Exclusive - Potential Structures of New Lebanese Government

Protesters re-install a cardboard fist labeled ‘Revolution’ in Martyrs’ Square after a previous one was burned down by unknown vandals in downtown Beirut, Lebanon, November 22, 2019. (AP)
Protesters re-install a cardboard fist labeled ‘Revolution’ in Martyrs’ Square after a previous one was burned down by unknown vandals in downtown Beirut, Lebanon, November 22, 2019. (AP)
TT

Exclusive - Potential Structures of New Lebanese Government

Protesters re-install a cardboard fist labeled ‘Revolution’ in Martyrs’ Square after a previous one was burned down by unknown vandals in downtown Beirut, Lebanon, November 22, 2019. (AP)
Protesters re-install a cardboard fist labeled ‘Revolution’ in Martyrs’ Square after a previous one was burned down by unknown vandals in downtown Beirut, Lebanon, November 22, 2019. (AP)

Nearly a month after the resignation of Saad Hariri as prime minister, Lebanese officials are still debating the appointment of his replacement and the formation of a new government, demonstrating just how out of touch they are with protesters. The longer they take to appoint a new premier, the worse socio-economic conditions become.

Already grappling with an economic crisis, Lebanon has slid even deeper into turmoil since protests erupted against the ruling elite last month, fueled by anger over the corruption of the sectarian politicians who have dominated Lebanon for years.

The protests led Hariri to quit as prime minister on October 29, toppling a coalition government that included the Hezbollah party. President Michel Aoun has yet to call for binding parliamentary consultations to name his replacement, drawing the criticism of rivals and ire of protesters.

The following are potential government scenarios that may take shape:

- Ongoing stalling with no appointed PM: Aoun’s political camp may exploit a constitutional loophole that does not bind the president to call for consultations within a specific timeframe. This will allow him the time to seek more potential candidates and to demonstrate that he was firmly in control of the state and preserving the “dignity” of the Free Patriotic Movement and its leader against the protesters. The stalling tactic allows the FPM to blame the political impasse and deteriorating economy on its rivals. It will also lower expectations and avoid appearing as though the FPM had succumbed to the protester demands. The stalling will deflate the demonstrators and create unease and exasperation that will ultimately lead forces to make do with whatever government that can ensure that life returns to “normal”.

- Hariri forms a government of independents: Such a scenario may “embarrass” the revolt because it will eliminate the sympathy of the Sunnis with the rallies should Hariri’s appointment be met with rejection. Prime ministers in Lebanon must be Sunni. The premiership was already dealt a blow when Hariri was forced to resign, while the president – a Maronite Christian – and parliament speaker – a Shiite – have only been dealt “metaphorical” blows.

Moreover, Hariri’s formation of a government of independent figures raises more questions than answers: How will it set economic policies? How will the powers react if the bank owners refuse to take on the brunt of salvaging the situation? What will Lebanon’s stance be towards regional disputes which the country was dragged into due to the policies of Foreign Minister Gebran Bassil and Hezbollah? Most importantly, will the new government be able to rid itself of clientelism and cronyism that have plagued the country for decades?

The Aoun-Hezbollah alliance still rejects a government of independents, claiming it will tighten the noose around the party. Hezbollah has offered unrealistic proposals to tackle the economic crisis, such as turning to China, while the FPM, which is headed by Bassil, has made farcical allegations that the revolt has adopted its demands of combating corruption.

- Government of independents without Hariri: This scenario meets the demand of the protesters to keep the current corrupt sectarian political class out of the new cabinet. This ultimately makes the demand the most difficult to achieve given the presence of the current balance of power. The parties in power will make it very difficult for independent figures to avoid political dictates. Moreover, the balance of power inside the cabinet itself will also be vague. What economic policies will they adopt? What about their political and sectarian views? One must also wonder what sort of international backing will such a government receive. Could it succeed in convincing it and Arab countries that it is serious about wanting to achieve real change and economic, judicial and political reform in Lebanon? This government must also be wary of Hezbollah and its international backers as they attempt to evade western sanctions and use Lebanon as a smuggling portal.

- Government of technocrat and political figures headed by Hariri: Hezbollah and its supporters have been demanding such a cabinet, saying it was the best solution to the current impasse. This government would include party representatives, excluding the Lebanese Forces and possibly Progressive Socialist Party of Walid Jumblatt. Hezbollah and its allies would take advantage of Hariri being appointed as premier. The government would also include figures that rightfully came to light or who exploited the revolt under the guise of the civil society. This new government would pick up where its predecessor left off and resume clientelism and repeat same empty promises to the international community in return for aid packages. The international community and Arab world will not support such a government, which should it be established, will further increase Lebanon’s isolation.

The materialization of such a scenario hinges on the success of attempts to tarnish the image of the revolt and claim that it will fail in achieving its goals.

- One-sided government: Hariri will not be considered to head such a cabinet, which would be formed of Hezbollah and its allies. Technically, Hezbollah and its FPM allies have enough lawmakers to form such a government. However, it would bring disaster to the economy and no one wants to be held responsible for that. It could also lead to more fragmentation among the FPM ranks and the supporters of Hezbollah and the Amal movement. As of yet, there is no reason why officials would resort to forming to such a cabinet. Threats to do so have been dismissed as political and media intimidation. The last time a one-sided government was formed was in 2011 under Najib Miqati and it was met with massive failure.



Borderless Europe Fights Brain Drain as Talent Heads North

Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
TT

Borderless Europe Fights Brain Drain as Talent Heads North

Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo

Until recently aerospace engineer Pedro Monteiro figured he'd join many of his peers moving from Portugal to its richer European neighbors in the quest for a better-paid job once he completes his master's degree in Lisbon.
But tax breaks proposed by Portugal's government for young workers - up to a temporary 100% income tax exemption in some cases - plus help with housing are making him think twice.
"Previous governments left young people behind," said Monteiro, 23, who is studying engineering and industrial management at the Higher Technical Institute in the Portuguese capital. "The country needs us and we want to stay but we need to see signs from the government that they are implementing policies that will help."
Monteiro cites in particular the cost of buying or renting a home amid a housing crisis aggravated by the arrival of wealthy foreigners lured by easy residency rights and tax breaks, Reuters said.
He is doubtful the government's new measures will be enough.
"Some of my friends are now working abroad and earn substantially more money... and have better career development opportunities," he said. "I'm a little bit skeptical concerning my job opportunities here in Portugal."
Portugal is the latest country in Europe to seek to tackle a brain drain holding back its economy. Tax breaks for young workers in the budget currently going through parliament will take effect next year and could benefit as many as 400,000 young people at an annual cost of 525 million euros.
Talent flight to wealthier countries of the north is a problem Portugal shares with several others in southern and central Europe, as workers take advantage of freedom of movement rules within the trade bloc. Countries including Italy have tried other schemes to counter the flight, with mixed results.
By exacerbating regional labor shortages and depriving poorer countries of tax revenues, it is yet another hurdle for the EU as it tries to improve its ebbing economic growth while addressing population decline and lagging labor productivity.
Donald Trump's victory in US elections this month raises the stakes, with the risk of across-the-board trade tariffs on European exports of at least 10% - a move that economists say could turn Europe's anaemic growth into outright recession.
About 2.3 million people born in Portugal, or 23% of its population, currently live abroad, according to Portugal's Emigration Observatory. That includes 850,000 Portuguese nationals aged 15-39, or about 30% of young Portuguese and 12.6% of its working-age population.
More concerning still is that about 40% of 50,000 people who graduate from universities or technical colleges emigrate each year, according to a study by Business Roundtable Portugal and Deloitte based on official statistics, costing Portugal billions of euros in lost income tax revenue and social security contributions.
DEMOGRAPHIC HELL
"This is not a country for young people," said Pedro Ginjeira do Nascimento, executive director of Business Roundtable Portugal, which represents 43 of the largest companies in the nation of 10 million people. "Portugal is experiencing a true demographic hell because the country is unable to create conditions to retain and attract young talent."
Internal migration within the EU is partly driven by the disparity in wages between its member states. Some economic migrants also say they are looking for better benefits such as pensions and healthcare and less rigid, hierarchichal structures that give more responsibility to those in junior roles.
Concerns are mounting over the long-term viability of Europe's economic model with its rapidly ageing population and failure to win substantial shares of high-growth markets of the future, from tech to renewable energy.
Presenting a raft of reform proposals aimed at boosting local innovation and investment, former European Central Bank chief Mario Draghi said in September the region faced a "slow agony" of decline if it did not compete more effectively.
Eszter Czovek, 45, and her husband are moving from Hungary to Austria, where workers earn an average 40.9 euros ($29.95) per hour compared to 12.8 euros per hour in Hungary, the largest wage gap between neighboring countries in the EU.
The number of Hungarians living in Austria increased to 107,264 by the beginning of 2024 from just 14,151 when Hungary joined the EU.
Czovek's husband, who works in construction, was offered a job in Austria, while she has worked in media and accounting at various multinationals. She cited better pay, pensions, work conditions and healthcare as motives for moving. She also mentioned her concern over the political situation in Hungary, which she fears might join Britain in leaving the EU.
"There was a change of regime here in 1989 and 30 years later we are still waiting for the miracle that will see us catch up with Austria," Czovek said of the revolution over three decades ago that ended communist rule in Hungary.
Since Brexit, the Netherlands has replaced Britain as a preferred destination for Portuguese talent while Germany and Scandinavian countries are also popular.
Many Europeans still head to the United States in search of better jobs - about 4.7 million were living there in 2022, according to the Washington-based Migration Policy Institute, which nonetheless notes a long-term decline since the 1960s.
In 2023, 4,892 Portuguese emigrated to the Netherlands, surpassing Britain for the first time, which in 2019 received 24,500 Portuguese.
At home, they face the eighth-highest tax burden in the Organization for Economic Co-operation and Development (OECD) even as house prices rose 186% and rents by 94% since 2015, according to property specialists Confidencial Imobiliario.
A single person in Portugal without children earned an average of 16,943 euros after tax in 2023 compared to 45,429 euros in the Netherlands, according to Eurostat.
Portugal will offer under 35s earning up to 28,000 euros a year a 100% tax exemption during their first year of work, gradually reducing the benefit to a 25% deduction between the eighth and tenth years.
Young people would also be exempted from transaction taxes and stamp duty when buying their first home as well as access to loans guaranteed by the state and rent subsidies.
"We are designing a solid package that tries to solve the main reasons why the young leave," Cabinet Minister Antonio Leitao Amaro said in an interview with Reuters.
'THINGS WON'T CHANGE'
Leitao Amaro said he did not know for sure if the tax breaks would work but that his government, which came into office in April, had to try something new.
"If we don't act ambitiously, things won't change and Portugal will continue down this path," he said.
The Italian government has already found that tax breaks used as incentives are costly and open to fraud.
In January, Italy abruptly curtailed its own scheme that was costing 1.3 billion euros in lost tax revenue, even as it lured tech workers such as Alessandra Mariani back home.
Before 2024, returners were offered a 70% tax break for five years, extendable for another five years in certain circumstances. Now, it plans to offer a slimmed-down scheme targeting specific skills after it attracted only 1,200 teachers or researchers - areas where Italy has a particular shortage.
Mariani said the incentives were key to persuading her to return to Milan in 2021 by allowing her to maintain the same standard of living she enjoyed in London.
"Had the opportunity been the same without the scheme, I would not have done it at all," said Mariani, now working at the Italian arm of the same large tech company.
With her tax breaks poised to be phased out by 2026 unless she buys a house or has a child, Mariani faces a drop in salary and she said she's once again eyeing the exit door.