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The top threat in Lebanon is the country's economy, not tension between the U.S. and Iran –



“Now we are in a dark tunnel and we don’t know what is happening or where we are going.”

So said an old friend and driver in Beirut as Iran and the U.S. faced each other down in the immediate aftermath of the killing of Gen. Qassem Soleimani, the head of Iran’s elite Quds Force, in a U.S. drone strike in Baghdad a week ago.

He wasn’t referring to that crisis though. Lebanon has too much history perched on the edge of wider regional conflicts to be too rattled by fears of another.


He was talking about Lebanon’s economic and financial crisis, the worst since civil war ravaged the country between 1975 and 1990.

The Lebanese pound has depreciated by more than 30 per cent against the U.S. dollar since September.

And capital controls imposed by the banks are drastically limiting how much money people can withdraw, leaving many struggling to pay rent and put food on the table.

Ask people on the streets here about “the situation” and that’s what they think you’re talking about.

The roundabout leading to Hadi Nasrallah Boulevard in south Beirut, where posters of Iranian general Qassem Soleimani went up immediately after he was killed by a U.S. drone strike in Iraq. (Stephanie Jenzer/CBC)

“The most dangerous thing in Lebanon is economic collapse,” said Makram Rabah, a political analyst, historian and lecturer at the American University of Beirut.

Lebanon has been without a government since the end of October, when protests against corruption and mismanagement forced the resignation of Prime Minister Saad al-Hariri.

The Sunni leader of the Future party, whose father, Rafik Hariri, was assassinated in 2005, is allied with Western nations and the Gulf states.

Sarah Ayoub, a 21-year-old student, says she isn’t confident the protests that ousted Lebanon’s prime minister have solved the country’s corruption problems. (Stephanie Jenzer/CBC)

“They’re acting so selfish — all of them,” said 21-year-old student Sarah Ayoub, referring to the political elite she demonstrated against.

The protests were remarkable in that they crossed the sectarian lines that tend to define Lebanese politics, drawing demonstrators from the Sunni, Christian, Druze and Shia communities. They were united in their opposition to what they see as rampant cronyism, nepotism and influence peddling. 

“We have to change the system and the laws so that there’s less favouritism,” Ayoub said. “And if we’re all equal in that matter, without someone having an advantage because of who they know, then something will improve.”

An anti-government protester shouts slogans during a protest against the ruling elite over corruption and mismanagement, in downtown Beirut last month. (Hussein Malla/The Associated Press)

Rabah focuses the blame on Iran and its Lebanese acolyte, Hezbollah, the Shia paramilitary group and powerful political party that exerts considerable sway in Lebanon.

“Iran has hijacked these states from within, which has exposed their economies,” he said, referring also to Iraq, where anti-corruption protests were fuelled in part by anger over Iranian meddling in the country’s affairs.

Iran has funded militias inside Iraq. It has also helped arm and fund Hezbollah in Lebanon, boosting its power.

Before his death, Soleimani was accused of ordering a deadly crackdown on the protests in Baghdad.

“Soleimani is someone who was spreading chaos and destruction in the region,” said Rabah. “I do not support any kind of assassination, but at the end of the day, he got what he deserved in the sense that you live by the sword, you die by the sword.”

Historian and political analyst Makram Rabah says the top concern in Lebanon isn’t the tension and violence between the U.S. and Iran in the region, it’s the risk of economic collapse. (Stephanie Jenzer/CBC)

But in south Beirut, Hezbollah heartland, there are huge billboards bearing Soleimani’s image hanging from freeway overpasses and on the sides of apartment buildings, sharing the streets with pictures of Iran’s ayatollahs.

“[Soleimani] is a loss because he has been fighting against terrorism and ISIS in Lebanon and Syria and Iran,” said Ahmad Nasser, a father out walking with his nine-year-old daughter on Hadi Nasrallah Boulevard.

The street is named after Hezbollah Secretary General Hassan Nasrallah’s son, who was killed during a guerrilla raid against Israeli forces in southern Lebanon in 1997.

Billboards of Gen. Qassem Soleimani, the leader of Iran’s Quds Force who was recently killed in a U.S. drone strike in Iraq, line the highway leading to Beirut’s international airport. The signs describe Soleimani as ‘the Leader of the Martyrs of the Axis of Resistance.’ (Stephanie Jenzer/CBC)

Nasser is also worried about the country’s economy, but he says Hezbollah must be a part of any solution.

“Hezbollah is a part of the social composition of Lebanon and has to be in government,” he said.

Nasser supported the anti-government protests in the fall but says he has since changed his mind, fearful of a power vacuum developing.

It could also be because the man chosen to lead a new government, Hassan Diab, has the backing of Hezbollah.

Diab has so far failed to win support from al-Hariri, or from Christian factions worried that his association with Hezbollah, already the target of U.S. sanctions, will deter much-needed international investment in Lebanon.

Ahmad Nasser, out for a walk with his daughter, Nagham, says he’s worried about Lebanon’s economy. (Stephanie Jenzer/CBC)

After Soleimani’s death, Nasrallah warned that U.S. soldiers would be returned home in coffins in retaliation.

Earlier this week, Iran launched missile strikes against military bases in Iraq housing U.S. troops, none of whom were injured. Hours later, a Ukraine International Airlines flight crashed shortly after taking off from Tehran, killing 176 people, including 63 Canadians. Both Canada and the U.S. believe an Iranian missile shot down the plane — a claim Iran denies.

Like the United States, Canada considers Hezbollah a terrorist group.

But it is also an important part of the social fabric in large parts of Lebanon.

“They’re not going away. It’s not like there are 10 people and we can deport them,” said economist and political analyst Kamel Wazne.

“They have representatives in parliament and municipalities and they’re a powerful organization and it’s very well structured.”

Economist and political analyst Kamel Wazne says Hezbollah is a powerful force in Lebanon that’s not going away. (Stephanie Jenzer/CBC)

Wazne says Lebanon will count on the Lebanese population abroad to help the country out of its economic crisis.

There have also been calls to create a government of experts to help solve the problem.

But 21-year-old Ayoub doesn’t have much confidence that what’s currently being negotiated is much more than a portfolio shuffle.

“We were on the street for 70 days and we still couldn’t [overthrow] them,” she said.

U.S. President Donald Trump delivers remarks to troops in an unannounced visit to Ain Assad airbase, Iraq, on Dec. 26, 2018. (Jonathan Ernst/Reuters)

When she does turn her mind to the recent escalation of tension between Iran and the U.S., she says American President Donald Trump has done well for himself by putting his country first.

Ayoub says she’d like to see Lebanon’s leaders focus more on putting the country and its people ahead of politics. 

“If politicians in Lebanon were behaving the same way that Trump is behaving, we wouldn’t have revolted against them.”

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U.S. economy and new incentives put Canada at disadvantage in Stellantis negotiations, professor says




Two weeks of negotiations between the federal and provincial governments and Stellantis have failed to produce a new deal for the NextStar EV battery plant in Windsor, Ont. Ian Lee, an associate professor at Carleton University’s Sprott School of Business, says the economic might of the U.S., coupled with the incentives offered in recent legislation, make it extremely challenging for Canada to compete.



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Watch Moody's Analytics' Ell on Asia Economy – Bloomberg



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Watch Moody’s Analytics’ Ell on Asia Economy  Bloomberg


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Theo Argitis and Robert Asselin: Trudeau can't keep juicing the economy with more spending – Financial Post



World entering period of scarcity, meaning Canada won’t be able to spend its way to prosperity


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The unexpected pick up in Canadian inflation last month — even if it turns out to be a blip — is a fresh reminder that Prime Minister Justin Trudeau’s government is facing a more perilous economic policy landscape going forward, with difficult trade-offs on the horizon.

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The natural economic instinct of this government has been generous budget spending and open international migration.

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Yet, Trudeau doesn’t need to look much further than Statistics Canada’s inflation numbers or last week’s call from the G7 for global “de-risking” to see how things are changing.

With the world entering a period of scarcity — from more expensive money to supply constraints — the rationale to juice the nation’s economy is weakening.

The housing crisis is a manifestation of that, as are broader price pressures and the Bank of Canada’s historically aggressive run of interest rate hikes.

Trudeau came to power in 2015 on an anti-austerity platform to reverse his Conservative predecessor’s sluggish growth record which, as the Liberals were quick to remind Canadians at the time, was the weakest since R.B. Bennet was prime minister in the 1930s.

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The economics were sound at the time, even if the growth dividend didn’t pay off.

Canada’s economy was demand deficient early in Trudeau’s mandate as commodity prices slumped, while the extra spending helped ease financial stability risks by taking some pressure off the Bank of Canada to stoke growth.

Higher international migration drove gains in labour income and provided support to a housing market that was still largely within reach of affordability. Inflation wasn’t a worry. In fact, the concern for policymakers was it may not have been high enough.

New social programs, meanwhile, allowed the government to make significant strides on equality and redistribution — particularly with respect to lowering poverty.

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The Trudeau administration’s weighty policy objectives were synergetic to the economic environment. Policies were rowing more or less in the same direction.

The current post-pandemic environment, though, is no longer as accommodating.

While many policymakers and economists still buy into a moderately optimistic outlook, with continued growth and inflation brought into check, less favourable outcomes are increasingly plausible.

There is a real possibility that inflation and interest rates will remain well above pre-pandemic levels, growth becomes more anemic, budget dynamics worsen and the climate transition proves costly.

Instead of working in concert, the government’s three core economic policy objectives — growth, equity and price stability — could become increasingly in conflict.

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For example, increasing immigration is a long-term positive for an economy threatened by aging demographics. And more social spending is typically associated with less inequality.

But higher borrowing costs stoked by large increases in population and government spending will impact disproportionately lower income Canadians and young families, potentially creating divisions and threatening new sorts of inequality.

Add energy transition to the mix and national security issues and the landscape becomes a minefield.

The policy arena will be more ambiguous and the government pulled in multiple directions. Policy paralysis, wasted effort and poor allocation of resources are real risks.

There are certain fundamentals and policy guardrails, however, that can help the government navigate this challenge.

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A construction worker frames a new home in London, Ont.
Temporarily slowing the pace of entrants to allow housing supply to catch up could be a good solution to the current housing crisis. Photo by Mike Hensen/The London Free Press/Postmedia Network

First, policymakers should prioritize growing GDP on a per capita basis and increasing productivity over expanding the overall aggregate economy. Both are important, but the former is where true prosperity lies and where Canada is failing. Masking underlying weakness with gains in national income is just a recipe for stagnant wages. Enhanced productivity also helps dampen inflationary pressures.

Second, toolkits and policy precision matter.

For example, supply side solutions are critical to productivity, but policymakers also need to be cognizant of short-term impacts in an inflationary world. Focusing more on economic migration and temporarily slowing the pace of new entrants to allow housing supply to catch up appears a reasonable solution to the current housing crisis.

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Another example is industrial policy, which needs to become more sophisticated. Advanced economies will compete in advanced industries, where there is a concentration of R&D and skilled workers. Quick fixes through corporate subsidies, however, are not the answer. Canada needs a modern science and technology architecture that translates ideas into economic outputs, higher wages and better living standards.

The third guardrail is the most Canadian: be reasonable and pragmatic.

This seems obvious but we should not take this principle for granted, particularly as we rush (rightly) to meet ambitious climate targets. Canada remains a resource economy. The sector pays a lot of bills, keeps our currency stable and government finances flush with cash.

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It’s also where any global power we may have as a nation lies. That makes an orderly climate transition paramount.

Theo Argitis is managing partner at Compass Rose Group. Robert Asselin is senior vice-president, policy at the Business Council of Canada.


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