Opinion

Hugo Dixon

Egypt needs a reconstruction fund too

Hugo Dixon
Mar 24, 2011 20:37 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — Egypt needs a reconstruction fund too. Japan will be spending tens of billions of dollars on rebuilding after its tsunami. Egypt can’t afford to finance an equivalent fund after its political tsunami. But foreign powers could help by showing they are not just interested in bombing neighbouring Libya.

In the long run, the most important thing is to accelerate free trade between Egypt and the industrialised world, notably the European Union. More immediately, as the country teeters on the brink of recession, foreign countries can show they really care about Egypt’s transition to democracy by financing a fund to invest in physical and social infrastructure — such as power generation, transport, housing and education.

Over the two months since the Egyptian revolution began, nothing concrete has emerged — despite much talk. Western countries want to help but are strapped for cash. There is also an understandable desire to link help to the achievement of the milestones on the road to democracy. Meanwhile, first the Japanese earthquake and then war in Libya has distracted attention from Egypt.

But it’s not too late to grab the moment. Nor is it impossible to raise cash. The main source of new money is the Gulf. Saudi Arabia, the United Arab Emirates and Qatar are bubbling with petrodollars. Even if these sheikhdoms don’t obviously have an interest in fostering democracy, they certainly have an interest in good relations with the Arab world’s most populous country. Meanwhile, Western countries could write off governement-to-government debt or convert it into equity in infrastructure projects. Of Egypt’s $34 billion external debt at the end of June 2010 (78 percent of which was owed by the government), 31 percent was owed to European Union countries, 12 percent to Japan and 10 percent to America.

Riposte: Portuguese default shouldn’t be taboo

Hugo Dixon
Mar 24, 2011 10:33 UTC

– The author is a Reuters Breakingviews columnist. The opinions
– The author is a Reuters Breakingviews columnist. The opinions
expressed are his own –

By Hugo Dixon

LONDON, March 24 (Reuters Breakingviews) – A Portuguese
default shouldn’t be taboo. The euro zone should make clear that
there will be no bailout until Lisbon gets its act together.

Portugal is in its current mess because Jose Socrates, whose
minority socialist government has just fallen, has spent the
last year dithering. The prime minister rejected many
opportunities for a bailout from his euro zone partners, most
recently in advance of a summit two weeks ago. Now time has
virtually run out. It may take two months to call elections and
form a new government and, in the meantime, Portugal has a big
debt repayment due in April.

Arab spring’s violent phase ratchets up risk

Hugo Dixon
Mar 21, 2011 15:21 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon
The Arab spring’s violent phase is ratcheting up investor risk. Hopes that further dominoes would fall with minimal violence, in the same way that regimes in Tunisia and Egypt were toppled, have been dashed. Others — notably Libya, but also Bahrain, Syria, Yemen and even Saudi Arabia — are still tottering. But none will fall easily. The prospect of bloody conflicts will push up already-heightened risk premia, including the resurgent oil price.

Conflicts are bubbling up throughout the region — most obviously in Libya, where it is unclear whether the Western-led imposition of a no-fly zone will lead to the swift ousting of Colonel Muammar Gaddafi or a long drawn out civil war. Yemen could be next but it probably won’t fall in a happy manner: the al-Qaeda-infested country could split and turn into even more of a failed state.