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Preventing State Collapse in Lebanon
Preventing State Collapse in Lebanon
Protesters congregating at Riyadh Solh Square in Downtown Beirut on 20 October 2019, asking for the resignation of the government and to bring down the ruling political elite. CRISISGROUP/Heiko Wimmen

Lebanon’s Revolt

Austerity measures have triggered countrywide unrest in Lebanon. In this Q&A, Crisis Group expert Heiko Wimmen says the prime minister’s emergency measures may be too little, too late. Most protesters appear bent on the government’s resignation if not the political system‘s complete overhaul.

What are the drivers of Lebanon’s mass unrest?

Lebanese have suffered for years from failing public services and state negligence, most visibly dismal electricity supply, massive pollution and the breakdown of garbage disposal, all apparently connected to deeply engrained clientelism and graft. Political polarisation has compounded the problem by repeatedly paralysing government institutions. The cost of living has ballooned, salaries have stagnated and unemployment rates have risen, prompting a significant proportion of the country’s well-educated youth to emigrate. A planned tax on free phone calls over popular social media applications, announced on 17 October along with other austerity measures, was the straw that broke the camel’s back.

Immediately before it announced the new taxes, the state put the failure of its institutions on display when firefighters were unable to control raging bush and forest fires. Their equipment had not been maintained and was unusable. On the evening of 17 October, groups of youths – apparently coordinating among each other over spontaneously formed networks on social media – took to the streets and closed major intersections in and around Beirut with burning tires. On 18 October, the phenomenon spread to other areas, bringing most of the country to a standstill. 

The current protests are so far free of sectarian undertones and have been marked by expressions of solidarity between localities and communities

What is new about these protests? How do they relate to other recent protests in the region, for instance in Iraq?

Lebanon has seen recurrent waves of mostly youth-led mass protest since 2005, when the so-called Beirut spring forced the departure of Syrian troops that had occupied the country for nearly 30 years. In the past, the country’s traditional leaders have typically co-opted the movements to draw the youth into their respective political camps. Sometimes these leaders have even initiated the movements. The leaders present themselves as the defenders of the numerous sectarian communities around which the Lebanese political system has been built since 1923. 

The current protests, however, are so far free of sectarian undertones. In fact, protests have been marked by expressions of solidarity between localities and communities supposedly on opposite sides of the country’s political/sectarian divides. Protesters have voiced rejection of the ruling political elites of all sects, often, explicitly, their own. This rejection of incumbent leaders viewed as inept and corrupt is something the Lebanese protests share with the wave of demonstrations that engulfed Iraq earlier this month. Both countries have experienced rending sectarian conflict, and while in Iraq the scars are still fresh, protests there, as in other parts of the region, now also focus on the increasing alienation of people – underemployed youth, in particular – from political leaders and systems that seem unable to promise them a better future.

How serious is the economic and fiscal crisis?

Lebanese governments have for years relied on deficit spending and borrowing, with the budget deficit peaking at 11.5 per cent of GDP in 2018, running what some have called a state-sponsored “pyramid scheme”. Much of Lebanon’s public debt is held by the country’s private commercial banks; many of those banks are, in turn, owned by the country’s politicians and their relatives. Public debt now exceeds 150 per cent of GDP and debt service consumes around 50 per cent of state revenues. Major rating agencies have graded Lebanese sovereign bonds as “junk”, ie, coming with a serious risk of default, driving the interest rates the state must pay to attract fresh money up to 15 per cent. These high interest rates suck liquidity out of the economy and stifle incentive to invest in businesses that could create economic growth (which turned negative this year) or gainful employment. Shortly before the protests, an acute shortage of U.S. dollars threatened to disrupt supplies of imported gasoline, medicine and food, and suggested that devaluation of the local currency could be imminent – and with it, a significant loss of income for lower social strata in particular.

How have political parties reacted to the protests? And the security forces?

Even as protesters curse the country’s political parties, those same parties claim to support the protests. But protesters are not fooled: attempts by parties and leaders to assume an active role by calling on their supporters to join or even lead the movement in areas they dominate have largely fallen flat. In some areas of the south, armed thugs allegedly affiliated with the Shiite Amal Movement led by Speaker of Parliament Nabih Berri attacked protesters and attempted to clear blocked roads by force on 19 and 20 October. These gunmen were apparently subsequently withdrawn, and the movement distanced itself from “undisciplined elements”. 

On the evening of 18 October, an escalation appeared possible. Protesters vandalised businesses in downtown Beirut and security forces used tear gas and water cannons to clear Riyadh Solh Square, a centre of protest in the immediate vicinity of parliament and the government palace. According to a General Security statement, 52 members of the security forces sustained mostly light injuries that evening and the authorities arrested 70 protesters. But the escalation seems to have been averted for now: on 19 October, increasingly massive throngs congregated in downtown Beirut, including a growing number of families; security forces adopted a conciliatory posture; and crowds quickly surrounded and dissuaded protesters who displayed aggressive attitudes. On 20 October, the demonstrations took on the air of a national celebration, with no violence recorded. 

At least four casualties have been reported since the start of the protests; two were related to confrontations and accidents around roadblocks, while two Syrian workers died in a building accidentally set on fire the first night.

These mostly technical solutions appear inadequate to the challenge of the protests, which now demand broader, systemic change

Where do we go from here? Will the government resign?

So far, only the Christian Lebanese Forces led by Samir Geagea have withdrawn their four ministers from the national unity government, citing a “lack of will to reform”. (The cabinet has 30 ministers in total.) The Christian Free Patriotic Movement (FPM) headed by Foreign Minister Jibran Bassil and the Shiite movement Hizbollah led by Hassan Nasrallah want to carry on. They argue that immediate emergency measures are required to stave off a financial meltdown. Forming a new government or holding early elections is unlikely to bring significant change, they say, and will instead waste time Lebanon does not have. In his 18 October address, Prime Minister Saad Hariri, leader of the Sunni Future Movement, gave himself a 72-hour grace period to sound out his partners in government and work toward consensus on an emergency action plan – asking the Lebanese people, implicitly, to wait at least that long. Druze leader Walid Jumblatt, who initially pushed for the government’s resignation, backpedalled in the meantime and expressed support for such an emergency plan. 

While genuine concern for the country’s stability may motivate these politicians, larger strategic, as well as narrow political, interests are also at stake. Both Geagea and Jumblatt have long opposed the dominant Hizbollah-FPM-Future alliance, as they reject Lebanon’s implicit alignment with Iran that flows from Hizbollah’s dominant role. Both nonetheless accepted to serve in the national unity government to preserve some political influence, but Geagea loathes the FPM’s competition in the Christian community, and Jumblatt has seen his position undermined by Druze rivals allegedly propped up by Hizbollah. The FPM, at this point, has achieved the largest representation in government ever and stands to lose from any change; party leader Bassil is capitalising on this position of strength to position himself to inherit the presidency from his father-in-law, party founder Michel Aoun, whose term expires in 2022. Hizbollah is in the comfortable position of wielding large influence in a government that represents nearly all the country’s political currents, thus partly shielding Lebanon from international pressures and, potentially, U.S. sanctions that could target a government it would form with loyal allies alone. Finally, Prime Minister Hariri found his position among Sunnis eroded in the last elections; retaining government positions that protect his constituents’ interests and taking charge of economic recovery is his best bet for holding on to his claim to leadership.

So is there a solution to the crisis?

Some six weeks ago, on 2 September, all the relevant political parties agreed on an economic action plan known as the Baabda paper. The economic plan seems to tick all the right boxes, initiating the reform measures demanded by international donors and institutions to unlock $11 billion in soft loans and grants pledged at the CEDRE donor conference in Paris in April 2018. Yet it remains vague on implementation. Differences about how and at whose expense budget cuts would be executed and additional revenue raised have stalled budget negotiations and may have led the government to see the new taxes and cuts to salaries and pensions as the easiest way out, prompting the current uproar. 

After announcing his 72-hour grace period, Prime Minister Hariri undertook intense deliberations with relevant political forces, leading up to a cabinet session on 21 October. In the afternoon of the same day, the prime minister announced that the 2020 budget would bring down the deficit to 0.6 per cent of GDP, provide $160 million for subsidised housing loans and $16 million in assistance to underprivileged families, and forge ahead with new power plants, all without raising taxes on average Lebanese. To finance these steps, two special government funds (for the south and the civil war displaced) widely seen as vehicles for clientelism would see their budgets slashed by 70 per cent, the salaries of ministers and members of parliament would be cut in half, and unnecessary spending would be ended. 

Most significantly, Lebanese banks are supposed to contribute $3.4 billion to resolving the crisis. This contribution may take the form of taxes on bank profits and interest payments, or a restructuring of public debt, which is mostly held by local Lebanese banks. In other words, the Lebanese banking sector, which has realised solid profits by financing deficit spending for nearly three decades, will be asked to contribute to a bailout to avoid the much larger losses it would incur if the state were to default on its obligations.

Will this be enough to mollify the people in the streets?

These mostly technical solutions may put the country on a sounder fiscal footing, but they appear inadequate to the challenge of the protests, which now demand broader, systemic change. Hariri’s statement on Monday afternoon met largely with rejection in the streets; the overwhelming sentiment appears to be to throw out the political elite as a whole. Numerous manifestoes of demands are circulating, which appear to converge on the government’s immediate resignation in favour of a new one that would be independent of the political parties. That new government would then address the economic crisis and perhaps prepare for new elections. 

If this mood prevails and protests continue at the current pace and scale, the country may be in for a prolonged period of unrest. No alternative political leadership or real opposition to the ruling parties exists. Earlier rounds of spontaneous movements, such as the 2015 protests against the collapse of garbage collection under the label “You Stink”, have spawned attempts to form anti-establishment platforms that achieved minor successes in recent municipal and national elections. Yet it is unclear if these groups are ready to participate meaningfully in political change, let alone shape a radical reform of political institutions. If sizeable numbers of protesters stay in the streets and continue to block circulation, businesses and public institutions that have been on lockdown since 18 October will remain paralysed. Attempts to restore order, for instance by deploying the army, may lead to another flare-up of violence.

Correction on 22 October: an earlier version of this Q&A referred to Prime Minister Hariri's televised speech taking place on 19 October. It was on 18 October.

Protesters in Beirut voice rejection of the ruling political elites of all sects, 20 October 2019. CRISISGROUP/Heiko Wimmen

Preventing State Collapse in Lebanon

Lebanon’s socio-economic and financial crisis accelerated greatly in the first half of 2020. The government resigned after the Beirut port blast, compounding the disarray. In this excerpt from our Watch List 2020 – Autumn Update, Crisis Group urges the EU and its member states to coordinate continued emergency assistance and revitalisation of key infrastructure, create reforms roadmap, boost civil society, and pool and coordinate emergency funds.

This commentary is part of our Watch List 2020 - Autumn Update.

Lebanon’s socio-economic and financial crisis accelerated greatly in the first half of 2020, pushed along by the COVID-19 pandemic, dramatised by the catastrophic explosion in the Beirut port on 4 August, and marked throughout by massive job and income losses. The government resigned six days after the port blast, compounding the disarray, though it had hardly been effective in addressing the country’s problems previously. At the end of August, President Michel Aoun, acting with broad parliamentary support, appointed Mustapha Adib as prime minister, but disagreement over cabinet posts has stymied efforts to form a new government. On 26 September, Adib withdrew amid apparently irreconcilable differences among political blocs, making it highly improbable that a new government can be formed soon.

The likely consequences will be three-fold. First, the enduring vacuum of political leadership will delay urgently needed reforms and external assistance, such as an agreement with the International Monetary Fund (IMF). Secondly, in the absence of an IMF bailout, large numbers of Lebanese as well as substantial portions of the Syrian refugee population (more than one million people) will slip into food insecurity and poverty. Thirdly, the state’s capacity will erode, not least in the security sector. As state control recedes and ungoverned spaces expand, turf wars may break out between political groups in some areas and between criminal networks in others, and illegal migration will increase.

To meet urgent humanitarian needs, and to fend off yet another state failure in the eastern Mediterranean basin, the EU and its member states should:

  • Continue providing emergency assistance that directly reaches people in need through the EU Civil Protection Mechanism and the EU Humanitarian Air Bridge. Programs could include disaster relief for victims of the port explosion (eg, “cash for work” to repair dwellings before winter).
     
  • Prepare to extend and expand support to prevent a serious humanitarian crisis, particularly if a solution to the political stalemate remains elusive; plan for long-term assistance directed at poor communities (Lebanese and refugees) that aims to create jobs and improve infrastructure; provide equipment to upgrade public hospitals and support for Lebanese entrepreneurs to boost exports and substitute imports.
     
  • Offer substantial assistance for revitalisation of key national infrastructure (in particular electricity generation) on the condition that the Lebanese government, once formed, establishes proper legal and regulatory frameworks for the sectors involved and transparent procurement, recruitment and planning procedures.
     
  • Draw up a roadmap of concrete reforms that a new Lebanese government should undertake to receive EU assistance, such as reaching preliminary agreement with the IMF, legislating to safeguard the independence of the judiciary, and passing anti-corruption and public procurement laws together with necessary implementation decrees.
     
  • Boost the capacity of Lebanese civil society organisations to participate in public policymaking and to increase government accountability. 

  • Distance itself from any U.S. attempt to influence Lebanon’s political processes for the sake of regional politics (eg, the U.S.’s “maximum pressure” policy aimed at squeezing Iran) and pursue an inclusive approach that enlists all major political actors in Lebanon, including Hizbollah, in the reform process.

Government Crisis

In the port explosion’s aftermath, French President Emmanuel Macron stepped in to urge that Lebanon fast-track the substantial reforms necessary to unlock external assistance, in particular an IMF package and some of the funds pledged by donors at the 2018 CEDRE conference. After the government resigned on 10 August, he also pushed for the quick formation of a new government backed by all political forces. On 31 August, on the eve of Macron’s second visit to Beirut, a broad majority of the Lebanese parliament nominated Lebanon’s ambassador to Germany, Mustapha Adib, as prime minister. Macron’s initiative stalled due to a combination of domestic competition and external pressure. As distrust runs deep, Lebanese actors, in particular Hizbollah and former Prime Minister Saad Hariri, battled over nominations of ministers to secure influence in the new cabinet, making Adib miss the two-week deadline proposed by the French president. Ten days later, he resigned. In reaction, Macron blamed all sides, adding he was “ashamed of Lebanon’s political leaders”, said he would give them a few more weeks to get their act together, but also pointedly criticised Hizbollah, asserting it “can’t be at the same time an army at war with Israel, an unrestrained militia against civilians in Syria and a respectable party in Lebanon”.

Uncertainty about the U.S. attitude toward Macron’s initiative – coupled with Saudi pressure on Hariri to adopt a tough stance toward Hizbollah – almost certainly further complicated the bargaining. Washington had expressed qualified support for the effort as a whole, but took exception to the French president’s explicit recognition of Hizbollah as a central and legitimate part of the Lebanese political system. The U.S. considers Hizbollah a terrorist organisation and aims to clip its wings as part of the “maximum pressure” policy against Iran and its allies. On 8 September, the U.S. Treasury imposed new sanctions on Lebanese politicians allied with the Shiite Islamist party, and seven days later Secretary of State Michael Pompeo warned France, while visiting Paris, that “efforts to resolve the crisis in Lebanon would be in vain without immediately tackling the issue of Iran-backed Hezbollah’s weaponry”. On the other hand, U.S. officials have indicated that their position vis-à-vis a new government may hinge on a distinction between Hizbollah having a “presence” in it or exercising “dominance” over it. 

The uncertainty created by signals from Washington has been compounded by the approaching U.S. elections. Lebanese politicians may prefer to wait to see if President Donald Trump wins or whether Washington moves closer to the French position under a Biden presidency. 

What is clear is that greater polarisation and renewed confrontation risks – as it has done repeatedly over the past fifteen years –provoking a breakdown in the political process and violence. Government formation, IMF negotiations and urgent reforms – all pre-conditions for badly needed external assistance – would become impossible. The social crisis would get still worse and state capacity dwindle faster.

Social Crisis

The collapse of the Lebanese currency and economy sped up in the first half of 2020. The loss of summer tourism revenue due to the COVID-19 lockdown was a further blow, followed by the 4 August port explosion, whose resulting damage cost between $3 and $5 billion, according to the World Bank. Lebanese citizens had already lost access to their savings as a result of informal controls local banks have enacted since late 2019 in response to capital outflows and their own severe lack of liquidity. Now citizens have also lost a significant part of their income to runaway inflation (110 per cent annually as of July). Since early 2019, some 350,000 private-sector employees (out of a total work force of 1.8 million) have been laid off and many more have been furloughed or suffered pay cuts as businesses, facing declining purchasing power and evaporating credit, scaled down or suspended operations. 

The situation is bound to deteriorate further: the Lebanese Central Bank is burning through its remaining foreign exchange reserves and its governor has warned that by year’s end, he will have to stop the policy of subsidising fuel, food and medicine imports by providing foreign exchange at a highly preferential rate. Scrapping the subsidies would cause yet another huge spike in inflation. Already, 55 per cent of Lebanese live below the poverty line and 23 per cent in extreme poverty; Save the Children estimates that in Beirut alone, more than 500,000 children “struggle to survive”. Among Syrian refugees, some 90 per cent of households are food-insecure, and negative coping mechanisms, such as child marriage and child labour, are common. Without substantial external assistance, the threat of widespread food insecurity is real. As a result of the misery, migration pressure is increasing. Thousands who have legal residency elsewhere or hold foreign passports have begun to leave. A Western diplomat in Beirut told Crisis Group: “Everybody I know is leaving”. Illegal migration by sea to Cyprus is on the rise.

Deteriorating State Capacity and Control

With revenue collapsing and access to financial markets cut off, the Lebanese state will soon be unable to fund ministry budgets or increase salaries to make up for state employees’ lost income caused by runaway inflation. Crucial state services would accordingly erode, particularly in the health sector. As public resources dry up, the capacity of some political actors to keep their constituents loyal by offering access to such resources (eg, by securing public employment) and their related ability to enforce social control will recede. Predatory and criminal networks could fill the gaps. 

Overstretched and underpaid security forces might be able to prevent some such developments, but not necessarily for long, and some of their personnel might have no choice but to find additional sources of income. Their professionalism would suffer further, as would the functioning of security institutions. Turf wars among local armed groups may become a daily occurrence and could scale up once groups driven by sectarian and political motivations become involved. Some parts of the country could turn into de facto ungoverned spaces, and some may even become safe havens for jihadists or organised crime. Security forces might also no longer be able to patrol the coastline and curb migration to Cyprus, which is less than 200km away.

A Role for the EU, with France in the Lead

European capitals have a strong interest – and a major role to play – in preventing the Lebanese state’s collapse. After the port explosion, France took the lead in mobilising support for Lebanon through two donor conferences (one held on 9 August, the second planned for October) and pushing the Lebanese leadership to adopt a reform roadmap. France is uniquely positioned to spearhead this effort, as it enjoys credibility with actors across the Lebanese political spectrum. Failure to form a government represents a serious setback for the French initiative; at this point, however, there is no viable alternative to Macron’s approach and, as he recognised, any solution will need to include Hizbollah – together with its Shiite ally, Amal.

Whatever happens with the French initiative, countries like Germany, Italy and Sweden should scale up their humanitarian assistance. Lebanon needs funding and technical capacity for major infrastructure projects (such as in energy, water and garbage disposal) and reconstruction in areas affected by the port blast. Through such projects, donor countries could insist on the establishment of new governance standards (eg, transparency in planning, procurement and disbursement of funds). Donors could also expand existing programs that seek to create jobs for Lebanese and refugees alike by improving local infrastructure and agricultural production, as these places will likely be the first to experience food insecurity and the failure of already feeble state services and control. They could also boost the capacity of Lebanon’s already well-developed civil society by facilitating its inclusion in planning procedures and access to information related to projects implemented with EU participation, so as to create new mechanisms of participation and public accountability. The private sector could be another avenue to explore, as increasing domestic production would reduce unemployment and the balance of payments deficit, substituting for imports that drain foreign currency reserves and creating a source of foreign currency through exports. 

Europe should assume a unified position vis-à-vis the U.S. and the Gulf Cooperation Council and urge that international assistance be conditioned on progress on reform, and not tied to U.S. and Gulf Arab strategic considerations.

Donors could better coordinate their assistance by pooling resources under a common instrument such as a dedicated EU Trust Fund. Europe should also assume a unified position vis-à-vis the U.S. and the Gulf Cooperation Council and urge that international assistance (in particular, an IMF package) be conditioned on progress on reform, and not tied to U.S. and Gulf Arab strategic considerations, such as disarming Hizbollah, diminishing the group’s influence in Lebanon and ending its activities in the region. The objective should be to prevent another failed state in the eastern Mediterranean, not to score points in a geostrategic competition.