Lebanon Forms New Government Amid Economic Crisis, Ongoing Protests
Changes from December 3, 2019 to December 20, 2019
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On October 29, Lebanese Prime Minister Saad Hariri announced his resignation, automatically triggering the resignation of his government. The move followed nearly two weeks of nationwide mass protests, described as potentially the largest in Lebanese history. As of early December, protests continued and political parties struggled to reach consensus on the appointment of a prime minister—acceptable to both protestors and party leaders—who could form a new government. Meanwhile,December 19, Lebanese President Michel Aoun appointed Hassan Diab—an engineering professor at the American University of Beirut—as prime minister-designate. Diab will replace former Prime Minister Saad Hariri, who resigned on October 29 following nationwide mass protests. While Diab was backed by a simple majority in Lebanon's parliament, he lacks support from some key constituencies, and may struggle to form a new government. Protestors have opposed Diab's nomination, and security and economic conditions in the country continue to deteriorate. Instability in Lebanon could create opportunities for actors of concern to the United States, including Hezbollah and Iran.
The Protest Movement
What triggered the protests? Protests began on October 17, triggered by a proposed tax on internet-enabled voice calls (notably WhatsappWhatsApp). However, the movement reflects broader dissatisfaction with what protestors describe as government corruption, ineptitude, and economic mismanagement. Demonstrators, who represent a broad economic, political, and sectarian cross-section of Lebanese society, have emphasized that protests are primarily driven by the state's failure to provide sufficient access to basic goods and services, including jobs, education, water, electricity, and garbage disposal.
What is new about these protests? Unlike in previous protests, Beirut is not the epicenter. Large-scale protests have persisted nationwide, and the pervasive economic concerns driving them also have largely transcended sectarian divisions. transcended sectarian divisions. Unlike past protests that generally were mobilized by political parties or civil society groups, demonstrators have organized around a shared national—rather than party or sectarian—identity.
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Figure 1. Lebanon |
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Source: CRS. |
What are their demands? Protestors lack centralized leadership, and their demands vary. Some have called for specific policy and/or leadership changes, such as early elections, a new electoral law, and the resignation of President Michel Aoun (whose term expires in 2022). Other demands have a less clear path towards implementation, such as a change to Lebanon's confessional system (in which power is divided based on sectarian affiliation), the return of "looted public money," and the removal of the entire political elite.
How has Lebanon's government responded? The government quickly scrapped the proposed tax on internet-enabled voice calls. Before its resignation, the government also passed what Lebanese press described as "a raft of unprecedented, radical economic reforms," including privatizations, salary cuts for ministers and legislators, and the establishment of a national anti-corruption commission. Some analysts argued that former Prime Minister Hariri's economic reform package "does not represent a realistic and sustainable fiscal consolidation plan. It also falls short of sufficient details and does not include the structural reforms required to put the country back on track."
What have U.S. officials said? Secretary of State Pompeo called upon Lebanon's leaders to "urgently facilitate the formation of a new government," and criticized what he described as Iranian meddling in the country. Assistant Secretary for Near Eastern Affairs David Schenker stated that the United States supports "the legitimate demands of the Lebanese people to have a government that will reform economically and will fight corruption," but added that the United States was not taking a position on the composition of a new government.
Hezbollah & Iran
Do protestors oppose Hezbollah? Protestors have called for the removal of all political elites, specifically naming Hezbollah leader Hasan Nasrallah. Protests have occurred in cities considered to be bastions of support for Hezbollah and the allied Amal movement. While some Hezbollah and Amal supporters have clashed with demonstrators, others have joined the protests. Those joining the protests generally have not criticized Hezbollah's military operations or stance against Israel, but rather focused on Lebanon's economic mismanagement, high unemployment, and the lack of consistent access to basic services such electricity, water, and garbage collection.
What is Hezbollah's position regarding the protests? Nasrallah opposed the resignation of Hariri's government, warning that it would lead to a power vacuum in the country, and instead called for reforms from within. Nasrallah also suggested that foreign embassies were financing the protests. Similarly, Iranian Supreme Leader Ayatollah Khamenei has blamed the United States for spreading "insecurity and turmoil" in Lebanon. Hezbollah was part of the ruling coalition in Lebanon's outgoing government, and held three Cabinet seats. In November, supporters of Hezbollah and Amal appeared to escalate physical attacks on protestors.
Next Steps
How will a new government be formed? According to the constitution, Lebanese President Michel Aoun must convene the various parliamentary blocs for consultations on the appointment of a prime minister-designate. To be designated and charged with forming a new government, a candidate will need to secure the support of a majority of political blocs in parliament. This is frequently a lengthy process—the outgoing cabinet was formed after eight months of deadlock. As of early December, President Aoun had not set a date for parliamentary consultations.
What could a new government look like? Protestors have called for the formation of a government of independent technocrats that excludes representatives of political parties. Former Prime Minister Hariri has endorsed this demand, and added that any candidate for the premiership must also seek extraordinary legislative powers from Parliament, redistribute key ministerial portfolios, and hold early parliamentary elections. President Aoun and most Lebanese parties have rejected the call for a technocratic government. Aoun has called for the formation of a blended "techno-political government," while Hezbollah has called for the formation of a national unity government representing all parties in parliament. Parliament Speaker Nabih Berri reportedly stated that the request for exceptional powers from parliament is "entirely out of the question because it means obstructing Parliament's legislative and oversight role."
Outlook
Political uncertainty has exacerbated the challenges facing Lebanon's economy—already in crisis prior to the protests. A scarcity of dollars in Lebanon has caused the Lebanese pound to depreciate in the black market and led banks to ration dollar withdrawals. It also has challenged the ability of importers to purchase critical goods like fuel, medicine, and food. Restrictions on dollar withdrawals and shortages of basic goods, if prolonged or exacerbated, could increase the risk for broader social upheaval. At the April 2018 CEDRE conference in Paris, international donors pledged more than $11 billion in loans and grants for Lebanon, but the funds are contingent on economic reform measures which were not implemented and which cannot be passed until a new government is formed.
Economic Crisis
What is the economic situation? In September 2019, Lebanese officials declared what they described as an "economic state of emergency." Lebanon's debt-to-GDP ratio stands at over 150%, and debt servicing consumes almost half of all government revenue. The majority of remaining government revenue is expended on public sector salaries and transfers to the state-owned electricity company, severely limiting the government's ability to invest in basic infrastructure and public services. Since protests began, a scarcity of dollars in Lebanon has caused the Lebanese pound to depreciate in the black market and led banks to ration dollar withdrawals. Importers also have struggled to purchase critical goods like fuel, medicine, and food. Restrictions on dollar withdrawals and shortages of basic goods, if prolonged or exacerbated, could increase the risk for broader social upheaval.
What has been the international response? At the April 2018 CEDRE conference in Paris, international donors pledged more than $11 billion in loans and grants for Lebanon, but the funds are contingent on economic reform measures which were not implemented and which cannot be passed until a new government is formed. In late 2019, Hariri requested international funds to help finance imports. However, U.S. officials have stated that Lebanon will not receive a "bailout" unless it implements reform.
Next Steps
Who is Prime Minister-designate Hassan Diab? Diab, a Sunni Muslim, is vice president of the American University of Beirut, where he also teaches engineering. Between 2011 and 2014 he served as education minister in the government of former Prime Minister Najib Mikati. He is not formally affiliated with any political party. Diab received a Ph.D. in computer engineering from the University of Bath in the United Kingdom.
Why has Diab's appointment generated controversy? According to Lebanon's constitution, the country's prime minister must be a Sunni Muslim. However, Diab received only six out of a possible 27 votes from Sunni MPs in support of his nomination, leading to some accusations that he does not represent the Sunni sect. Diab was nominated mostly on the strength of support from non-Sunni elements: Hezbollah, the Amal movement, and the Christian Free Patriotic Movement. 42 MPs abstained from the vote, including Hariri's Future Movement—the largest Sunni bloc in parliament.
What could a new government look like? Protestors have called for the formation of a government of independent technocrats that excludes representatives of political parties. While Hariri endorsed this demand, President Aoun and most Lebanese parties have rejected it. Aoun has called for the formation of a blended "techno-political government," while Hezbollah has called for the formation of a national unity government representing all parties in parliament. Diab may struggle to form a government, as he received only a slight majority (69 out of 128) votes in support of his nomination.