Critics Decry 'Destroy and Lend' Policy
 http://www.ipsnews.net/news.asp?idnews=34545
By Emad Mekay
Inter Press Service

Thursday 31 August 2006

Washington - Lebanon is firmly en route to becoming the third nation in
the Middle East after Iraq and the Palestinian territories to experience a
devastating Washington-backed war and a massive influx of new illegitimate
debt to cover reconstruction expenses, anti-debt activists say.

A conference held Thursday in Stockholm for donors raised more than 940
million dollars in pledges of new money to reconstruct Lebanon after 33 days
of Israeli bombing of the country's infrastructure, bridges, roads and
factories.

More than 1,100 Lebanese people were killed in the conflict between
Israel and Hezbollah, a third of them children under 12. More than one
million were forced to leave their homes.

Initial official figures estimate the first phase of reconstruction at
2.5 billion dollars. Damages include some 150 bridges and an oil spill that
dumped 15,000 tonnes of oil into the sea and polluted 140 kilometres of
coastline.

According to the U.N. High Commissioner for Refugees, 60,000 housing
units in Lebanon were damaged or destroyed in the war, of which at least
15,000 were completely destroyed while another 15,000 sustained major
damage.

Since the Aug. 14 ceasefire, the United Nations says the return of
hundreds of thousands of people to their homes has been hampered by enormous
quantities of unexploded ordnance (UXO), especially the bomblets scattered
by cluster bombs, which will place a long-term drain on the government.

Prior to the conference, the Lebanese government said at least 540
million dollars were immediately needed to help the country with short-term
recovery.

On Thursday, the International Monetary Fund (IMF) said the damages
could reach at least 3.5 billion dollars for infrastructure alone.

"We have heard of preliminary estimates of 3.5 billion dollars in
infrastructure damage, to which one needs to add the impact of the massive
displacement of the population, the exodus of many professionals, and
possible private sector bankruptcies," the IMF's representative at the
Stockholm meetings said in a statement.

At this rate, Beirut will most certainly continue to turn to
international lenders and donors for help with reconstruction for a long
time. And this, debt watchers say, will in turn plunge the country into
greater debt.

World Bank figures show that Lebanon was already up to its neck in debt
-- some 22.2 billion dollars -- even before the war. For a country of only
3.5 million people, the smallest Arab nation, it is a colossal burden.

"What was already a difficult budgetary and debt situation has been made
much more precarious by the conflict. Government debt stood at 175 percent
of GDP (Gross Domestic Product) at end-2005, one of the highest ratios in
the world. The conflict has made matters much worse," the IMF said.

The country's main creditors are Saudi Arabia and France. Both have
pushed for a neo-liberal set of policies in Beirut which led to the
privatisation of pubic assets and, critics say, the empowerment of local
elites and foreign companies at the expense of the middle classes and the
poor.

The European-based Committee for the Abolition of Third World Debt
(CADTM) notes that in 2004, Lebanon paid out 4.4 billion dollars to service
its external debt and warns that new borrowing will bring further pressure
from rich nations and international financial institutions like the IMF.

"This implies another increase in its debt and in new economic measures
of structural adjustment which accompany it," said Éric Toussaint and Damien
Millet of CADTM in a brief assessment of the country's new needs.

"Therefore, the Lebanese people are going to have to pay very dearly, in
the years to come, for consequences of this war inflicted by Israel in
violation of international treaties governing relations between states."

Just like Iraq in 2003, a foreign country came in and destroyed the
country's infrastructure, only to give foreign companies and institutions
power in the subsequent reconstruction efforts, they said.

For example, the Paris Club of bilateral creditors gave Iraq a partial
and conditional debt reduction in 2004 as long as it followed economic
prescriptions from the IMF. The Paris Club figures say the country's total
debt for 2005 was 63.2 billion dollars, or 183 percent of GDP.

Now Iraq is back to borrowing from multilateral lenders like the IMF and
the World Bank. The IMF alone lent Iraq 685 million dollars last year.

"The Lebanese people paid the first time by giving their lives, losing
their loved ones, enduring the destruction of their homes, their property
and infrastructure," the authors said. "They must not pay a second time by
being bled dry to finance reconstruction."

Israel has also destroyed most of the Palestinian infrastructure,
consistently targeting power generation stations as well as government
ministry buildings.

"Palestine, Iraq and Lebanon must demand accountability from their
aggressors," the CADTM analysts say.

For Lebanon, they suggested that its people demand cancellation of their
debts instead of allowing their government to seek more aid and new loans.

"For Lebanon, a possible solution resides in the immediate cancellation
of its debt and the establishment of funds for its reconstruction, which
would be fed by reparations deposited by Israel," the authors suggested.

The United States, which backed the Israeli campaign and helps equip and
finance the Israeli army, should also contribute to the fund.

"It is only then that it will be possible to say that the Lebanese
people will have received justice," they said.

In a telephone interview from Paris, Millet acknowledged that their
proposal will not fly without the commitment of the Lebanese government,
which as part of the local elite and ruling class, is unlikely to back a
proposal that would not benefit the local businessmen.

He argued that some rich Lebanese whose wealth is held in Western banks
should invest in their own country's bonds.

"They have no interest in (debt) cancellation because cancellation will
give power to those who suffer from the debt (the poor and the middle
classes)," Millet said.

The IMF itself acknowledges that without highly concessional new
financing for Lebanon, there is a real risk of the total collapse of the
Lebanese economy. The institution did not mention grants or debt
cancellation.

The combination of a growing government financing need, higher world
interest rates, and lower GDP growth will all certainly cause Lebanon's debt
to spiral upward.