MGLE01: SPECIAL CABINET SESSION DISCUSSES

UNCLAS BEIRUT 001086 SIPDIS SIPDIS STATE FOR NEA/ELA STATE PASS USTR TREASURY FOR MSHWARZMAN USDOC FOR 4250/ITA/MAC/OME NSC FOR ABRAMS/DORAN/WERNER/SINGH E.O. 12958: N/A TAGS: PGOV ECON EFIN LE SUBJECT: MGLE01: SPECIAL CABINET SESSION DISCUSSES ECONOMIC REFORM AGENDA ¶1. Summary: The GOL's economic reform agenda was presented before the full Cabinet for the first time during a special session on April 5. President Lahoud chaired the session where both Finance Minister Azour and Economy Minister Haddad made Power Point presentations outlining the GOL's reform agenda. The session was notably calm in contrast to the acrimony present at the Cabinet session on March 30. Prime Minister Siniora stated that the special Cabinet session was the first in a series of meetings for economic stakeholders and Cabinet members that would discuss elements of the GOL's economic reform agenda "one by one." The GOL has scheduled a special Cabinet session for April 11 to discuss the social security fund; another special session later that week may take up electricity reform. PM Siniora said he would soon engage labor unions on economic reform. Information Minister Aridi told the press after the meeting that the reform agenda would be discussed during weekly special sessions until a consensus is reached among Lebanon's political and economic leaders. Four ministers out of the 24-member cabinet were absent: Minister of Defense Murr (abroad for medical treatment),Minister of Transportation Safadi, Minister of Justice Rizk (abroad),and Minister of Tourism Sarkis (boycotting because of Lahoud's presence). End Summary. ¶2. Finance Minister Jihad Azour introduced the program as a "passport for the Beirut I conference" that would allow the Lebanese economy to "stand on its feet again." According to Azour, the program has four parts: achieving economic growth of at least five percent, providing a social safety net, dealing with the economic problems burdening the citizens, and revenue measures including taxes. While responding to criticism over the possibility of higher taxes, Azour defended the need to reduce the deficit through lower public expenditures and increased revenues. He told the Cabinet members that tax increases would be subject to discussion, saying that if the chronic problems and corruption facing the power company Electricite du Liban were dealt with, Lebanon would not need to raise future taxes. PM Siniora also told Cabinet members that the current plan was "subject to alteration," as he responded to criticism over tax increases. Azour emphasized the need to have "consensus over the reform program" from all political leaders. ¶3. President Lahoud entered the meeting calmly and shook hands with all the ministers who were present, including Interior Minister Fatfat, who visibly sparred with President Lahoud at the March 30 Cabinet session. He stated that the current reform document has "more titles than details" at this point. He told the press that he would support any economic reform program that "guarantees" the best interests of Lebanon. He also told press sources that he was concerned about criticism of the program and would listen to all ministers' points of view with "an open mind." ¶4. Three Shia ministers were vocally skeptical of the program presentation. Health Minister Khalifeh described the reform document as "very vague" and said "the only thing clear in this program is the tax increases." Khalifeh also expressed concern over the lack of a tangible safety net in the program. Labor Minister Trad Hamadeh told the press he had concerns that the philosophy of the program was based on liberal, Western economic textbooks. Energy Minister (and Hizballah member) Mohamd Fneish said the program contained both "positive and negative aspects." ¶5. COMMENT. The fact that the Cabinet is now discussing the economic reform agenda in a calm manner is a positive development, and the marketing of the reform agenda should become more pronounced as economic issues are increasingly becoming part of the national debate. The Prime Minister and his economic team need to continue to press the virtues of fiscal responsibility, even though the proposed tax increases are widely unpopular with the public, members of the business community, and several Cabinet members. END COMMENT. FELTMAN