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First – The political structure that has existed for thirty years has managed to reestablish its control over the situation in the country. Of course, this happened without any responsibility or reprogramming of his way of working.
Second, the Banque du Liban, with its continued leadership for almost thirty years, continues to handle the matter as usual, despite the fact that the monetary policies of these years have led the country to the collapse in which we find ourselves. In any country with little accountability or governance, there would have been a change in central bank policy, starting with the resignation or removal of the governor’s staff. On the contrary, nothing has happened and will not happen as long as the political forces have not changed.
Third: the movement did not find common ground or an acceptable political and economic program outside of an effective proportion of the movement’s components. As a result, the movement did not achieve any sustainable results in terms of achieving a tangible positive change in the political and economic situation of the country.
In light of these events, which do not appear to be subject to change in the foreseeable future, we must find effective means to deal with the economic and financial collapse that is taking place in the country. This will not happen unless we can separate the path of economic and banking reform from the current political system.
Lebanon faces two main problems; The collapse of the economy, the collapse of the banking sector, and consequently the loss of deposits. Without a plan to revive the economy and restructure the banking sector, the country will not establish itself. It is illogical to expect that the same political, monetary and banking power that led the country to collapse can lift the country out of this situation. The twelve months that have passed, that is, since the flash crash began, are the best proof of this. Nothing constructive or helpful happened.
After the financial crisis that Greece faced from 2009, which caused the collapse of the economy and the banking sector, in 2010 an agreement was reached with the European Union, the European Central Bank and the International Monetary Fund (which is known like the Troika) to establish an independent institution with its own law with full powers to restructure the banks. And support your capital. Because of its knowledge of the level of corruption in the state and the banking sector, the troika (the donor of support to Greece and this institution) insisted on establishing specific systems for the institution and participating in the election of an experienced board of directors and executive leadership. and good reputation and independent from the centers of political and financial power that led the country to collapse. This institution managed, in a relatively reasonable period of time, to reactivate the banking sector and reduce the number of banks to four banks, which constitute 95% of the banking sector’s volume.
The approach taken by Greece may be appropriate for Lebanon, not only to restructure the banking sector, but also to design and implement a plan to revive the economy. And since international financial institutions and donor countries insist on not providing support to Lebanon before carrying out reforms in state and fiscal policy, the approach, through the establishment of an independent institution, may be the solution. In other words, the support would be through this institution, which would work under the supervision of representatives of donor countries such as the European Central Bank and the International Monetary Fund. In Greece, the General Council of the Foundation (which is the supreme authority of the institution) consists of seven members, two of whom represent the Ministry of Finance and the Central Bank, and the remaining five, including the President of the Council, who They are approved by the European Union and they have international banking experience and cannot have Greek citizenship.
Since the experiences needed to run an institution dealing with banking sector restructuring may differ from those dealing with managing and developing the economy, we may need two institutions. The first has to do with restructuring banks and supporting their capital, and the second is responsible for reactivating the economy, including the implementation of all projects that international financial institutions and donor countries agree to finance. Thus, we will separate any external support from the waste and corruption that is likely to occur if we keep these tasks within state institutions controlled by corrupt political forces and the logic of quotas and sectarianism.
The European Troika insisted on establishing an independent institution to restructure the banks and support their capital, and that approach may be the solution in Lebanon.
These two independent institutions do not replace the state. As in Greece, the period of time specified for them will be limited to ten or fifteen years, in the hope that this period of time will be sufficient to establish a civilized, non-corrupt civil state that can complete the role of these two institutions to long term.
Is this proposal realistic?
At first, the accident happened and it is even worse in one sense. We have a limited time before things get to a point where getting out of this crisis becomes one of the most difficult things. The current political system in Lebanon is incapable of doing anything positive or effective, and its history of more than thirty years confirms this, either due to corruption or in some exceptions to a lack of reformist thinking.
Second, getting out of this financial and economic crisis requires the help of the international financial community, including the International Monetary Fund and the European Union. Therefore, we have to create a structure that allows this support to be carried out as quickly and efficiently as possible. If we wait for the current political forces to reform, this will not happen. Since all political forces agreed with the French initiative, if not French tutelage, accepting it under international supervision focused on economic affairs should not be difficult.
Third, the preceding argument does not deny the existence of the state. These two independent institutions will not be in the business of holding the corrupt accountable or reforming state institutions. This will continue to be one of the responsibilities of the current political forces if they really want reforms. The only thing that remains is that the State, as it is today, will not control international financial support, which today seems to be far from being realized. Creating an adequate structure for the international community is the shortest path to economic and financial progress.
Fourth, this structure was adopted in circumstances similar to those in Lebanon and has proven its worth.
References
1. Hellenic Financial Stability Fund, www.hfsf.gr
2. Hugo Dixon, “Greek Governance Gamble”, Reuters, December 3, 2012.
3. Yannis Stournaras, “The Greek Economy 10 Years After the Crisis”, speech at the European Court of Auditors, Luxembourg June 28, 2019.
4. Daniel Munevar, “Greece – PSI and the bank recapitalization process (2012-2016)”, CADIM, January 24, 2017.
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