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Obama's Middle East message: nurture the economy as well as democracy

U.S. President Barack Obama delivers a speech about United States' policy on the Middle East and North Africa at the State Department in Washington May 19, 2011. In his much-anticipated "Arab spring" speech, Obama will try to reset relations with the Middle East, but his outreach could falter amid Arab frustration over an uneven U.S. response to the region's revolts and his failure to advance Israeli-Palestinian peacemaking.

JASON REED/Jason Reed/Reuters

President Barack Obama's speech on the Middle East on Thursday presented a daunting challenge to Benjamin Netanyahu, the Prime Minister of Israel, urging the taking of action, not "endless delay." But neither Mr. Obama nor Mr. Netanyahu in a speech today will resolve the Israeli-Palestinian question.

But the most important part of Mr. Obama's speech may well have been on another issue, though a related one: "Just as democratic revolutions can be triggered by a lack of individual opportunity, successful democratic transitions depend upon an expansion of growth and broad-based prosperity."

The joyous Arab spring is at risk of yielding a poor autumn harvest, if economic decline gets in the way of democratization. Egypt, the most populous and conspicuous country concerned, is right to be applying for loans from the International Monetary Fund, the World Bank and some Gulf states - and Mr. Obama, on behalf of the United States, is right to be encouraging this refinancing and indeed proposing to contribute to it.

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Samir Radwan, the Egyptian Minister of Finance, insists that his country will not accept any conditions to a loan from the IMF, though he is seeking to borrow a sum from $3-billion to $4-billion, as part of a group of loans intended to fill a fiscal gap of $10-billion to $12-billion for the current fiscal year. On the other hand, he will agree to a set of "benchmarks" - and presumably compliance (or non-compliance) with these criteria would affect Egypt's credit for future years.

Tourism revenue in Egypt has fallen by 80 per cent since the Tahrir Square revolution and the fall of Hosni Mubarak. Foreign investment has fallen, and the rise in oil prices has hurt, too. Puzzlingly, remittances from abroad are down, in spite of the democratic enthusiasm among the Egyptian diaspora.

The advent of democracy has led to an atmosphere of hope, which ought to foster business initiatives, but it has also meant rising expectations, which are "unrealistic, to use a polite term," Mr. Radwan said to the Financial Times. On the other hand, it would also be unrealistic to suddenly do away with food and fuel subsidies, though these must in due course be phased out.

One of the most important gaps is the lack of policing. Without basic security, the Egyptian economy cannot thrive. The ruling Supreme Council of the Armed Forces are giving little direction in this or in most other policy areas. It is true that they are not trained to do so, but the military need to show that their authority is behind the actions of a reasonably enlightened government.

The benchmarks that Mr. Radwan speaks of should be deployed as an opportunity for better governance and fiscal management in the transition to democracy. The Arab spring can still bear fruit - indeed, it must do so for the sake of the whole region.

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