WE HAVE ALL HAD ENOUGH! WE NEED A SOLUTION.

WE HAVE ALL HAD ENOUGH! WE NEED A SOLUTION

19/07/2015

Gentlemen,

We are meeting today to discuss a very important subject and consider adopting, among us, some very important decisions for the country.

The attached documents attempt to describe the current situation of our country’s finances while suggesting a way to get out of the mess that our leaders have put us in, particularly during the past two decades.

We have started in 1993 with an initial debt of around seven billion US dollars that were needed to finance the cost of the post-civil war reconstruction. The money was borrowed from private lenders at the horrendous rates that were prevalent at the time. These rates were gradually reduced, over the years to reach their current average of some 6.50%.

The seven billion dollars were never repaid. Every year, since 1994, the bonds were renewed with the unpaid interest added to them. Through this compound formula the seven billion dollars  initially borrowed have become now $72 billion dollars.

I believe that it is high time to stop and consider where we are going to and what ought to be done to bring that vicious trend to an end. We must act now, before it is too late. At the end of this publication, I have included some references to the Greek crisis in order to warn the readers about the necessity to act, if we do not want to suffer the same fate as the Greeks, if not worse.

I hope that we can put our minds together to find a way out of the maze for our country in danger.

Sincerely

George Sabat (ACMA)

Part One FOREWORD

I suspect that a group of influential businessmen who, directly or indirectly hold, a large portion of Lebanon’s public debt bonds, are eager, though they have not publicly announced it yet, to promote the privatisation of some large sectors of the country’s economy, such as the electricity, the water, the transports, the Beirut Port Authority, the Hariri International Airport and some others that I may have omitted.

Their aim is to recuperate, at favourable terms, the amount of their bond holdings through such a scheme, as they assume that the Nation will never be able to redeem them.

In order to counter such a program that could prove detrimental to the country, particularly in the current political circumstances, I believe that it is necessary for the country to agree upon a broad National Policy that will embody all the aspirations of the citizens for a sustained economic and social development.To achieve that purpose, I recommend to undertake, at the earliest possible opportunity, a thorough study of the Lebanese National Development Plan (L.N.D.P.). This Plan will embody the Country’s medium and long term policy and will translate the will and the aims of the Nation for the short, the medium, and the long terms. This is why, once drawn up by the Authorities that Plan ought to be approved by Parliament.

Such a study could, in my view, be achieved by year end, provided we start right away. Once completed, one could have a broad view of the extent of the reforms needed to be implemented and the financing required in order to start putting the National Development Plan into execution on the first of January 2016. This can be made possible provided a decision to start upon the study project, is reached within a few days. Time is getting short, and not one day should be lost from today, onward.

The country and the citizens both need a NATIONAL MEDIUM AND LONG TERM POLICY to guide the government and the people and stimulate them to achieve the goals included in these Policies. A country without a policy is like a ship without a rudder. This is how we have been going for the past seven decades and why we are in a mess today.

Kindly inform me if you are interested in taking part in that project which I propose to name:

“THE L.N.D.P. PROJECT"

19/07/2015

PART TWO   

Remarks on the L.N.D.P.

1.       1) It may not be catastrophic if the studies are not fully detailed by year end

2.        2)  What is essential is that the 18 sectors ought to be finished at the same time because they are all interdependent, and we need to have the entire financial picture in order to determine the overall financial requirements.

3.     3)   The essential goal is to start, because all the sector plans, in the end, will need to be adjusted in the course of execution

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4.      4)  The setting of primary and subsidiary goals is essential

5.    5)  The system of follow up is also very important. The undergrads who assisted in building up the Plan ought to be assigned to share in the follow up function as well.

6.     6)  Contacts between the followers-up and the parliamentary commissions ought to be a permanent fixture of the project

7.     7)   Contacts between the followers-up and the  ministry staff ought to be also a permanent fixture of the project

8.     8)   A project magazine ought to be a priority. The magazine will publish the progress of the work

9.       Permanent contacts ought to be maintained between the followers-up, the ministry staff, the political parties, and the civil society organizations

1     9)    Political parties ought to be encouraged to get involved in the project

1   10) Monthly or quarterly reports ought to be submitted to the IMF and/or the WORLD BANK

1   11) Getting support and cooperation from the World Bank and the IMF would be the best way to counter any foreign hegemony.

PART THREE  - THE TIME SCHEDULE OF THE ELABORATION OF THE L.N.D.P.

PART FOUR - LNDP – THE GREEK DEBACLE
LET IT BE A LESSON TO THE LEBANESE SO THAT THEY DO NOT FALL INTO THE SAME TRAP

Greece’s Debt Crisis Explained

By THE NEW YORK TIMES UPDATED July 16, 2015

1.          What’s the latest?

Greece and its European creditors announced an agreement in Brussels on Monday that aims to resolve the country’s debt crisis and keep it in the eurozone, but that will require further budgetary belt-tightening that Prime Minister Alexis Tsipras could have trouble selling back in Athens.

The International Monetary Fund threatened to withdraw support for Greece’s bailout on Tuesday unless European leaders agree to substantial debt relief.

Greece's Parliament approved painful new austerity measures early Thursday.

2.          What happens next?

One open question is whether the deal gives enough confidence to theEuropean Central Bank to let it continue channeling sorely needed emergency funding to Greek banks.

As part of Greece’s commitments, Chancellor Angela Merkel of Germany said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said.

Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments.

Despite the agreement, Greek banks are expected to remain closed this week. To reopen, the banks would need more emergency loans from the European Central Bank.

3.          How does the crisis affect the global financial system?

In the European Union, most real decision-making power, particularly on matters involving politically delicate things like money and migrants, rests with 28 national governments, each one beholden to its voters and taxpayers. This tension has grown only more acute since the January 1999 introduction of the euro, which now binds 19 nations into a single currency zone watched over by the European Central Bank but leaves budget and tax policy in the hands of each country, an arrangement that some economists believe was doomed from the start.

Since Greece’s debt crisis began in 2010, most international banks and foreign investors have sold their Greek bonds and other holdings, so they are no longer vulnerable to what happens in Greece. (Some private investors who subsequently plowed back into Greek bonds, betting on a comeback, regret that decision.)

And in the meantime, the other crisis countries in the eurozone, like Portugal, Ireland and Spain, have taken steps to overhaul their economies and are much less vulnerable to market contagion than they were a few years ago.

Debt in the European Union

Gross government debt as a percentage of gross domestic product plotted through the fourth quarter of 2014.

Source: Eurostat

4.          What if Greece left the eurozone?

At the height of the debt crisis a few years ago, many experts worried that Greece’s problems would spill over to the rest of the world. If Greece defaulted on its debt and exited the eurozone, they argued, it might create global financial shocks bigger than the collapse of Lehman Brothers did.

Now, however, some people believe that if Greece were to leave the currency union, in what is known as a “Grexit,” it wouldn’t be such a catastrophe. Europe has put up safeguards to limit the so-called financial contagion, in an effort to keep the problems from spreading to other countries. Greece, just a tiny part of the eurozone economy, could regain financial autonomy by leaving, these people contend — and the eurozone would actually be better off without a country that seems to constantly need its neighbors’ support.

Greece’s G.D.P. and Unemployment Rates in Europe

First quarter 2015 average; *Britain is the three-month average through February.

Source: Eurostat

Others say that’s too simplistic a view. Despite the frustration of endless negotiations, European political leaders see a united Europe as an imperative. At the same time, they still haven’t fixed some of the biggest shortcomings of the eurozone’s structure by creating a more federal-style system of transferring money as needed among members — the way the United States does among its various states.

Exiting the euro currency union and the European Union would also involve a legal minefield that no country has yet ventured to cross. There are also no provisions for departure, voluntary or forced, from the euro currency union.

5.                  3:52

A 2013 video on how Greeks were turning to dirty and environmentally damaging solutions for heat after the government raised taxes on heating oil by 450 percent.CreditVideo by Nikolia Apostolou on Publish DateFebruary 03, 2013

How did Greece get to this point?

Greece became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. With global financial markets still reeling, Greece announced in October 2009 that it had been understating its deficit figures for years, raising alarms about the soundness of Greek finances.

Suddenly, Greece was shut out from borrowing in the financial markets. By the spring of 2010, it was veering toward bankruptcy, which threatened to set off a new financial crisis.

To avert calamity, the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission — issued the first of two international bailouts for Greece, which would eventually total more than 240 billion euros, or about $264 billion at today’s exchange rates.

The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business.

6.                  Photo

A father and daughter at a demonstration in Athens in late June.CreditEirini Vourloumis for The New York Times

If Greece has received billions in bailouts, why is there still a crisis?

The money was supposed to buy Greece time to stabilize its finances and quell market fears that the euro union itself could break up. While it has helped, Greece’s economic problems haven’t gone away. The economy has shrunk by a quarter in five years, and unemployment is above 25 percent.

The bailout money mainly goes toward paying off Greece’s international loans, rather than making its way into the economy. And the government still has a staggering debt load that it cannot begin to pay down unless a recovery takes hold.

Many economists, and many Greeks, blame the austerity measures for much of the country’s continuing problems. The leftist Syriza party rode to power this year promising to renegotiate the bailout; Mr. Tsipras said that austerity had created a “humanitarian crisis” in Greece.

But the country’s exasperated creditors, especially Germany, blame Athens for failing to conduct the economic overhauls required under its bailout agreement. They don’t want to change the rules for Greece.

Greece’s Creditors

Almost two-thirds of Greece’s debt, about 200 billion euros, is owed to the eurozone bailout fund or other eurozone countries. Greece does not have to make any payments on that debt until 2023. The International Monetary Fund has proposed extending the grace period until mid-century.

So while Greece’s total debt is big—as much as double the country’s annual economic output—it might not matter much if the government did not need to make payments for decades to come. By the time the money came due, the Greek economy could have grown enough that the sum no longer seemed daunting.

In the short term, though, Greece has a problem making payments due on loans from the International Monetary Fund and on bonds held by the European Central Bank. Those obligations amount to more than 24 billion euros through the middle of 2018, and it is unlikely that either institution would agree to long delays in repayment.