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Mon 28 Nov 2011 08:57 AM

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Egypt faces unrest, crumbling economy as polls open

Egyptians will vote on Monday in the first election since the toppling of Hosni Mubarak

Egypt faces unrest, crumbling economy as polls open
Voting for the lower house of parliament in the Arab world’s most populous country will take place in stages
Egypt faces unrest, crumbling economy as polls open
Egypt faces unrest, crumbling economy as polls open

Egyptians vote Monday in the first election since the toppling of Hosni Mubarak as foreign investors abandon the country and a protest movement against the ruling generals becomes entrenched.

Voting for the lower house of parliament in the Arab world’s most populous country will take place in stages, corresponding to three sets of governorates, with the last vote slated for January. Final results are due by Jan 13. The Freedom and Justice Party, set up by Egypt’s once-banned Muslim Brotherhood, is expected to emerge as one of the largest blocs in the parliament.

The vote, which may make or break the transition to democracy in this US ally, is overshadowed by clashes that have killed 43 people in the past week. Protesters accuse the ruling military council of stifling freedoms while failing to restore security or revive an economy growing at the slowest pace in more than a decade.

“Egypt is at a critical juncture,” the head of the ruling council, Field Marshal Mohammed Hussein Tantawi said in televised comments urging Egyptians to go to the polls. “It either succeeds, and gets through this social, economic and political situation, or the consequences will be very grave.”

Egypt’s benchmark stock index is down 47 percent this year, the yield on the country’s 2020 dollar bonds has soared to the highest in 10 months and the cost of protecting the nation’s debt against default for five years has risen to the highest since March 2009.

Islamist groups have already won elections in Morocco and Tunisia, where the first in a wave of popular uprisings that have ousted four Arab leaders began a year ago.

“The dictators were suppressing the Islamic current,” said Muslim Brotherhood spokesman Mahmoud Ghozlan. “When the people in this region get some space and freedom, they choose Islamists.”

Founded in 1928, the Brotherhood survived crackdowns by secular governments owing in part to its organizational skills. That and its name-recognition may help give it an edge over the secular youth who were at the forefront of the leaderless anti- Mubarak revolt. The Brotherhood stayed away from most recent protests and focused on canvassing.

In Tahrir Square and other parts of central Cairo, scene of mass rallies and violent confrontations between security forces and protesters in the past week, many demonstrators vowed to continue their vigil.

 “An election held under such circumstances can never be serious,” said Khalid Tallima, a 28-year-old parliamentary candidate who plans to remain in the plaza during the voting. “In the absence of an empowered government, I doubt this vote will have a real effect. Staying in the square is the answer.”

The unrest in Egypt has hurt the economy, as tourists have shunned the country and industrial production has been hit by strikes. Gross domestic product grew 1.8 percent in the fiscal year through June, the slowest in at least a decade. The country’s long-term foreign sovereign credit rating was cut one level to B+, four levels below investment grade, at Standard & Poor’s on Nov. 24.

The cost of protecting Egyptian debt against default for five years jumped 90 basis points last week, the biggest five- day gain since mass protests began in January, to 563 on Nov. 25, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The yield on the government’s 5.75 percent dollar bonds due April 2020 climbed 82 basis points last week, or 0.82 of a percentage point, to 6.97 percent, the highest since Jan. 31.

 “The investment community is taking a risk-averse view to the country, because the situation can deteriorate further,” Abdul Kadir Hussain, chief executive officer at Mashreq Capital DIFC Ltd., said in a telephone interview. “If it erupts, and it turns into another Syria, there’s a lot at stake here, borrowing costs will rise, and it’ll be a long time before investors will regain confidence in Egypt again.”

The Freedom and Justice party adopts a largely pro-market platform, supporting private enterprise and a stock market. The group said it would create jobs by directing more investment than the previous regime did toward industries, agriculture and information technology.

The party wants to trim the budget deficit and increase the use of Islamic bonds, or sukuk, that comply with Shariah. The bonds technically don’t pay interest, forbidden by Islam.

Monday’s vote may provide the first real gauge of the popularity of the Brotherhood and other long-standing political groups. Under Mubarak, widespread reports of vote-rigging marred elections and Brotherhood candidates ran as independents to circumvent a ban against them. Some politicians from the former ruling National Democratic Party, now dissolved, are running on new platforms and stand to benefit from their political experience and ties to local communities.

Samer Soliman, who belongs to the secular Egyptian Social Democratic Party, said members were stretched thin last week between supporting the Cairo protests and preparing for the vote. “Both Tahrir and elections are the same battle for us,” he said. “If we find out that the vote is rigged or if there’s violence, then we will take to Tahrir.”

Under Mubarak, Nevine Keroless was member of the so-called “couch party,” or silent majority, never casting a ballot. Not only is the 32-year-old Christian pharmacist voting Monday, she has also recruited her mother, father and hairdresser to head to the polls.

“We don’t want the Brotherhood to score a landslide victory,” she said. “I don’t believe that they’re showing their true colors. I don’t think they will give us our rights.”

Keroless, a supporter of the secular Egyptian bloc that includes the Egyptian Social Democratic Party, said she received a list of recommended candidates from her local church. The Free Egyptians Party, another member of the bloc, criticized the idea of church-backed lists.

“I know this runs against democracy, but the stakes are too high,” Keroless said. “We don’t want the liberal vote to be split.”

On the eve of the vote, thousands of Egyptians gathered in Tahrir amid a rare shower of rain to protest military rule. The army has said it won’t cede power until after presidential elections, due by the end of June.

“If the election in Egypt succeeds, it will put the country on the path toward democracy and serve as a model for the region,” said Emad Gad, an analyst at Al Ahram Center for Political and Strategic Studies and a parliamentary candidate. “If it fails and is marred by security problems, it will be a recipe for unrest and the Arab Spring will give way to a premature autumn.”

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