All winners of 4th El Gouna Film Festival    Key legal battles over voting rules as US election looms    Alaba future at Bayern still unclear-coach Flick    BREAKING: CAF president Ahmad Ahmad tests positive for COVID-19    Emerging Markets-EMEA FX falls; Turkish lira set for worst month since 2018 crisis    Why the US military would welcome a decisive 2020 election win    Restrictions needed to battle COVID-19 in Europe, EU says    France on alert as official warns of more militant attacks after Nice church killings    English Premier League fixtures (7th matchday)    WHO: Europe now has more than 10 million COVID-19 cases    Thwart US veto or await new president? WTO has leadership dilemma    UK doing everything it can to avoid national lockdown, minister says    In Photos: Egypt collector accumulated over 100 vintage cars    Egypt extends deadline for reconciliation requests in building violations to 30 November    El Gouna Film Festival sheds light on digital media in the wake of COVID-19    Parliament's ‘driving force'    The Senate and the return of party politics    GERD: In quest of meaningful negotiations    Egyptian insurance companies' premiums 9.6% up in five months    Egypt's President Sisi names new head of anti-corruption watchdog    Egypt's offers 18 bln pounds T-bills on Sunday    EgyptAir offering discounts for some international flights    Egypt records 212 new coronavirus cases, 14 deaths on Saturday    Egypt to require PCR coronavirus tests for airport travelers    Egypt sends 125 tonnes of glass by sea to Beirut    Legend Messi officially wants to leave Barcelona, hands transfer request    Global smartphone sales drop 20% in Q2, yet Apple's iPhone sales steady    Sisi: Egypt keen on establishing development projects with Iraq, Jordan    Egyptian megastar Amr Diab releases new hit music video    Making of Harry Potter will be available for fans at new park in Tokyo    Egypt's Senate elections official results to be announced Wednesday    Netflix Egypt is bringing megastar Amr Diab back with a new original    Egypt reopens Rafah border crossing for first time since April    Egypt's senate elections 2020 trending on social media in few days    African Champions League final will be played on Oct. 16-17, CAF says    No room to delay Egyptian Premier League games – EFA's board member    The Facebook Preacher's Search for Fame, and Egypt's Economy    Egypt calls on UNSC to address oil spill risks off Yemen coast    Egypt economically strong in face of COVID-19, reforms ongoing: International Cooperation Minister    Arafa Holding reports $144,000 COVID-19-related losses in April    Egypt's efforts in Libya to activate free will of Libyan people: Al-Sisi    Hyksos campaigns were internal takeover, not foreign invaders: study    COVID-19 affects Egypt sporting clubs    COVID-19 will soon turn to seasonal like swine flu: Presidential Health Advisor    ‘Egypt's Support' coalition convenes to discuss its Senate election list    Robbery attempt leads to discovery of Ptolemaic monuments in Qena    Flouting international guidance, Ethiopia unilaterally starts filling its Nile dam    Zaha speaks out after online racial abuse    

Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.

Egypt army faces challenge over workers, subsidies
Published in Daily News Egypt on 17 - 02 - 2011

CAIRO: The Egyptian army, praised for overseeing a mostly peaceful revolution, is running into a storm of wage and subsidy demands overtaking pressure for democracy and piling more burdens on an already teetering economy.
That has already happened in Tunisia, where strikes and protests continue more than a month after citizens ousted their strongman president and galvanized Egypt's opposition forces to do the same with theirs last week.
Violence has flared anew in Tunisia, raising new questions about its stability and leading the government to ask military reservists to report for duty as police skipped work.
In Egypt, pro-democracy marches have subsided for now but thousands of workers in banks, textile and food factories, oil facilities and government offices went on strike this week, emboldened by the overthrow of president Hosni Mubarak.
"One thing that led to unrest in Tunisia is that workers can now express themselves and make demands they couldn't make under the previous government, and that may be manifesting itself in Egypt too," said North Africa political risk consultant Geoff Porter. "I think Egypt is in for a very tough economic future."
Egypt's financial market remains shut and the tourism industry — a vital source of hard currency — faces crisis.
The military called on Monday for national solidarity and criticized the strikes.
Risks for Egypt look, if anything, greater than in Tunisia.
Its much larger population is poorer and tourism accounts for a bigger chunk of Egypt's economy — more than 11 percent of its GDP, making it one of the top sources of foreign revenue.
In the major seaside tourist destinations of Sharm El-Sheikh and Hurghada, hotel occupancy rates plummeted to 11 percent on Feb. 11, the day of Mubarak's fall, from 75 percent on Jan. 25, according to an industry body. It was not aware of layoffs yet.
Two thirds of the population is under 30, an age group that accounts for 90 percent of Egypt's jobless. Officially, around 10 percent of Egyptians are jobless but analysts say the figure is probably much higher when factoring in the under-employed.
Economists say that is partly due to systematic corruption which distorts competition and discourages investment.
Food inflation was already running high before the protests and anecdotal evidence suggests it has soared further, weakening an already brittle social balance.
"The issues in Egypt are all the greater given the stresses in the economy, particularly food price inflation which is unsustainably high," said Angus Blair, head of research at investment bank Beltone. Credit Agricole estimated that the crisis was costing the Egyptian economy $310 million every day.
Wage demands
Prices of food and drinks, accounting for 44 percent of the basket used to measure inflation, accelerated year-on-year to 18 percent in January, up from 17.2 percent in December. That was before the crisis. Egyptians say prices have risen since then.
The new cabinet has already promised to maintain subsidies and raise some state wages and pensions by 15 percent.
The army might seek to quell labor unrest with more wage hikes and subsidies, cutting funds available for social services and infrastructure projects, analysts said.
Economic liberalization measures could take a back seat, because these steps could threaten state jobs and damage popular support for the military and its own business interests.
That might buy time but will add stress on state finances facing a sharp drop in tax revenue and costlier borrowing.
"There is this jubilation and exuberance of Egyptians but the reality is there are more uncertainties than before," said John Sfakianakis, chief economist at Banque Saudi Fransi.
He said the government may be waiting for political tension to ease before reopening Egypt's bourse because "if they settle the situation they could save the market from sinking further."
Trading on the Egyptian Exchange was halted after the market lost LE 69 billion ($11.74 billion) of its value over two days. The reopening has been delayed several times.
Deficit warning
Some investors are still upbeat, given the absence of mass protests after the army dissolved parliament and suspended the constitution, saying it would govern the country for six months or until new elections were held.
But growth will suffer. The government says it could fall to 3.5 or 4 percent in 2010/11, down from a previously forecast 6 percent. J.P. Morgan slashed its 2010/11 growth forecast to 3.1 percent from 6.4 percent after the protests exploded.
"We will probably change it again this week and it will be biased to the upside because of the fact the situation has become more or less stable," said Brahim Razgallah, J.P. Morgan's Middle East and North Africa economist. "The impact on the economy in Egypt is still not very clear but ... they avoided the worst case scenario and a large hit to sentiment."
The army urged strikers to go back to work, if they do not and it considers concessions on wages and subsidies, that could further depress Egyptian assets.
Egypt's state debt was already beyond safe levels at 89.5 percent of gross domestic product in mid-2010, the head of the Central Auditing Agency Gawdat El-Malt said this week.
"The budget deficit is going to balloon, whether they like it or not," said Sfakianakis. –Additional reporting by Sara Mikhail

Clic here to read the story from its source.