The National Bloc calls for an independent transition government: 5 rescue conditions to make the responsible parties for bankruptcy take the brunt of the losses

Unfortunately, the most important achievement of the government’s leaked rescue plan did not go beyond revealing the amount of the accumulated losses, losses that were greater than those of other countries such as Greece and Argentina.  The plan failed to assign responsibility to the political system that had accumulated the losses, it also ignored the catastrophic role that successive governments, the central bank, and the fragility of the Lebanese banking sector played in those losses.

Such great losses require much more that a financial plan: it requires political reform because the rules of the political game that allowed for this to happen are still the same and are still ruling the country, and consequently prevent the alleviation of the crisis. Recent events confirm this theory as the parties in power raced to make statements about protecting depositors, after having squandered those same depositors’ funds over the last 30 years, instead of claiming responsibility, changing their way of doing things, and improving their performance.

On the other hand, the value of the Lebanese Pound keeps falling without any control because of the division of roles between the ruling parties and the central bank, resulting in the burden of the losses to fall on the entire population.

Therefore, some preexisting conditions need to be met in order for any rescue plan to work, and they are as follows:

First Condition: Formation of an independent government

The financial collapse is the result of two main factors: first the corruption and mismanagement of the parties in power, and second is the inefficient political system that led to the debilitating of government for decades. Political leader have taken advantage of some of the ambiguities in our constitution to turn the system into one akin to that of the United Nations where some political powers have the right to veto on all issues. The veto system, or the “vetocracy” is a system of ongoing disruption and paralysis that was going to lead to collapse sooner or later.

In face of this unprecedented economic crisis that is in need of emergency measures to protect Lebanese citizens, and considering that there is no time to hold early elections under independent administration that will lead to changing the political class after 30 years of rule, the only remaining solution is to form and independent transition temporary government with exceptional powers to ensure that it does not fall into the trap of conditions and counter conditions like the current government.

Second Condition: Holding officials accountable and recovering the stolen funds

The Lebanese people will not make any more sacrifices unless the state changes its approach, and presents guarantees through fundamental and immediate reforms that prove its true intention to create a social contract, and put an end to corruption. This should be done with the following practical and immediate measures:

1. Adoption of the law on the independence of the judiciary, in accordance with the proposal submitted by the "Legal Agenda"
2. Canceling bank secrecy
3. The establishment of an independent panel of independent judges and experts to undertake the following tasks:

• Recovering stolen funds and funds that were smuggled out of the country: both MPs Hussein El Hajj Hassan and Inaya Izzeldine admitted that corruption costs Lebanon between 4 and 6 billion dollars annually.
• Reviewing all bids of over 5 million dollars and the logic behind the set prices. Reviewing all technical specs and comparing the announced prices of tenders with the actual paid amounts. Former Finance Minister, MP Ali Hassan Khalil, admitted in the introduction to the budget for the year 2020, and in a subsequent statement that "the government paid the difference to the contractors with very large sums" he later said that those sums were four times the value of the basic obligation.
• Investigating tax evasion, which was estimated to be at 1.8 billion dollars annually by Minister Mansour Beteish. Seizing the funds and or property from tax evadors in order to recover the smuggled amounts.
• Investigating customs evasion, which was estimated 700 million dollars annually in Beirut Port by Representative George Adwan. Seizing the funds and / or property of those who smuggled in order to recover the smuggled amounts.
• Immediate collection of penalties for occupancy of marine property specified in the 2020 budget at 100 million dollars for one year. Seizing the funds and / or property of the defaulters.

1. Freezing all fixed and movable assets, in Lebanon and abroad, belonging to anyone who occupied a political or governmental financial position since 1990.
2. Auditing the accounts of all institutions and companies wholly or partly owned by the state.

Third Condition: Putting the interest of Lebanon and the Lebanese ahead of regional political conflicts

It is clear that Lebanon is living in a kind of schizophrenia: on the one hand it is committed to a political axis hostile to the West, and on the other hand it extends its hand to seek aid from it. This reality would have been avoided had all the political parties committed to distance themselves and support the formation of an independent government. Instead those parties chose to cling to their old alignments and led the country to the unknown by forming a one-color government.

Therefore, it is necessary to reassess foreign policy and reposition Lebanon in the regional conflict in a manner that secures the best relations with the conflicting parties without allegiance to any of them, while adhering to the imperatives of defending Lebanon in the face of the Israeli enemy.

Fourth Condition: Creating a new social contract

The government put the rest the Lebanese economic model by allowing for “capital control” (without any legislation), and defaulted on loan payments, without having a clear vision of a new economic and social model. The traditional political parties cannot envision a new Lebanon because they benefit from the status quo, and are responsible for its failure. Therefore, the “October 17” forces must come to unified vision of the new Lebanese economic and social system; a vision that must include an economic system that is fair, open to the world, productive, and not dependent on remittances from abroad.  As for the social system, it should provide for the economic and social rights of citizens that are guaranteed in the constitution, including the right of every citizen to social security, and the right to having his or her basic needs met, this in addition to adopting a fair and effective progressive taxation system.

Fifth Condition: Equitable distribution of losses

The government presented its vision of a fair distribution of losses by charging part of it to banks and large depositors: the “haircut” however is being practiced as depositors funds are held by the banks, and people are being subjected to fluctuating exchange rates on the dollar with terms and conditions that change on a daily basis. 

The distribution of losses is inevitable, provided that it is the last resort to get out of the crisis, and provided that 3 contradictory imperatives be taken into account: protecting young depositors, protecting future generations by protecting state property, and protecting investors because in the end they are the ones who provide jobs to raise Lebanon from the crisis.

Before deducting from depositors, the government is required to provide clear numbers and answers to alternatives to the “haircut”, and they are:

1. Recovering the stolen and smuggled funds and starting the reforms as mentioned earlier in this statement to put an end to waste and corruption.
2. Recovering the accrued interests that go beyond the international interest rates for each depositor in the previous period.
3. Adopting a contingent tax on wealth.
4. Encouraging large depositors through incentives to invest in the Lebanese production sector, especially exporting sectors.
5. Putting a stop to the random memos issued by the Banque du Liban

In the case where losses are not recuperated after exhausting the above mentioned procedures, the following can be done:

1. Cutting deposits of large depositors, with a maximum deduction limit of 20% or 30% of deposits.
2. Privatization of some government sectors if necessary, but with clear and objective conditions that safeguard the people’s rights. This should be done at low prices, and should not be returned to the parties in power through fake investors.

In contrast with the government’s plan, the measures listed above put the brunt of the losses and the compensation responsibility on those who caused those losses without touching citizens’ funds and properties. More importantly, if officials are punished for their crimes trust can be restored in Lebanon, and investors can come back to grow the economy and to lessen the repercussions of past mistakes.

In conclusion, we reiterate that any rescue plan that is overseen by the parties in power, who have brought the country to bankruptcy, will only lead to more losses, poverty, and suffering.  Changing the rules of the political game is the only way to come out of this crisis.