MEMO POLICY

EGYPT, THE IMF AND EUROPEAN ECONOMIC ASSISTANCE Farah Halime

Egypt is in the grip of profound economic and political SUMMARY Egypt is in the grip of dual crises that are fuelling crises, each of which reinforces the other and imperils dangerous discontent. First, it faces contentious the prospects for long-term social stability, growth, and parliamentary elections amid a mounting challenge development. The International Monetary Fund (IMF) to the legitimacy of post-Mubarak institutions. has made a $4.8 billion loan conditional on reforms that Second, in order to secure a $4.8 billion loan it believes are essential in order to create sustainable from the International Monetary Fund, it must growth in Egypt. But the government in Cairo is reluctant implement austerity measures and broad structural to implement these reforms, which would have a negative reforms. The IMF loan would provide temporary short-term impact on the living standards of many millions fiscal relief and unlock billions in additional aid, of Egyptians. The toxic political atmosphere is endangering which European, US, and other donors have made conditional on Cairo adopting the Fund’s terms. prospects of achieving the political consensus over economic However, the political risks attached to enforcing reform that the IMF believes is essential to the programme’s the austerity programme leave an increasingly success. The inflationary impact of the growing balance-of- fragile Egyptian government reluctant to sign on. payments deficit threatens a new season of social outrage on the streets. This memo argues that it is shortsighted for the European Union and key member states to withhold The IMF loan is central to Egypt’s immediate economic all of the $6.5 billion in economic support they have prospects, not only because of the likely impact of the earmarked for Egypt until the IMF accord is signed. loan itself but also because a number of other donors and Europe should not wait for Cairo to agree on the investors have made their own commitments conditional long-term structural reform demanded by the IMF on Cairo’s adoption of the IMF’s terms. Egypt’s adoption before helping Egypt address the growing crisis of unemployment, which threatens to fuel renewed of the IMF reform package is thus the trigger for releasing social turbulence. Instead, even before terms are an estimated $12 billion in contingent loans. An IMF loan agreed between Cairo and the IMF over long-term agreement would also be viewed in international capital macro-economic policy, European donors should markets as a signal that Egypt is finally on track to narrow immediately commit funds to grassroots training its budget deficit and implement key reforms, easing the and vocational skills programmes to help tackle uncertainty that has restrained foreign investors from unemployment. returning to Egypt. But the long-term structural reform envisaged under the loan agreement is not a panacea for the problems facing the country and will not solve the immediate 2 ECFR/76 April 2013 www.ecfr.eu egypt, the imf and european economic assistance critical-level-164608124.html. December 2012,available athttp://news.yahoo.com/egypts-central-bank-reserves- 6 Monthly+Statistical+Bulletin/Feb+2013+Statistical+Bulletin.htm. at http://www.cbe.org.eg/English/Economic+Research/Publications/ 5 unemployment-reaches-3-5-million/. 4 March2013,availableathttp://www.dailynewsegypt.com/2013/03/04/capmas- 4 pepo/LabourForce/sdds_lb2_e2.pdf. Unemployment inEgypt”,16February2013, availableathttp://www.capmas.gov.eg/ 3 idUSL6N0C243J20130310. 10 March2013,availableathttp://www.reuters.com/article/2013/03/10/egypt-imf- 2 economy-idUSL6N0C3B8Z20130311. Reuters, 11March2013,availableathttp://www.reuters.com/article/2013/03/11/egypt- 1 its own reserves and used some of the assistance from Qatar depleted has government the Although uprising. 2011 the a third of the $36 billion that Egypt held immediately before than more little at stand now reserves currency foreign But wheat. grain, staple its of cent per 60 about including food, its of much imports that country a in consequences social potentially volatile with situation a – measures currency-control and Qatar from infusion cash a despite fallen levels” had “critical to reserves foreign Egypt’s that warned recently period. post-Mubarak the of uncertainty the amid percent 56 by fallen has investment direct foreign while revolution, the of of start the since fifth a than source more down by are – key decades a for income – exchange foreign tourism Egypt’s from revenues Meanwhile, unable tofindwork. higher. much is and 29, and unemployed are who 15 those of number real the believe some of between aged are percent 74 whom unemployed, of are Egyptians of percent According 13 figures, unemployment. official youth burgeoning Egypt’s is amid the ensuing political turmoil since then. Most alarming exacerbated been have Mubarak Hosni President of ouster the to led that uprising 2011 the for tinder the set had that economy Egyptian the in weaknesses structural deep The A deepeningeconomiccrisis measures” totackleitsbudgetdeficit. structural “broad needed Egypt that Minister said al-Araby Planning Ashraf fixes”, “quick than Rather it. rejected far thus has – IMF the from package stopgap the dwarfing grants, and loans immediate in billion $13 offered already have Libya and Arabia, Saudi Turkey, Qatar, from grants and loans immediate in billion $13 offered been already has original larger loan. Thus the Egyptian government – which the as conditions restructuring similar had have to likely is full the of terms negotiated. being are the programme while loan bridging a with assisted be nonetheless should it problems, economic its tackle to reforms ambitious needs urgently Egypt while that, argued have officials IMF crisis. budget and currency a with cope it offered Egypt a temporary loan facility of $750 million to help assistance until the reform programme had been agreed and delaying of danger the recognised IMF the mid-March, In crisis ofstubbornlyhighyouthunemployment. MarwaAwadandYasmineSaleh,“EgyptstudiesIMFbridgingloanascrisisdeepens”, MonthlyStatisticalBulletin,CentralBankof Egypt,February2013,available AyaBatrawy,“Egypt’scentralbank:reserves at‘critical’level”,AssociatedPress,29 NadaBadawi,“CAPMAS:Unemploymentreaches 3.4million”, Central AgencyforPublicMobilizationandStatistics,“LaborForce,Employment& Asma al-Sharif,“EgyptdoesnotneedIMFbridgingfunding-minister”,Reuters, 6 $15 billion typically covers three months’ imports. imports. months’ three covers typically billion $15 3 Eight out of ten university graduates are are graduates university ten of out Eight 4

1 But this emergency loan emergency this But 2

5 The central bank central The Daily NewsEgypt , billion in the country’s coffers last August. last coffers country’s the in billion an opened $2 and deposited having credit, of line billion million $500 additional $2 Egypt loaned Qatar In region. January, the in elsewhere allies Muslim political the from Brotherhood’s loans through deterioration economic dramatic more off staved has government the now, Until Anwar el-Sadatin1977. President of government the against and 1990s and 1980s sparked by rising bread prices in the Mubarak era during the even create a revolutionary situation reminiscent of the riots could and streets the on turmoil new risk would Egyptians poorest the by suffered pain economic the in increase sharp a Such citizens. for fuel and wheat import to ability Egypt’s precipitous fall in asset prices, while dramatically impairing 7 pound could plunge by up to 50 percent in a the matter whereby devaluation, of disorderly weeks”. more a of risk real a is “there say Economics Capital at Analysts grow. to likely is Without an IMF agreement, pressure on the Egyptian pound 8.2 currently – percent –islikelytorise. rate inflation Egypt’s prices, food rising global as well as this, of Because fall. to continue to likely is pound Egyptian the of value the currency, the defend to idUSL6N0BXEZV20130305. March 2013,available athttp://www.reuters.com/article/2013/03/05/egypt-gasoil- 11 egypt-oil-payments-idUSL5N0CJ14G20130327. debt”, Reuters, 27 March 2013, available at http://www.reuters.com/article/2013/03/27/ 10 egypt-qatar-talks-idUKBRE9390B920130410. talks”, Reuters,10April2012,availableathttp://uk.reuters.com/article/2013/04/10/uk- 9 at http://www.reuters.com/article/2013/01/08/egypt-qatar-idUSL5E9C878S20130108. 8 updates/how-far-and-how-quickly-will-the-egyptian-pound-fall.html. capitaleconomics.com/middle-east-north-africa-economics/middle-east-economic- Economics, MiddleEastEconomicsUpdate,8January2013,availableathttps://www. political 7 Egypt’s uprising. the by damaged economy an buffer to injection cash emergency an international as it and viewed donors billion politicians 2011 $3.2 May of in IMF amount the an from requested first Egypt When supportive governmentswithdeeperpockets. on reliance its extend to government economic the tempt may terms long-term Egypt’s solve problems, the political risks attached to embracing not the IMF’s may measures which could be at preferential rates. month, every Iraq from oil of barrels million four import to plans it that said has government Egyptian the shortages, the is with also considering offering Egypt financial aid. Egypt provide to equivalent of one million barrels of crude oil per month and committed has billion, Libya $2 Egypt while lend to agreed has Turkey Meanwhile, groups saytheyhavenotseen. IMF an agreement, which comes with a plan that delay secular and liberal further could Doha from support financial continued as demands opposition’s the to more in giving be may government Egyptian the that suggest Qatar from as needed. promising also to extend gas supplies April, to the country in this summer lifeline billion $3 another Egypt threw then This could spur inflation and a banking crisis, as well as a as well as crisis, banking a and inflation spur could This WilliamJackson,“HowfarandhowquicklywilltheEgyptianpoundfall?”,Capital ReganDohertyandMaggieFick,“Qatarthrows Egypt$3billionlifelineamidIMFloan “QatarsaysboostingaidtoEgyptbyextra$2.5bn”, Reuters,8January2013,available JessicaDonatiandJuliaPayne,“Egyptcuts backonoilimports”,Reuters,5 Asmaal-SharifandReganDoherty,“Egyptto importLibyaoil,paydownenergy 9 The total $8 billion in loans, grants, and deposits 11 While such emergency 8 Gas-rich Qatar Gas-rich 10 To ease fuel turmoil has already delayed the adoption of the IMF loan fees”.12 But others question or contest that claim and MPs terms by almost two years, and it had been widely assumed from the Salafist Nour Party requested that the agreement that an agreement would be postponed at least until after be referred for a religious ruling to al-Azhar, the 1,000-year- the legislative elections had been concluded in the summer. old Islamic university and mosque mandated by the Egyptian However, a successful court challenge has forced President constitution to vet legislation for sharia compliance.13 Morsi to delay the election, which is now expected to be held in October. According to the new timetable, a parliament Opposition to public sector cuts should be formed by the end of the year, but recent history suggests that it could be delayed further. Meanwhile, the Although the government concurs with the IMF that loan has grown not only in size but also come to epitomise scaling back public spending will have to include cuts to the challenges of reforming a creaking, public-sector leaning the state payroll, widespread dependence on public sector economy amid growing political polarisation. employment creates countervailing political pressures. While job growth in the private sector is slow, Egypt’s public sector has six million employees whose salaries consume Points of contention one quarter of the state’s budget. But as IMF adviser Magda Kandil noted in an August 2012 brief, attempts to cut the Mindful of the social context in Egypt, the IMF has sought to size of the public sector have “torn at the fabric of the middle taper its reform demands to ease their impact on the poor, class. Young college-educated Egyptians can no longer be for example by demanding changes to the rules governing sure of getting civil service jobs in an era of privatisation and subsidies to ensure that they benefit only the neediest greater budget discipline.”14 If anything, the government is Egyptians. Still, the IMF reform package will impose a heavy now under pressure to spend more, not less. burden, and the loan agreement’s political risk is exacerbated by the fact that the IMF has become associated, in the eyes Unwillingness to cut energy subsidies of many Egyptians, with the cronyism and kleptocracy of the Mubarak era. (A small business elite connected to President Egypt has a system of subsidies for commodities such as Mubarak’s son, Gamal, had been the prime beneficiaries petroleum and flour that is hugely expensive and works of the massive privatisation of state-owned enterprises very poorly. In particular, it spends about 20 percent of its undertaken at the IMF’s behest in the 1990s.) national budget on keeping down fuel prices for the general public even though it pays out more to support wealthier The Muslim Brotherhood believes that the loan agreement households whose fuel consumption is higher than in represents the country’s best chance for economic recovery. needier ones. The public debt is further swelled by the fact But the negative perceptions of the IMF in Egypt – and the that, because of Egypt’s declining domestic output and the fact that the majority of working Egyptians saw little benefit, sporadic disruption caused by strikes, a growing portion of and in many cases grew poorer, after previous rounds the subsidised petrol and natural gas is imported. However, of privatisation, deregulation, and trade liberalisation – the Morsi government is unlikely to tempt fate by altering have created fertile ground for those opposition groups the fuel subsidy status quo amid the uncertainty over the denouncing the current package as “bondage and slavery” election. In February, Egypt’s oil minister Osama Kamel claiming it will force Egypt “to sell the pyramids”. At the announced a delay of up to three months in implementing a same time, the military is also opposed to IMF-mandated new system of rationing subsidised fuel – a move initially set privatisation because it threatens its massive role in the for April as part of IMF-mandated austerity measures.15 civilian economy. Some of the points of contention over the IMF plan are specific to Egypt’s post-Mubarak political Inability to collect taxes environment, while others are based on the long-term structure of the country’s economy. The Egyptian state’s inability to expand tax revenues was highlighted on the eve of the constitutional referendum Islamist objections in December when the Morsi government announced a package of sharp tax hikes on items ranging from cigarettes The anti-usury prescriptions of Islamic sharia law could be and mobile phone calls to electricity bills and real estate invoked as a potential rallying point for Islamist opposition but was forced to back down within hours in the face of a to the loan. The largest bloc of Egyptian voters backed concerted public outcry. The ruling party has signalled that Islamist parties in the last legislative election, giving it favours progressive taxation and raising the tax burden on added significance to the sensitivities of this constituency. corporations and wealthier Egyptians, but the risk of capital Although the Morsi government shares many of the free- flight and scaring away already jittery investors makes any market economic assumptions of the IMF, the need to fend 12 Author interview with Ashraf Serry, an economist and Steering Committee Member at off the challenge of the more conservative Salafis competing the Muslim Brotherhood’s Renaissance Project team, 16 January 2013. 13 Salafi MPs consider EU loan as usury”, MSN Arabia, 11 February 2013, available at for the same voter base has prompted it to insist that the http://arabia.msn.com/news/middle-east/1295526/salafi-mps-consider-loan-usury/. 14 Magda Kandil, “The Egyptian Economy in Retrospect and Future Prospects”, Egyptian 1.1 percent interest rate on the loan is sharia-compliant. Center for Economic Studies, Number 32, August 2012, available at http://www.eces.org. Muslim Brotherhood economists have characterised the eg/publications/View_Pub.asp?p_id=9&p_detail_id=324&logout=1. 15 Asma al-Sharif, “Egypt to Delay Fuel Subsidy Rationing”, Reuters, 12 February 2013, interest that would be paid on the loan as “administrative available at http://www.zawya.com/story/Egypt_to_delay_fuel_subsidy_rationing- TR20130212nL5N0BCCL82/. 3 4 ECFR/76 April 2013 www.ecfr.eu egypt, the imf and european economic assistance economy-imf-idUSBRE9070FD20130108. January 2013,available athttp://www.reuters.com/article/2013/01/08/us-egypt- also 16 He million. $17 about than more owning anyone of wealth the on tax on percent 20 one-time a including taxes rich, the annual steep imposed and orthodoxy economic Western from itself weaned country the if unnecessary be would loan the that insisted has markets, free of suspicious deeply is who that public Egyptian Sabahi, the of segment a Hamdeen for speaks socialist Nasserite the example, For it). of support in Party, consensus national a for Constitution called new have Mohammed the heads now who Director-General el-Baradei, Agency Energy International Atomic former and Moussa Amr Minister Foreign former as such figures opposition pro-Western (while loan secular parties, are already campaigning directly against the and centre-left left to Islamists fromSalafist opposition, the of elements fact, In moment. pre-election a in dangerous However, “owning” the programme is particularly politically the populationastheirs”. to it propose and it, own programme, the endorse actually can IMF that authorities political the the of “commitment that a needed said Lagarde Christine Director IMF Managing January, In opinion. public of supported consensus is broad a that by plan economic an out hash to order negotiations in the into brought parliament have of and members IMF opposition the European with Senior working are environment. diplomats political current the in prospect unlikely an – terms its of acceptance public broad agreement, the IMF has repeatedly urged the Egyptians approve to to secure required not is parliament Although make. to willing are Egyptians the changes the and expectations reform IMF’s the between gap the bridge to required be will As a result of these points of contention, further negotiations and GDP. employment boost to strategy investment concomitant the and vision economic broader a communicate to failed has government the while reforms, subsidy and tax proposed on informed poorly was public The engage. to little inclination shown also has opposition the while respect, this in record track poor a had has administration government’s Morsi’s the plans. of discussion public greater and with transparency achievable more be might it but Egypt’s, as divided as polity a in ask difficult a is This turmoil. political to enough broad inoculate the buy-in reform programme from the country’s ongoing political requires sustainable for development course on economy Egyptian the Putting The lackofacleareconomicvision Muslim Brotherhoodcircles. of outside from expertise technical of use make to reluctant reforms been far so has other Morsi President But IMF. assistance the by implement mandated and technical collection tax extensive improve to require will Egypt that estimate Analysts revenues. resulting the collect to capacity government’s the over remain questions raised, were rates tax if Even unlikely. direction this in movement short-term Joe Bavier,“Egyptmustconvincepeopleofneed forIMF-Lagarde”,Reuters,8 16

programme. During a visit to Cairo in early March, US US would March, Washington that early said Kerry John in State of Secretary Cairo to visit austerity a an During implementing programme. risk to strength finds political government the the until waiting of consequences the fear some Egypt, for earmarked funds own their releasing before package IMF the adopt Cairo that insistent remain donors international and Western of number a Although with theIMF. negotiations in on agreed previously programmes spending public other and subsidies on energy to cuts renege and or reforms tax delay and agreement loan IMF the postpone to signing Morsi President prompted that constitutional referendum December’s last surrounding atmosphere political febrile the was it Indeed, notwithstanding. results election opponents, its by streets the on challenged being is been has unsurprisingly reluctant to take government at a time when the its legitimacy that risk political substantial a consequent economic pain for millions of Egyptians presents the and terms IMF’s the adopting reforms, market-oriented to desperate be secure may the IMF loan and government is committed to Morsi making far-reaching the while Thus, jobs forthepoor. more create to sector public Egypt’s expanding advocates pdf. http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/133513. 19 idUSBRE9220AK20130303. 2013, availableathttp://www.reuters.com/article/2013/03/03/us-egypt-usa-kerry- 18 middleeast/egypts-hamdeen-sabahy-vs-islamists-and-free-markets.html?_r=0. Times, 25December2012,availableathttp://www.nytimes.com/2012/12/26/world/ 17 on Europe leaves effectively IMF funds disbursing the before terms of adoption for waiting Thus, reform. economic comprehensive of implementation the delay to and it enables government Egyptian the cushions artificially Qatar especially and Arabia Saudi from money easy Meanwhile, signed. being loan IMF the on conditional is most this, of Reconstruction for Bank Development. and European the from European years the two from 2013 next the for year a and billion $1.3 to up and Bank, 2012 Investment for up of billion lending $2.2 potential to grants, and assistance, loans, macro-financial in concessional EU the from billion additional an $1.3 Union, European the Egypt, from to available already made 2011-2013 billion period the $6.5 for of million $590 total including a pledged already have donors and investors European of range A aid. and loans, soft assistance, technical with transition economic Egypt’s help to ready stand they that said have officials European What Europeshoulddo to findsomecommonground.” and choices economic the around together “come to parties political its exhorting terms, aside IMF’s the put adopt to and differences class political Egypt’s urged Kerry time, process”. IMF the “complete to plans he that Morsi President by assurance an following Egypt to support budget in million $450 pledged a of million $190 release DavidKirkpatrick,“FirstFightingIslamists, NowTheFreeMarket”,NewYork “EU-EgyptTaskForceFactSheet”,European Union,14November2012,availableat “U.S.togiveEgyptbudgetaidafterassurance onIMF:Kerry”,Reuters,3March 17

19 But aside from about $900 million million $900 about from aside But 18 At the same the At the sidelines when it could be playing a more immediate According to a senior EU diplomat in Cairo, the EU will and constructive role in Egypt. Nor would a collapse of the sign two programmes under the ongoing national European Egyptian economy or further political instability be in the Neighbourhood Policy that “respond directly to this European interest. problem”.23 An emergency $90 million employment grant, to be signed in the next month, will create 90,000 jobs in Europe’s proportional over-representation in the IMF’s basic infrastructural works while an additional $64 million decision-making structures could allow it to play a positive for a technical and vocational skills programme, to be signed role in achieving a reform agreement between the IMF later this year, will benefit many thousands of young job and the Egyptian government, particularly since European seekers in the construction, industry, and especially the officials are aware of the danger of over-burdening Egypt’s tourism sectors. The funding for these initiatives will be fragile polity with additional reform demands. But it could provided “quite apart from the IMF package and budget also make a more direct impact on the overall political, support, which is a mix of grants and loans and linked to economic, and social situation in Egypt by taking a systemic reforms”. The World Bank has also disbursed staggered approach to aid that would alleviate pressure on $200 million to fund Egypt’s small and medium enterprises balancing the budget once the IMF loan deal is signed. In though the Social Development Fund, with a special focus this way, Europe would be able to complement and support on rural Egypt. the broader reform project while helping to prevent the economy from sliding into a zone from which accessing This promising development exemplifies the awareness that outside assistance would require even tougher and more Europe can and should move quickly to support Egypt’s politically risky conditionality. It should immediately release economy even before the IMF package is agreed, through part of its funding package, which had initially been directed aid and on-the-ground assistance. It should serve as a model at supporting immediate infrastructure improvement and for EU member states to develop their own programmes youth employment schemes. of targeted assistance, delinked from the conditionality of the larger IMF and other assistance, to help build Egypt’s The EU should reassess its mechanism of conditionality, capacity in education, energy, tourism, and infrastructure. which is based on the principle of “more for more” and “less Europe should also aim to support Egypt’s floundering for less” that has guided European support of the transitions manufacturing sector. A recent Egyptian report estimated in North Africa.20 Disbursements could be predicated only that over 4,500 factories have shut down since the revolution on the stated condition that Egypt maintains its democratic at a cost to the economy of thousands of jobs, while many goals. Thus the EU should withhold aid only if Egypt’s that remain open are plagued by power cuts, strikes, poor government breaks fundamental democratic principles by, security, and difficulty in securing loans in credit markets as for example, preventing free and fair elections. In light of a result of their government’s shaky credit.24 A little cash and the current economic and political climate, the European a lot of technical expertise could have a significant positive Parliament’s resolution that would withhold funds if Egypt’s impact on reversing this trend. government fails to carry out significant steps to abide by human and democratic rights and the rule of law should Egypt’s political situation prevents the Morsi government define “significant” to ensure that funds are only held back if from embracing a comprehensive reform programme red lines are breached.21 as demanded by the IMF at this point in time. Essential measures such as overhauling subsidies and raising the Europe’s priority in Egypt should be investing in young sales tax are a difficult sell to an already over-burdened people, both by targeting partnerships with large companies population, many of whom have lost income and jobs over and by promoting investment in the job-creation engine of the past two years. The IMF loan effectively asks Egypt’s Egypt’s manufacturing sector. It is a tragedy that the private political class, despite its profound schisms, to achieve sector struggles to find qualified employees even though consensus over a programme of economic reform that will more young Egyptians than ever are looking for work.22 bring short-term pain to millions of Egyptians. Advocates Graduate jobs at large transnational companies typically insist that the reform package offers the best prospect for require applicants to apply business and management skills sustainable development that raises living standards; many lacking in graduates of Egypt’s tertiary education system. Egyptians, including major players in the political arena, The long-term solution to this problem lies in overhauling believe it demands that ordinary Egyptians shoulder the and reforming Egypt’s education sector, but European burden of a set of changes that will bring them little benefit. donors could have an immediate positive impact by finding and supporting private-sector partners on the ground that Conditioning European financial assistance to the Egyptian are able to plug the short-term gap in on-the-job vocational government on the adoption of an austerity programme training and business skills among young Egyptians. will likely exacerbate political turmoil and place Egypt in a Catch-22 situation: lenders require political stability before 20 See Anthony Dworkin, “The Struggle for Pluralism after the North African Revolutions”, European Council on Foreign Relations, March 2013, available at http:// releasing loans and aid; but political stability requires loans ecfr.eu/page/-/ECFR74_PLURALISM_REPORT.pdf. 21 “No aid to Egypt without democracy, human rights: EU Parliament”, Ahram Online, 23 All quotations in this section are from a background interview in March 2013 with a 15 March 2013, available at: http://english.ahram.org.eg/News/66924.aspx. senior EU diplomat in Cairo, conducted by the author. 22 Moataz al-Alfi, “Jobs for the Young and Restless”, McKinsey on Society, January 24 Asma al-Sharif, “Factories struggle in Egypt as costs, risks rise”, Reuters, 27 February 2013, available at http://voices.mckinseyonsociety.com/youth-unemployment-egypt- 2013, available at http://www.reuters.com/article/2013/02/27/egypt-industry- solutions/. idUSL6N0BKDRW20130227. 5 6 ECFR/76 April 2013 www.ecfr.eu egypt, the imf and european economic assistance in whichEuropealsohasastake. project a – transition democratic successful a for prospects the to vital is economy Egypt’s revitalising and Reforming creation. job on focused aid and loans soft through provide to placed well is Europe which solutions, immediate needs pressing problem – stubbornly high youth unemployment – most nation’s the But economy. Egypt’s in flaws structural long-term fixing toward geared is loan IMF The signed. loans is and grants Egypt targeted offer at increasing employment even European before the IMF loan therefore growth. should inclusive and lenders jobs create to aid and business journalist whose contributions have appeared in in appeared have contributions whose journalist business on Foreign Relations. Based in Cairo, Farah is a Middle East Council European the at Fellow Visiting a is Halime Farah About theauthor my eyes. open helping and paper this of drafts several reading re- and reading for Hope Bradley to indebted I’m ever, as for essential Finally, argument. my strengthening and paper the refining course of were edits final Kundnani’s Hans journalist. a as meet to struggled have would I diplomats to doors opened who and me on off rubbed enthusiasm whose Levy, Daniel with closely work to lucky been have I editing. eagle-eyed and meticulous his for Karon Tony to and place, first the in Ayub ECFR to ideas Fatima my pitch to to me encouraging Thanks for identified. but be not knowledge rather and time would their who with Egypt generous and been London have in officials my various express to to like gratitude would I people. many of support and help the without possible been have not would paper This Acknowledgements countries arerebuildingpost-revolution. Arab how on focusing blog business a RebelEconomy.com, Tribune Herald the Wall Street Journal . She is also the founder and editor of of editor and founder the also is She . , Financial Times and International The European Council on Foreign Relations is a unique strategic Carl Bildt (Sweden) Maria Cuffaro (Italy) Jaime Gama (Portugal) Foreign Minister Anchorwoman, TG3, RAI Former Speaker of the Parliament; community composed of over two former Foreign Minister hundred members - including Henryka Bochniarz (Poland) serving foreign ministers, members President, Polish Confederation of Daniel Daianu (Romania) Timothy Garton Ash of parliament, former NATO secretary Private Employers – Lewiatan Professor of Economics, National (United Kingdom) School of Political and Administrative generals, intellectuals and business Svetoslav Bojilov (Bulgaria) Professor of European Studies, leaders - from across Europe. Studies (SNSPA); former Finance Oxford University Founder, Communitas Foundation and Minister President of Venture Equity Bulgaria Carlos Gaspar (Portugal) Ltd. Massimo D’Alema (Italy) Chairman of the Portuguese Institute Asger Aamund (Denmark) President, Italianieuropei Foundation; of International Relations (IPRI) President and CEO, A. J. Aamund A/S Ingrid Bonde (Sweden) President, Foundation for European and Chairman of Bavarian Nordic A/S CFO & Deputy CEO, Vattenfall AB Progressive Studies; former Prime Sylvie Goulard (France) Valdas Adamkus (Lithuania) Minister and Foreign Minister Member of the European Parliament Former President Emma Bonino (Italy) Amaud Danjean (France) Former Vice President of the Senate; Member of the European Parliament Teresa Patricio Gouveia Urban Ahlin (Sweden) former EU Commissioner (Portugal) Deputy Chairman of the Foreign Stine Bosse (Denmark) Marta Dassù (Italy) Trustee to the Board of the Calouste Affairs Committee and foreign Chairman & Non-Executive Board Deputy Minister for Foreign Affairs Gulbenkian Foundation; former policy spokesperson for the Social Foreign Minister Democratic Party Member Ahmet Davutoglu (Turkey) Foreign Minister Heather Grabbe (United Martti Ahtisaari (Finland) Franziska Brantner (Germany) Kingdom) Chairman of the Board, Crisis Aleš Debeljak (Slovenia) Poet and Cultural Critic Executive Director, Open Society Management Initiative; former Member of the European Parliament Institute – Brussels President Jean-Luc Dehaene (Belgium) Han ten Broeke Member of the European Parliament; Charles Grant (United Kingdom) Douglas Alexander (United Director, Centre for European Reform (The Netherlands) former Prime Minister Kingdom) Member of Parliament and Jean-Marie Guéhenno (France) Member of Parliament spokesperson for foreign affairs Gianfranco Dell’Alba (Italy) Director of the Centre on International and defence Director, Confindustria Delegation to Brussels; former Member of the Conflict Resolution, Columbia Ekim Alptekin (Turkey/The European Parliament University (New York); Senior Fellow, John Bruton (Ireland) Brookings Institution; former Under- Netherlands) Former European Commission President, Turkish American Business Pavol Demeš (Slovakia) Secretary-General for Peacekeeping Ambassador to the USA; former Prime Operations at the UN Minister (Taoiseach) Senior Transatlantic Fellow, German Association Marshall Fund of the United States (Bratislava) Elisabeth Guigou (France) Francois Burgat (France) Member of Parliament and President Luis Amado (Portugal) Senior Research Fellow at the French Chairman, Banco International do National Centre for Scientific Research; Kemal Dervis (Turkey) of the Foreign Affairs Committee Director, French Institute of the Near Vice-President and Director of Global Funchal (Banif) Economy and Development, Brookings East Institution Fernando Andresen Guimarães Giuliano Amato (Italy) (Portugal) Former Prime Minister; Chairman, Ian Buruma (The Netherlands) Tibor Dessewffy (Hungary) Head of the US and Canada Division, Scuola Superiore Sant’Anna; Chairman, Writer and academic President, DEMOS Hungary European External Action Service Enciclopedia Treccani; Chairman, Hanzade Dog˘an Boyner Jytte Gutland (Sweden) Centro Studi Americani Erhard Busek (Austria) Chairman of the Institute for the (Turkey) Porject Manager, Global Challenge Danube and Central Europe Chair, Dog˘an Gazetecilik and Dog˘an Jose M. de Areilza Carvajal On-line (Spain) Karl-Theodor zu Guttenberg Professor of Law, ESADE; Secretary Jerzy Buzek (Poland) Andrew Duff (United Kingdom) (Germany) General, Aspen Institute (Spain) Member of the European Parliament Former Defence Minister Member of the European Parliament; 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9 Rescuing the euro: what is China’s A Power Audit of EU-North Africa price?’ Relations François Godement, November 2011 Nick Witney and Anthony Dworkin, (ECFR/45) September 2012 (ECFR/62)

A “Reset” with Algeria: the Transnistria: A Bottom-up Solution Russia to the EU’s South Nicu Popescu and Leonid Litra, Hakim Darbouche and Susi September 2012 (ECFR/63) Dennison, December 2011 (ECFR/46) Why the Euro Crisis Threatens the European Single Market Ukraine after the Tymoshenko Sebastian Dullien, October 2012 verdict (ECFR/64) Andrew Wilson, December 2011 (ECFR/47) The EU and Ukraine after the 2012 Elections European Foreign Policy Andrew Wilson, November 2012 Scorecard 2012 (ECFR/65) February 2012 (ECFR/48) China 3.0 The long-shadow of Edited by Mark Leonard, November Ordoliberalism: Germany’s 2012 (ECFR/66) Approach to the Euro crisis Sebastian Dullien and Ulrike Time to grow up: what Obama’s re-

, the imf and european economic assistance Guérot, February 2012 (ECFR/49) election means for Europe Dimitar Bechev, Anthony Dworkin, The end of the Putin consensus François Godement, Richard Gowan,

egypt Ben Judah and Andrew Wilson, Hans Kundnani, Mark Leonard, March 2012 (ECFR/50) Daniel Levy, Kadri Liik and Nick Witney, November 2012 (ECFR/67) Syria: Towards a Political Solution Julien Barnes-Dacey, March 2012 Jordan Tremors: Elusive consensus, (ECFR/51) deepening discontent Julien Barnes-Dacey, November 2012 How the EU Can Support Reform (ECFR/68) in Burma Jonas Parello-Plesner, March 2012 The EU, Algeria and the Northern (ECFR/52) Mali Question Susi Dennison, December 2012 China at the crossroads (ECFR/69) François Godement, April 2012 (ECFR/53) What is Political Union? Sebastian Dullien and José Ignacio Europe and Jordan: Reform Torreblanca, December 2012 before it’s too late (ECFR/70) Julien Barnes-Dacey, April 2012 (ECFR/54) Shooting in the Dark? EU Sanctions Policies China and Germany: Why the Konstanty Gebert, January 2013 Emerging Special Relationship (ECFR/71) Matters for Europe Hans Kundnani and Jonas Parello- The New Political Geography of Plesner, May 2012 (ECFR/55) Europe edited by Nicholas Walton and Jan After Merkozy: How France and Zielonka, January 2013 (ECFR/72) Germany Can Make Europe Work Ulrike Guérot and Thomas Klau, European Foreign Policy Scorecard May 2012 (ECFR/56) 2013 February 2013 (ECFR/73) The EU and Azerbaijan: Beyond Oil The Struggle for Pluralism after the Jana Kobzova and Leila Alieva, North African Revolutions May 2012 (ECFR/57) Anthony Dworkin, March 2013 (ECFR/74) A Europe of Incentives: How to Regain the Trust of Citizens and Georgia’s bumpy transition: How Markets the EU can help Mark Leonard and Jan Zielonka, Jana Kobzova, April 2013 (ECFR/75) June 2012 (ECFR/58)

The Case for Co-operation in

www.ecfr.eu Crisis Management Richard Gowan, June 2012 (ECFR/59)

The Periphery of the Periphery: The Western Balkans and the Euro Crisis Dimitar Bechev, August 2012 (ECFR/60) April 2013 Lebanon: Containing Spillover from Syria Julien Barnes-Dacey, September 2012 (ECFR/61) ECFR/76

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