader, Col. Muammar el-Qaddafi, to step aside, saying he and his government “have failed to fulfill their responsibility to protect the Libyan population and have lost all legitimacy. He has no future in a free, democratic Libya. He must go.”The leaders also backed Mr. Obama’s call for an Israeli-Palestinian peace deal, but conspicuously left out a mention of his call for negotiations to be based on the 1967 borders. The group generally operates by consensus, and Canada opposed a reference to the borders.If the statement was going to mention the 1967 border, said Stephen Harper, Canada’s conservative prime minister, it should also cite other elements of Mr. Obama’s speech, including that Israel be recognized as a Jewish state and that the Palestinian state be demilitarized.“I would support any statement on finding peace in the Middle East that was balanced,” he told reporters. “I would not support any statement that was not balanced.”
DEAUVILLE, France — Leaders of the Group of 8 wealthiest industrialized nations pledged on Friday to send billions of dollars in aid to Egypt and Tunisia, hoping to reduce the threat that economic stagnation could undermine the transition to democracy.
Doug Mills/The New York Times
President Obama walks with United Nations Secretary-General Ban Ki-moon to a luncheon following a meeting in Deauville, France on Friday.
Related
At a series of working sessions that lasted until the early morning hours Friday, representatives of the Group of 8 expressed concern that the democracy movement in the Arab world could be “hijacked” by Islamic radicals if the West did not help stabilize the economies of the two countries that touched off the Arab Spring, according to two European diplomats who were present during the discussions.
Comparing the uprisings that are sweeping the region to the fall of the Berlin Wall, which eventually paved the way for a historic shift to democracy in Central and Eastern Europe, the group said in a communiqué that its aim was “to ensure that instability does not undermine the process of political reform.”
How much aid the Western powers would ultimately provide, and how effective any aid would be during volatile political transitions in the two countries, remained uncertain. The group’s official communiqué promised $20 billion, which would be a major infusion of funds.
President Nicolas Sarkozy of France, the meeting’s host, said the total could be double that. But he and other officials did not specify how much each country and international development agency would provide, and the Group of 8 countries have in the past made commitments that they did not ultimately fulfill.
Even so, the incomplete transition in the Middle East was a dominant worry at the meeting. Democracy, the leaders said, could be rooted only in economic reforms that created open markets, equal opportunities and jobs to lower staggeringly high unemployment rates, especially among restless youths.
“We’re seeing growth slow, budget deficits rise, in the case of Egypt, some foreign exchange reserves being lost,” said David Lipton, a senior director for international economic affairs at the National Security Council. “We and the countries both see the very high priority of keeping the countries stable so that the backdrop of democratization is one of economic stability rather than instability and chaos.”
That challenge has grown acute in Egypt since the fall of President Hosni Mubarak. Revenues from tourism, a mainstay of the economy, have plummeted by 40 percent, the new military government says.
Foreign investment has dried up. Factories are paralyzed by strikes. Meanwhile, prices for food and energy have surged, leaving people feeling deeply insecure ahead of crucial parliamentary and presidential elections in the fall.
“We members of the G-8 strongly support the aspirations of the Arab Spring, as well as those of the Iranian people,” the leaders, who discussed the situation with the prime ministers of Egypt and Tunisia here, said in the communiqué.
Officials said the aid would come from the member states of the Group of 8, which includes the United States, Japan, Canada, Britain, France, Germany, Italy and Russia, and from international organizations, including the World Bank, the International Monetary Fund and the European Investment Bank.
Officials cautioned that the projected $20 billion in aid from international financial institutions would come in phases and be contingent on democratic and economic reforms. The pledge, an aide to President Obama said, was “not a blank check” but “an envelope that could be achieved in the context of suitable reform efforts.”
There is a fear, shared by both the American administration and democracy activists, that plunking down large dollar pledges upfront would risk funneling money into the hands of institutions, including the Egyptian military, which could misuse or simply siphon it off.
Even such a large infusion is dwarfed by the scale of the two economies — $500 billion in Egypt and $100 billion in Tunisia. Mr. Sarkozy said that he hoped the total aid package would eventually reach $40 billion, including $10 billion from Saudi Arabia, Qatar and Kuwait.
Qatar is also urging its Persian Gulf partners to consider creating a Middle East development bank to help Arab states making a transition to democracy.
The economies of the Middle East and North Africa have been weak for years, and per capita growth over the past three decades was only half a percent, a fraction of the average for emerging economies, according to the International Monetary Fund.
Weak growth and poor job opportunities are among the major factors that prompted the outpouring of unrest among young people in Egypt and Tunisia.
But political change has, if anything, brought more economic pain. In Egypt, many people are again complaining of soaring food prices, just as they did last fall before the revolution. Many are now also wrestling with exaggerated expectations about how much the revolution will lift their personal fortunes.
Labor unrest has swept the country as workers everywhere demand more pay. Newspapers report rumors of vast illicit fortunes to be recovered from Mr. Mubarak and his associates that many mistakenly believe will change the Egyptian economy.
Old leftist political parties are re-emerging as though they have been frozen in time for the 30 years of the Mubarak police state to demand that the government again expand its role in the economy to help the poor, even at the price of discouraging foreign investors.
In Tunisia, the revolution that ousted former President Zine el-Abidine Ben Ali began in the country’s impoverished interior as a revolt against dismal economic conditions; it only later took on demands for political democracy and freedom as it reached the more affluent, educated and Westernized coast.
Now many inlanders are complaining that the resulting upheaval has not brought development or opportunity.
Resentment of the coastal elite runs high, and some say they feel so disappointed they have soured on participating in the democratic process.
In Tunisia, too, old leftist parties are trying to come back, and parts of the country’s strong labor movement are stepping up their demands or returning to radical roots.
In both countries, unrest has led to security problems that have scared away tourists, an important source of revenue. Tourist demand has fallen so much that many airlines have canceled or scaled back flights.
The Group of 8 leaders want their aid to help address those issues by broadening economic opportunity and breaking down trade barriers; Egypt, seeking to protect state industries, has some of the highest in the world.
The European Bank for Reconstruction and Development developed expertise in overhauling centrally planned economies in Eastern and Central Europe, which is why officials said its role would be central in the Arab world.
Masood Ahmed, the Middle East director of the International Monetary Fund, said that to ensure stability Egypt needed to generate up to 10 million jobs over the next decade and Tunisia about 1 million.
Turning to Libya, the Group of 8 leaders reiterated calls for its leader, Col. Muammar el-Qaddafi, to step aside, saying he and his government “have failed to fulfill their responsibility to protect the Libyan population and have lost all legitimacy. He has no future in a free, democratic Libya. He must go.”
The leaders also backed Mr. Obama’s call for an Israeli-Palestinian peace deal, but conspicuously left out a mention of his call for negotiations to be based on the 1967 borders. The group generally operates by consensus, and Canada opposed a reference to the borders.
If the statement was going to mention the 1967 border, said Stephen Harper, Canada’s conservative prime minister, it should also cite other elements of Mr. Obama’s speech, including that Israel be recognized as a Jewish state and that the Palestinian state be demilitarized.
“I would support any statement on finding peace in the Middle East that was balanced,” he told reporters. “I would not support any statement that was not balanced.”
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