Analysts say the dramatic decision by Arab states to turn against President Bashar al-Assad has further damaged Syria’s economy. Some even believe this poses a graver challenge to al-Assad’s survival than the country’s uprising.

A recent report suggests public expenditure in 2011 has already increased by $19bn, mainly because of increased military costs, while public revenue has decreased by $2.31bn.

Cargo volumes passing through Syrian ports declined by 35 to 40 per cent in the first eight months of last year, losing the economy an estimated $6.1bn.

The Syrian ministry of economy says that food prices in the country surged at the end of 2011 – with some items increasing by up to 37 per cent – compared with the same period in 2010.

With the Central Bank’s currency reserves depleted, it will become trickier for the government to support the Syrian pound at the official rate of 47 Syrian pounds (SYP) to $1. On the black market the value of the pound against the US dollar has fallen to 62 SYP to $1, which means that Syrians have lost some 25 per cent of their spending power.

But as Syria’s economy staggers, some neighbouring countries could be key to providing a lifeline – despite the sanctions.

Firstly, Lebanon has strong political links with its larger neighbour and the Lebanese group Hezbollah is a key Syrian ally. Syria and Lebanon’s economies are closely linked too – Syria is Lebanon’s only overland trade route and several Lebanese banks operate in Syria. And Lebanon abstained from the Arab League vote in November to impose economic sanctions against Syria.

Syria’s second-biggest trading partner is Iraq, which also abstained from the Arab League vote. According to official figures, trade between the two countries reached nearly $3bn in 2011. And there are almost 250,000 Iraqis living and working in Syria.

Finally there is Iran, which is Syria’s closest ally in the region, and potentially its strongest economic lifeline. It has billions of dollars of investments in Syria, ranging from energy and construction to automobiles and cement. Analysts say Iran could help Syria by buying their crude oil, which is now under Western sanctions, or by allowing it to pay for imports in Syrian currency.

On this episode of Inside Syria, we ask: Is Syria facing a severe economic decline? And are Syrians finding ways around the sanctions and their country’s economic problems?

To discuss this we are joined by: Samir Seifan, a Syrian economist who used to be an advisor to the Syrian government but who now lives in exile; Ammar Waqqaf, a member of the Syrian Social Club, which is a group of UK-based Syrians supporting government-led reform of their country; and Mona Yacoubian, a senior advisor at the think tank The Stimson Center, where she directs its new project ‘Pathways to Progress: Peace, Prosperity, and Change in the Middle East’.

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In his lengthy speech on January 11, al-Assad sought to stress the strength of the country’s economy, asking the people to turn from consumerism to productivity.

“We must put an emphasis on productivity and we are capable of, even in this crisis, to increase our productivity. We are aware that we have great point of strength, we have very low debt, we have good relations with great industrial countries, we are in the fifth or the fourth place in terms of production of olives.”
Bashar al-Assad, Syria’s president

But in October 2011, Mohammad Nidal al-Shaar, the Syrian economy minister, described the country’s economy as being in a “state of emergency”:

“Unemployment is rising, imports are falling, and government income is reduced in areas where there are protests, there is no economic activity – so people aren’t paying tax.”

However, earlier this year, on January 3, al-Shaar presented a more positive view, declaring:

“The Syrian economy is still strong and the only solution to control the prices of goods is to support and develop the local industries and to increase the productivity.”

Facts about the Syrian economy

• According to the International Monetary Fund (IMF), Syria’s economy will shrink by 2% this year
• Economic sanctions have aggravated Syria’s already struggling economy
• The European Union (EU) accounts for 95% of Syrian oil exports
• An EU ban on Syria’s oil has hurt the economy
• The Arab League imposed sanctions on Syria and suspended its membership of the group
• Unrest in Syria has halted tourism and hit foreign investment and trade
• Unemployment is estimated to have risen to more than 20%
• Syria has suspended its free trade agreement with Turkey

Al Jazeera

Youngsters are being dumped by their parents who are struggling to make ends meet in what is fast becoming the most tragic human consequence of the Euro crisis.

It comes as pharmacists revealed the country had almost run out of aspirin, as multi-billion euro austerity measures filter their way through society.

Athens’ Ark of the World youth centre said four children, including a newborn baby, had been left on its doorstep in recent months.

One mother, it said, ran away after handing over her two-year-old daughter Natasha.

Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’

And another desperate mother, Maria, was forced to give up her eight-year-old daughter Anastasia after losing her job.

She looked for work for more than a year, having to leave her child at home for hours at a time, and lived off food handouts from the local church.

She said: ‘Every night I cry alone at home, but what can I do? It hurt my heart, but I didn’t have a choice.’ She now works in a cafe but only make £16 per day and so cannot afford to take her daughter back.

Centre founder Fr Antonios Papanikolaou told the Mirror: ‘Over the last year we’ve had hundreds of parents who want to leave their children with us. They know us and trust us.

‘They say they do not have any money or shelter or food for their kids, so they hope we might be able to provide them with what they need.’

Further evidence of Greeks feeling the pinch of austerity measures is the lack of aspirin and other medicines now available in the country.

Pharmacists are struggling to stock their shelves as the Greek government, which sets the prices for drugs, keeps them artificially low.

This means that firms are turning to sell the drugs outside of the country for a higher price – leading to stock depletion for Greeks.

Mina Mavrou, who runs one of the country’s 12,000 pharmacies, said she spent hours each day pleading with drug makers, wholesalers and colleagues to hunt down medicines for clients.

And she said that even when drugs were available, pharmacists often must foot the bill up front, or patients simply do without.

Meanwhile, talks about private sector creditors paying for part of a second Greek bailout are going badly, senior European bankers said tonight.

That raises the prospect that euro zone governments will have to increase their contribution to the aid package.

‘Governments are mulling an increase of their share of the burden,’ said one banker, while another said ‘Nothing is decided yet, but the bigger the imposed haircut the less appetite there is for voluntary conversion.’

A third senior banker told Associated Press: ‘Private sector involvement is going badly.’

There are suggestions in euro zone government circles that ministers are coming to the realisation they may need to bolster Greece’s planned second bailout worth 130 billion euros if the voluntary bond swap scheme, which is a key part of the overall package, falls short of expectations.

Stumping up yet more money would be politically difficult in Germany and other countries in the northern part of the currency bloc.

dailymail.co.uk

Oil declined for the first time in seven days as a surge in the European Central Bank’s balance sheet to a record highlighted the growing risks of the region’s debt crisis.

Futures dropped as much as 1.4 percent after the ECB lent financial institutions more money last week in an attempt to keep credit flowing. The European single currency tumbled to the lowest level since January against the dollar, curbing investor demand for commodities. Oil also decreased on reduced concern that Iran will block the Strait of Hormuz.

“The biggest news right now is that the euro is coming in pretty strongly,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “It was time for a correction after rising for six days.”

Crude oil for February delivery decreased $1.06, or 1 percent, to $100.28 a barrel at 10:47 a.m. on the New York Mercantile Exchange. Earlier, prices touched $99.91 a barrel. Futures have climbed 9.7 percent this year, extending last year’s advance of 15 percent.

Brent oil for February settlement fell 78 cents, or 0.7 percent, to $108.49 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to crude in New York was $8.21 a barrel, up from $7.93 at yesterday’s close, the smallest differential based on settlement prices since Jan. 20.

New York oil prices surged 1.7 percent to $101.34 yesterday, the highest settlement since Nov. 16, during a period of slow trading. Volume was 167,547 on Dec. 23, the lowest level since Dec. 26, 2008, and down 73 percent from the average of the past three months. Open interest was 1.31 million contracts.
‘Exaggerated’ Move

“The significant rally yesterday was probably exaggerated because of low volume,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Lending to euro-area banks jumped 214 billion euros ($280 billion) to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. Its balance sheet increased 239 billion euros to 2.73 trillion euros, it said.

The 17-nation currency fell against the dollar as concern increased that the region’s sovereign-debt crisis will reduce economic growth in the region. The euro decreased as much as 1 percent to $1.2943.

About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground- to-sea missile systems and torpedoes, Press TV said Dec. 24.
Bloomberg

“The Shura Council might issue its verdict before Wednesday’s cabinet session… It might reject the cabinet’s most recent wage hikes or demand major changes on it,” ministerial sources told As Safir.

The cabinet voted on Wednesday to increase the minimum monthly wage from 500,000 LL to 868, 000 LL or about 74 %

Information Minister Walid Daouq said following the meeting that the ministers also agreed to increase the daily minimum wage to 33,000 LL and introduce a minimum monthly transportation allowance of 268,000 LL.

Daouq also said that salaries less than LL1.5 million will be increased by 18 percent while salaries between LL1.5 million and LL2.5 million will be increased by 10 percent. Wages above LL2.5 million will not be increased.

The new wages are retroactive to December 1, 2011.

The plan was proposed by Labor Minister Charbel Nahhas of the Free patriotic Movement (FPM).

Lebanese Association of Industrialists chief Nehme Efram rejected the cabinet’s latest decision on wage hikes and pledged not to implement the new wage plan

He told told MTV television on Thursday evening: “We will not accept” the cabinet’s latest decision to increase minimum wage and will not implement it”.

Similarly the Economic Committees condemned on Thursday the cabinet’s latest decision on wage hikes and said the wage plan by the cabinet is a wrongful decision that will be a major blow to the economy.”

The head of the committee Adnan Kassar said: “We hope the Shura Council will reject the decision.”

He urged the government to retract the decision since it is “a blow to the most important basis of stability in Lebanon.”

Public Works and Transportation Minister Ghazi Aridi , who represents the Progressive Socialist Party in the cabinet said on Thursday ” the voting that took place Wednesday during a cabinet session to discuss the issue of wages was politically-motivated, National News Agency reported.

Lebanese Forces bloc MP Antoine Zahra branded the new wage hike proposed by the FPM minister a “bribe”
stressing that all the economic experts said it will ruin the economy and cause the closure of many small and large institutions.”

Zahra also said in his statement that “the Lebanese people deserve a government that does not yield to blackmail and does not offer fake victories at the expense of Lebanon’s national economy and the stability.”

FPM declared victory following the approval of the wage hike by the cabinet

The rating firm said Syria’s current instability was especially notable, as was the local banks’ exposure to countries with political unrest or economic slowdowns or both, such as Egypt or Jordan.

The trend of non-performing loans, which has improved from 2006 to 2010, will likely reverse, Moody’s said, along with the weakening Lebanese economy. Moody’s said it expects that the political unrest and the broader economic slowdown in neighbouring countries, will pressure problem loans, at least into the first half of 2012.

The rating firm expects the banks’ profitability to come under pressure, as well, as subdued business activity will likely cause a slowdown in credit growth and fee-generating income.

The banks also have significant exposure to Lebanese government debt, so their fate also will be tied to the strength or weakness of the government. Moody’s rates the government’s debt at B1, a junk-level rating, and has a stable outlook.

Marketwatch

“The Lebanese banking sector is essential for Lebanon’s economy,” he said according to National News Agency.

“No Lebanese citizen, whether he [works] in the public sector or banking sector, can expose the banking sector to any danger.” He said without elaborating

Mikati’s statement comes after Central Bank Governor Riad Salameh said Wednesday during an interview by Russia Today TV that the political upheavals gripping many Arab countries had dire effects on the overall performance of most Middle East economies, including Lebanon.

“Since Lebanon’s economy is so closely intertwined with that of neighboring Syria, the unrest across the border has taken a huge toll on the Lebanese economy,” he added.

Lebanon’s GDP grew 7.5 percent annually between 2007 and 2010. However, the latest growth forecast for the country has shrunk from a high of 7 percent to a low of 1.1 percent.

Salameh acknowledged that Lebanese banks with operations in Damascus have been impacted by the events in Syria.

Economic experts agree with Salameh saying that the transition from autocracy to democracy in the Middle East is likely to be bumpy and unstable, at best.

Salameh however tried to play down the impact, saying that Lebanon was able to manage the repercussions through financial maneuvering and that the country has yet to experience decelerated growth.

“The negative impact has not reached a crisis stage as Lebanon is expected to record a growth of 2 percent in 2011,” he explained without elaborating

The governor also denied reports of illegal Syrian capital flow into Lebanon, adding that the Lebanon’s growth in deposits dropped this year when compared to 2010.

The latest data supports his claim. Deposits grew 5.4 percent in the first eight months of 2011, compared to growth of 7.3 percent in the first eight months of 2010, according to numbers by data provider, Economena Analytics.

The Lebanese economy has been a great concern ever since the Iranian and Syrian backed Hezbollah militant group brought down the pro-western government of former PM Saad Hariri.

The new government of PM Mikati is completely dominated by Hezbollah and its allies.

Agencies

The choice of Mr. Papademos, a former vice president of the European Central Bank, came after four days of tense negotiations that put Greece’s feuding political parties on full display.

A written statement issued by the office of President Karolos Papoulias was read on television in the afternoon confirming Mr. Papademos’s appointment and adding that the “chief role of the new interim administration will be the implementation of the decisions of the European Union summit of Oct. 26 and the policies that are connected to this.”

Mr. Papademos made a brief appearance shortly after the announcement. He said Greece still faced dire problems. But he struck an optimistic note.

“The course will not be easy,” he said. “But the problems, I’m convinced, will be solved. They will be solved faster, with a smaller cost and in an efficient way, if there is unity, agreement and prudence.”

After months of domestic protests and building pressure from the European Union, Prime Minister George Papandreou agreed on Sunday to step down once a coalition government had been formed. But the talks dragged on, apparently hostage to political maneuvering by all sides.

Mr. Papademos, however, is seen as outside the old-boy networks of Greek politics — a technocrat, perhaps able to take Greece on a new path.

News reports earlier this week said that Mr. Papademos was insisting on several measures he believed were crucial to his success, including a minimum of at least six months at the helm. Earlier, Greece’s major political parties had agreed to new elections in just 100 days.

The reports also said that he insisted that members of the opposition New Democratic Party play a significant role in the unity government, which will have to impose additional austerity measures almost immediately.

The opposition, led by Antonis Samaras, had resisted, not wanting to be linked to deeply unpopular reforms.

But standing outside the presidential palace, Mr. Papademos said he had not made any demands before accepting the job. He also said the new unity government would be “transitional,” and its priority would be to ensure that Greece stayed in the euro zone. “I am convinced that Greece’s continued participation in the euro zone is a guarantee for the country’s stability and future prosperity,” he said.

He faces a difficult task. He will have to move swiftly to reassure the country’s major foreign lenders — the so called troika comprising the European Commission, the European Central Bank and the International Monetary Fund — who were shocked when Mr. Papandreou decided without warning to submit the latest bailout package to a referendum, a move that eventually led to his demise.

Mr. Papademos must also persuade the Greek Parliament to pass the new austerity measures, which include more layoffs of government workers, in a climate of growing social unrest.

Mr. Papandreou went on national television on Wednesday evening to announce that a new interim government had been formed.

But he did not name his successor, and in the hours that followed, it became clear that political confusion had set in once more. Television provided glimpses of some of the drama. A furious Giorgos Karatzaferis, the leader of the small far-right party Laos, stormed out the presidential office building shortly after Mr. Papandreou’s speech. He told waiting reporters that he had been summoned to a meeting with Mr. Papandreou; the president; and Mr. Samaras, but found himself sitting in a hall alone. Apparently, the other men were too busy arguing to meet with him.

Mr. Karatzaferis, one of the few politicians willing to risk the potential damage from supporting a new power-sharing government that must take on a host of unpopular tasks, said political games were being played. “This is unacceptable,” he huffed before leaving.

Some Pasok members had appeared to push publicly on Wednesday for Mr. Papademos, a respected economist and former vice president of the European Central Bank who was seen as being a dynamic and technically able choice.

But his strength made him a potential rival for those who have aspirations in the next elections, analysts said. In addition, reports that Mr. Papademos had set several conditions for taking the job, including a six-month term and the ability to choose his own finance minister, had troubled some members of both parties. In fact, Mr. Papademos was acting to remove one of the most powerful members of Pasok, the current finance minister, Evangelos Venizelos, who was likely to run for prime minister in the next elections.

Nonetheless, many of the younger politicians were eager for someone who would make quick progress in getting the country’s financial house in order. One prominent member of Pasok, Anna Diamantopoulou, the minister of education, issued a letter on Wednesday that was widely interpreted as public support for Mr. Papademos.

“The country needs a prime minister of high status and acceptance, both inside and out of the country, with deep knowledge of financial affairs,” she wrote.

Mr. Papandreou’s televised address served as a kind of valedictory speech, summing up moves in recent years to stabilize and help the country, expressing the country’s continued commitment to the European bailout plan and urging political parties to transcend their differences.

Ahead of the meeting with the Mr. Papoulias, Mr. Papandreou said the country’s new government would signal the “beginning of a new political mentality, a new political culture.”

“Today, we leave aside our differences,” he said, heralding “a common effort to ensure the country moves forward, not only to remain part of the euro zone but also to emerge from the crisis.”

He said the interim government would make the necessary efforts to “justify the sacrifices made by the Greek people over the past two years,” referring to a raft of wage and pension cuts as well as hefty tax increases. The chief goals would be to secure crucial rescue financing for the country and continue talks with foreign creditors, he said.

Some interpreted the tone of his speech as signaling his departure not only from Greek politics but also from the country itself.

“I never put my position above the national good,” he said. “For me, Greece is above everything. Wherever I go, I will carry the Greek flag in my heart.” He added that he would do everything he could to support the new prime minister and the new government.

NYT

“The draft budget does not address what should be addressed in light of the current economic recession,” he said following his meeting with former Prime Minister Salim Hoss.

Siniora , who served for several years as a Finance minister also said that “the wage increase decision was not based on solid research.”

Many observers are of the opinion that the 40 % increase in minimum wages will lead to inflation in the country.

PM Nagib Mikati on Tuesday agreed to raise the minimum wage from 500,000 LL to 700,000 L.L, and to raise wages of up to 1 million L.L by 200,000 L.L and wages ranging from 1 million to 1,8 million L.L. by 300,000 L.L. The cabinet approved the wage increases on Wednesday during its meeting at the Baabda palace, despite the objection of the business community.

The average growth is 4.1 percent in the Middle East & North Africa.

The January forecast was made when the cabinet was headed by former PM Saad Hariri, but on January 12 Hezbollah and and its March 8 allies brought down Hariri’s cabinet .PM Najib Mikati heads the new cabinet which is completely dominated by Hezbollah and its allies.

The World Bank also forecast Lebanon’s fiscal balance would post a deficit of 5.5 percent of gross domestic product in 2011

Compare this to an average surplus of 1.4 percent of GDP for the Middle East and North Africa.

Earlier this month , the International Monetary Fund has also revised downward economic growth for Lebanon from 7 to 2.5 percent for 2011.

This compares with an economic boom in recent years that saw Lebanon witness a record 7.5 percent growth in 2010.

Lebanon is relatively one of the most heavily indebted nations with a current public debt of more than 53 billion dollars (38.8 billion euros), which represents 135 percent of the country’s GDP.

The Shareholders issued a statement reminding Prime Minister Najib Mikati that he should implement decree Number 109, which has already approved the loan.

The committee criticized the delay in implementing the decree “specially since Coop has net assets of about LL200 billion that can easily be used to secure the loan.”

The shareholders also called on Mikati to appoint a temporary committee to manage the company.

The COOP was established in 1974, with 2 supermarkets in Sabra and Achrafieh under the name of “Popular Markets”, it was later changed to COOP after it expanded throughout the country. In the late 90’s COOP faced a financial crisis and reorganized .