Lebanese Economic Woes Erode Public Confidence

Crisis prompts calls for new government and charges of corruption

AFTER 16 years of civil war, Lebanon finds itself trapped in a severe economic crisis. The strife, analysts say, has revealed serious strains of incompetence and corruption among senior Lebanese officials that are denting confidence in the country and deterring investors from overseas.

When the guns fell silent nearly a year and a half ago the Lebanese people hoped the new atmosphere of calm would herald a quick return of economic prosperity. But euphoria has been replaced by despondency as economic difficulties pile up.

Public dissatisfaction with the performance of the government prompted President Elias Hrawi and other Lebanese leaders to hold several rounds of talks with Syrian leaders in Damascus earlier this week. They discussed the possibility either of making changes within the 30-person national unity government or of forming a new administration.

In the months since the fighting ended some garbage has been collected from streets and roadsides in Lebanon. But in Beirut and other cities acres of urban wasteland are visible - battle-scarred and wrecked buildings awaiting demolition or reconstruction. Thousands of streets are in chronic need of repair. The telephone system barely works, and electricity is supplied only a few hours each day. Steep price rises

But the biggest problem is prices. "It is becoming very, very difficult to live on the salaries we are getting," says Ismat, a secretary with an airline. "Everything is getting more expensive - literally by the day."

Patrick Smith, a British-born Beirut supermarket owner, notices "people are cutting back on what they buy - and not just on luxury items, on everything."

The steep rise in the cost of living prompted the Confederation of Trade Unions to stage a one-day protest strike on March 6. A second strike was averted only when the government first froze and then cut increases in the price of bread and other essentials. Import taxes on some luxury goods were increased.

The difficulties for the Lebanese became acute toward the end of February. Without warning the Central Bank announced that it could no longer afford to draw on reserves to prop up the value of the Lebanese pound.

In one month the bank had paid nearly $400 million in supporting the currency. The end of this assistance precipitated an immediate slump. In days the Lebanese pound fell from 880 to 1,200 per dollar.

"This move by the Central Bank tipped the balance," says Elias Saba, a former finance minister, "leaving people overwhelmingly pessimistic."

But public euphoria had begun to evaporate several months earlier. It had become clear by the end of last year that neither Lebanese nor other investors were prepared to commit money to the country. A promised Arab investment fund failed to materialize, and the European Community froze aid pending release of two German hostages.

Making matters worse, the image of Lebanon, a nation finally at peace, was shaken by car-bomb explosions in Beirut late last year, followed by new fighting in southern Lebanon in February.

But while external factors may have deterred investors, the Lebanese public laid the blame for their difficulties squarely at the feet of the government. Anger grew when it became known Cabinet ministers and parliamentarians had awarded themselves a 400 percent pay raise. Loss of confidence

Dr. Saba, himself a member of the Lebanese parliament, says that toward the end of March the people lost confidence in the administration. "The government," he says, "is caught in a diabolic triangle of laziness, incompetence, and self-interest."

The Lebanese people point to the potholed state of the streets of Beirut as an example of corruption in high places. Last autumn a Gulf state provided funds for the resurfacing of roads. But it is widely believed that so much of the money was pilfered by state officials that the contractor was left short. As a result, he used inferior materials and the new tarmac was simply washed away.

Such allegations appear to have sound backing. Youssef el-Khalil, an economist at the Central Bank, spoke in a recent survey of the Lebanese economy of the need to restructure the public administration "from which large scale and organized corruption should be eradicated." Unwieldy government

Western diplomats in Beirut had been expressing serious doubts for several weeks about the ability of the Syrian-controlled government - made up of former militia leaders and representatives from the major political and ethnic groups - to steer Lebanon back to prosperity.

"Because the Cabinet is large and unwieldy," a diplomat says, "reaching consensus on even a minor matter can take weeks. Agreeing on moves to weed out public corruption looks to be out of the question."

The government responded angrily to suggestions that it should be blamed for the economy. Prime Minister Omar Karami said it was untrue "the government is the cause of all evil and is responsible for the economic crisis." Mr. Karami even talked of a plot to destabilize Lebanon.

But while the prime minister deflected blame from his Cabinet, President Hrawi - sensing, perhaps, the growing public discontent - last weekend went to Syria to seek approval for a wholesale change of government.

The move was opposed by Karami and the speaker of parliament, Hussein al-Husseini. They met Syrian leaders in Damascus on Monday. On the following day Hrawi returned to the Syrian capital, amid strong indications that ministerial changes were imminent, but with Karami keeping the premiership.

Against the background of economic difficulties, plans are being prepared for a multibillion-dollar high-rise development scheme for the war-ravaged commercial center of Beirut.

But such elaborate schemes offer little comfort for ordinary Lebanese. "I wish the government would provide me with electricity all day," one shopkeeper in Beirut says, firing up a diesel generator, "instead of planning grand schemes to make money for themselves."

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