Lebanese lose faith in politicians as economy falters

The public has grown distrustful of the political class widely considered corrupt and steeped in personal rivalries. Taxes, utility bills, and prices have increased in recent years while income has stagnated.

First Look

For days, Lebanese TV stations have been blanketed with live coverage as lawmakers held heated debate over a controversial austerity budget meant to salvage the flailing economy, with protests outside parliament and critics denouncing its focus on tax hikes and wage cuts. Mohammed Badran, sitting in his barber shop empty of customers, couldn't be bothered to watch.

Those officials don't even know how much bread costs, he scoffed. "They basically don't know anything about us." The hair stylist – his hair spiked stylishly in front – sat idle in his salon in central Beirut with the TV tuned to Quranic recitals.

Mr. Badran said things have gotten worse the past few years. Taxes, utility bills, and prices have increased, while his income hasn't changed. Once, he kept about three quarters of his earnings; now he pockets only about a quarter, he said.

"Things have been turned upside down," Mr. Badran said.

As the economic crisis deepens in Lebanon, so has the public's distrust in the ability of the old political class, widely viewed as corrupt and steeped in personal rivalries, to tackle major reform. Many fear a Greek-style bankruptcy, without the European Union to fall back on and with potentially more violent social unrest in the small country wedged between war-torn Syria and Israel.

A new budget that reduces public debts, improves governance, and reforms infrastructure could unlock some $11 billion in aid promised to Lebanon last year by European countries. But after weeks of delay amid haggling among the government and lawmakers, the result is a bill that mostly taps into the pockets of average Lebanese, while critics say it does little to tackle structural issues and deeply entrenched corruption at the root of the crisis.

The final vote on the budget is expected Friday, unless more delays occur. It is expected to pass overwhelmingly.

Still, during three days of live-televised debate this week, a line of lawmakers took to the podium to rail against it – most of them members in the government that designed it. In his speech Thursday, the finance minister snapped back, saying they were treating the budget like an "abandoned baby" no one would admit to fathering.

Critics said the theatrics were designed to absorb public anger over an economic slump that has hit hard.

Growth reached an all-time low of 0.2% last year. It slowed further after the Central Bank halted subsidized housing loans through commercial banks, contracting the real estate market, a main engine for growth since 2012. The budget deficit reached 11% of GDP, up from 8.6% in 2017, and public debt stands at 150% of GDP, one of the highest in the world. Fuel imports have increased, further deepening a trade deficit.

The downturn has impacted the country's trusted banking sector. The Central Bank's foreign assets have receded by around $6 billion since last year, as it props the currency pegged to the dollar. Deposit growth has been the lowest since 2005 as some people transfer savings abroad.

Meanwhile, some businesses have liquidated and shops have closed. More apartments are up for sale, deflating prices.

The budget submitted to the parliament aims to bring the deficit for 2019 down to 7.6%, though the International Monetary Fund projects it will likely be at 9.75%.

Last year, the government hiked the value-added tax to finance a pay increase it promised to public sector workers. This year's proposed new budget cuts pay and benefits for government workers and freezes public sector hiring for three years. The VAT hike remains in place, and other taxes are also increased.

Economist Jad Chaaban said the anxiety around a potential Greek-style bankruptcy has allowed government officials to push an emergency fix rather than enact major changes, such as progressive taxes or debt restructuring.

The real problem, he wrote recently, is the political elite, which treats the public sector as a jobs source for supporters and covers up corruption that enriches them and drives up debt. Commercial banks are largely owned by ruling politicians and profit from holdings of public debt.

Mr. Chaaban and other critics say officials have tried to divert bitterness over the economy by campaigning against the nearly 1.1 million Syrian refugees in Lebanon, calling for their return and clamping down on illegal labor.

For Mr. Badran, economic hardship has curbed even the simplest of dreams. He dropped plans to build a solarium at his salon. After 14 years of owning his shop, he still lives with his parents, unable to afford marriage.

In the last year, his profits maxed at $500 a month in the face of increasing bills, rent, and costs. Like all Lebanese, he pays one electricity bill to the government and a separate one to a private generator provider to fill in during daily power cuts caused by the decrepit infrastructure.

"Ever since I can remember, there has been no electricity, no water. Now I am 33 years old, and we still complain of the water and electricity," Mr. Badran said, who was born at the height of Lebanon's 15-year civil war. "Look next door, in Syria, there is war and all that, and it has electricity and water. Here, we have charlatans."

With mounting costs – hair gel prices have gone up by 30%, for example – he has cut back on supplies for the salon as well as personal spending.

Most of his young, stylish clientele have also cut back, coming to his shop once a month instead of three times.

Once the new budget passes, Mr. Badran said he'll likely have to raise his prices for the first time in years, adding to the burden on his regulars, many of whom already work two jobs.

"I have been buttering up my clients so as not to lose them," he said.

Along one street in the busy commercial neighborhood of Mar Elias, known for its jewelry stores, at least four shops had "For Sale" signs in the window.

Among them was an emptied-out family gold shop. One family member named Maha staffed the shop with her uncle on a recent day. The family still has its wholesale gold business but can't keep running an idle retail shop, they said. Both refused to give their last name to protect the family's commercial reputation and private plans.

Maha said only the middle class feels the economic pain since the wealthy and government officials stash their money abroad.

"People ask why we don't protest. Look around us what happened when people protested?" she said. "Look at Egypt, or even worse Syria. We will end up in a worse place."

This story was reported by The Associated Press