The Hezbollah have remained as silent as the grave - of which there are a lot in Lebanon - as well they might. For both Mr Ezzedine's radio station and his publishing business were named after Hadi Nasrallah, son of Hezbollah's general secretary, Hassan Nasrallah, who was killed leading a brave but suicidal attack on Israeli occupation troops in southern Lebanon.

But things were worse than this. It now appears that Mr Ezzedine's financial collapse became inevitable after he wrote a $200,000 cheque to Hussein Haj Hassan, one of Nasrallah's closest political advisers and a Hezbollah member of parliament. The cheque bounced. The response to this within Hezbollah's bunkers can only be imagined.

The movement, created in 1982 as a result of Israel's Lebanon invasion, had built up its prestige in the Arab world on its squeaky-clean reputation for financial and political probity. Middle East dictatorships and the third-rate leadership of the Palestinian Authority may salt their millions away in foreign bank accounts, but not the incorruptible Hezbollah. Or so the world thought, until the scandal that burst around Salah Ezzedine. He is now being interviewed by the Lebanese judiciary, and is allegedly being held in the grim old prison at Roumieh, north of Beirut.

The story seems a familiar one. Flushed with massive profits in the oil business, Salah Ezzedine - so say economists in Beirut - began investing the savings of Lebanon's Shia population, rewarding them with 40 per cent interest on their deposits - with the money from yet newer investors attracted by the rewards of his scheme. Whether Salah Ezzedine did this with the calculation of a Bernard Madoff or with a charitable desire to spread his own wealth among the largest single community in Lebanon, we do not know.

The Hezbollah - the "Party of God" in Arabic - has been strangely silent this past week, an unusual characteristic for such a publicity-conscious movement whose own millions - faithfully shipped in US currency bills to Beirut from Tehran - rebuilt dozens of Shia Muslim villages destroyed in Israel's bombardment of southern Lebanon in 2006. Hezbollah members could be seen handing out bundles of newly minted hundred-dollar bills to villagers and thousands of home-owners in the Dahiya area of Beirut whose property was "rubble-ised" in Israel's bombing. Many of these civilians, Lebanese newspapers are reporting, have now lost their money with Salah Ezzedine's collapse.

While traditionally ignored by the country's government and living in the stony hills of southern Lebanon - many grow tobacco crops - as well as the Bekaa valley, members of the Shia Muslim community have been emigrants to west Africa, Brazil and Holland and have made fortunes abroad (especially on the Antwerp diamond market). The size of their remittances home is made manifest in many of their ancestral towns. Villas of unseemly conspicuous wealth - replete with marble colonnades, Greek pillars and manicured lawns - sit on desolate hillsides, sometimes only metres from the Israeli border.

Of course, there is another reason why Hezbollah might want to keep quiet just now. Many Muslims believe that bank interest is un-Islamic, which is why the Lebanese Shia put their money in businesses run by Salah Ezzedine, who was known as a "pious" man - an optional extra for all friends of the Hezbollah - and whose Haj pilgrimages had become an essential element of that fixed part of the Muslim calendar in Lebanon.

Independent

A Podcast of the above can be heard at: ramblings11.mypodcast.com

Send comments to: wp.karam@gmail.com

Elie Marouni, Lebanon's tourism minister, is a man with a plan. He has recently launched a 10 year programme he calls "a vision" for the tourism industry in Lebanon.
He insists he has reason to be optimistic.

His ministry estimates that two million tourists, which amounts to half of the country's actual population, are expected to visit Lebanon before the end of this summer.
"The numbers have doubled, and I am not surprised. Lebanon has it all: the environment, weather, nature, nightlife, ruins and history - and we are still the cheapest country to visit in the Middle East," says Mr. Marouni. Many Lebanese like to describe their country as the place where one can ski in the morning and swim in the Mediterranean in the evening.

It's not just the beaches, mountains, culture and food that make Lebanon a unique tourist destination.

In this largely conservative region, Lebanon is a place where the glitzy nightlife is a thing of national pride, where alcohol flows freely, and where less is more as far as bikini fashion is concerned.

These laid back beachwear rules apply to the resorts across the country, including the south where the radical Shia group Hezbollah is in control.

Full resorts

But this summer's unprecedented influx of tourists has little to do with the country's natural beauty or the relaxed attitudes of its residents.

The reason for the tourism boom is rather unnatural for Lebanon - political stability.
Mr Marouni admits that it's because of the relative political calm that hundreds of thousands of visitors have descended on Lebanon, paralyzing the traffic, filling the seaside resorts and bringing the much needed cash to the economy.

The richest among the tourists come from the neighboring countries of the Arab Gulf, while most visitors from Europe and North America seem to be the members of Lebanon's 12 million strong diaspora.

Jasmine Khoury, 32, fled the Lebanese civil war in the 1980s and grew up in the UK. She says political stability for Lebanon is what sun is for London.

"In London, the second that the sun comes out people begin to pour out. Here, the minute there is some sort of political stability, we all come back to enjoy our country while we can.

"After all Lebanon's stability is as reliable as the English weather," Jasmine adds with a smile.

Funding shortage

The same day that Elie Marouni spoke to me about his 10 year plan to build more hotels, remove army checkpoints on the roads that lead to tourist sites and renovate the battered ski lifts, the Lebanese army arrested 10 men on charges of plotting terrorist attacks against United Nations workers in the South. The army said the men were part of a larger network lined to al-Qaeda.

"It shows that we are fighting to stop terrorist in Lebanon and to make sure that only the army has the weapons," Mr Marouni insists. But he admits that the Lebanese government does not have a full control over what goes on in the country, and that security is a real issue that turns many potential visitors away.

There are major financial issues too. Mr Marouni's says he needs around US $100m a year to implement his plan, but at the moment he only has around US $8m a year at his disposal.

The Ministry, housed in a run down building in Beirut's Harma district, cannot afford to place advertisements on major international TV networks.

"Good marketing and improving Lebanon's image could play a huge role in attracting tourists," says Stephen Orr, the general director of the US government sponsored project, which tries to link private businesses to the global markets.

He works with dozens of companies in the tourism industry that have mushroomed here over the years.

Tenacious

The tourism boom shows that while the government drags itself through endless political crises and stalemates, Lebanon's famously creative entrepreneurs are grabbing every chance to develop and grow.

"I am very impressed with Lebanon's private sector. Lebanese companies are extremely tenacious. They all have very good contingency plans, they are all able to function under extremely challenging circumstances," says Stephen Orr.

The level of the development of the private sector, and Lebanon's natural beauty, is the reason Mr Orr believes the country could easily rival Turkey and Greece as a Mediterranean tourist destination.

But he says the country needs at least five years of stability to get to that level. And few in Lebanon believe that stability can last that long.

Back in his office, even Mr Marouni admits that there is an element of wishful thinking in his 10 year plan.

"In this country something might happen any minute, and any minute we could be thrown 10 years back in time," he says.

Top picture : A Lebanese beach , just north of Beirut . Lebanon expects two million tourists this year, about half of the country's population

One of the attractions is the relaxed attitudes in a conservative region

Source: BBC

His removal comes as tensions run high in the Islamic republic, with reformist challengers to incumbent President Mahmoud Ahmadinejad, led by Mir Hossein Mousavi, disputing the outcome of this month's elections with protests across the country.

The sudden dismissal could raise concerns that political unrest in the second-largest member of the Organization of Petroleum Exporting Countries may be spilling over into the country's oil industry.

"If his removal is for political considerations, it is sad to bring in politics into the oil industry," Manouchehr Takin, an analyst covering Iran at the U.K.-based Centre for Global Energy Studies. "He was considered a 'doer', someone getting things done. He got projects moving."

A prominent political figure since Iran's 1979 revolution and the establishment of the Islamic republic, Torkan became the first head of the country's ministry of defense and armed forces logistics in 1989.

Torkan, also a former minister of roads and transportation, headed Iran's Industrial Development & Renovation Organization, or IDRO, during the presidency of former president Mohammad Khatami.

He took on the role of deputy minister for planning in Iran's oil ministry in late 2007 after holding chief executive positions at PetroPars, an oil and gas contractor, and at Pars Oil and Gas Co., the National Iranian Oil Co. subsidiary mandated to develop the giant South Pars and North Pars gas fields.

Torkan, said the oil ministry has appointed an interim caretaker, Ebrahim Radoafzun, formerly one of five director generals working under the deputy minister for planning, until a new deputy minister is appointed.

A spokesperson from the office of press relations at Iran's oil ministry confirmed that Torkan was removed from his post on Sunday.

The front-month August light, sweet, crude contract on the New York Mercantile Exchange was trading $0.20 higher at $67.70 a barrel at 1330 GMT Tuesday.

DOW JONES

Photo : Akbar Torkan , former Iranian deputy oil minister. According to Ya Libnan sources, Torkan is related to former president Ali Akbar Hashemi Rafsanjani. Rafsanjani's daughter and grandchild were arrested last Saturday in Tehran over their involvement in protests against alleged election fraud in Iran. Rafsanjani, 75, heads the cleric-run Assembly of Experts, that has the power to monitor and remove the supreme leader, the country's most powerful figure (Ayatollah Ali Khamenei)

The parliamentary battle between the March 14 coalition -- headed by Saad Hariri, son of slain billionaire and former pro-West Premier Rafik Hariri -- and the Syria- and Iran-backed Hezbollah was billed as a battle to determine whether this volatile Mediterranean nation would be able to move past the political deadlock and toward economic reform.

An early sign of the election's impact appeared minutes after the Beirut Stock Exchange opened Tuesday, the first working day this week, with shares of Solidere, Lebanon's largest construction and development firm, rising 15 percent.

"There is demand in Lebanese markets today. The (election's) effect was positive, and people saw it as a good sign," said Fadi Mubarak, head of treasury at Lebanon's Credit Bank.

Final results from Sunday's race showed March 14 winning 68 seats to the Hezbollah-led alliance's 57, with three seats going to independents. The outcome served as a clear reflection of the fears voiced by many Lebanese that a Hezbollah win would alienate the country's main donors in the West and drive away Persian Gulf investors.

"What is also helping is the political courting between Lebanese leaders," Mubarak said, referring to efforts by March 14 and Hezbollah officials to tone down their rhetoric after the vote.

The fears appeared to have been well-founded.

Amid the global economic crisis, Lebanon -- a nation whose famed banking secrecy laws as well as towering mountain backdrop had earned it a comparison to Switzerland -- could ill afford to alienate anyone. Unlike many other Arab nations, it lacks oil wealth and has relied on its history of commerce and tourism to build its economy.

During a visit to Beirut last month, Vice President Joe Biden warned that the U.S. will evaluate the shape of its assistance programs based on the composition of the new government and the policies it advocates. Washington has branded Hezbollah a terrorist group while the movement is widely viewed among many Arabs as a political player and one of the few groups with the ability to stand up to Israel militarily.

The U.S. has provided Lebanon with more than $1 billion in assistance since 2006, including $410 million to the military and the police.

Similar fears were voiced in relation to the oil-rich Gulf Arab countries' willingness to continue funneling investments into a country run by a Shiite Muslim militant movement at odds with their Sunni governments.

Paul Salem, the Beirut-based director of the Carnegie Middle East Center, said the outcome of the election "will be more confidence."

"We're in the beginning of a summer season, and I think it reinforces the sense of Lebanese, as well as Gulf (investors) ... that Lebanon is on a reasonably stable path and is a good place in which to invest," he said.

That perception is particularly important in Lebanon, which has weathered decades of conflict, civil war, assassinations and sectarian strife while struggling to rebuild after each cycle of violence.

Rafik Hariri, who was killed in a truck bombing in 2005, was credited for his role in rebuilding downtown Beirut, which was destroyed during the 1975-90 civil war. Hariri, a contractor, took the helm of a country aching for economic stability.

His death cast a pall on those prospects, even as Lebanon's various factions struggled for control in a feud that pushed the nation to the brink of civil war in 2008.

Hopes are now that the election of a pro-West government will allay outside concerns, particularly as the global recession has squeezed growth rates worldwide.

Lebanon has so far managed to weather the financial meltdown, and Central Bank governor Riad Salameh said in March that economic growth this year is expected to come in around 4 percent. The rate was far below the roughly 7 percent growth rate Lebanon recorded in 2008, but appeared to exceed expectations.

Still, one of the country's most pressing issues is reducing its national debt.

"While the Lebanese economy has been resilient amid the political downturn, there are a number of issues that the government must address, including reforming the energy sector and reducing its public debt, which is the highest in the world at 162 percent" of gross domestic product, analysts at Standard Chartered Bank wrote in a Tuesday report.

"Now that the power vacuum has been filled, the Lebanese government can focus on economic issues," the report said.

AP

Speaking at the Rafik Hariri International Airport, Interior Minister Ziad Baroud said that the Sikorsky was the first of two helicopters expected to be delivered soon.

He added the ministry will also purchase 50 four-wheel drive vehicles for immediate intervention to prevent small fires from spreading.

Launched in 2008, the campaign aims to raise funds from the private sector and civil society to purchase fire-extinguishing helicopters and other necessary equipment. In March, Baroud was able to raise $200,000 in donations.

Baroud and Public Works and Transportation Minster Ghazi al-Aridi later flew in the helicopter to Baabda Palace where a symbolic "ignition" key was handed over to President Michel Suleiman.

Baroud praised collaboration between the ministries, civil society and private sector to "realize this project."

He said the purchase of fire-fighting equipments helps civil defense forces become "more efficient in responding to fires."

For his part, Aridi praised "this great achievement" as the outcome of "agreement and cooperation among the Lebanese." He voiced hope that politicians can also unite to "prevent political fires, which the president always tries to extinguish."

"We are all required to protect Lebanon from political fires and to seek reason, dialogue and goodwill to save this country," he said.

INFLATION

Peaked at nearly 30 percent in October 2008 from about 11 percent when Ahmadinejad took power in 2005. Critics blame expansionary fiscal and monetary policies, but he points to global food and energy price rises.

The official rate fell to about 18 percent in March. Analysts attribute this partly to lower oil income, likely to slow growth and government spending, and to monetary tightening under former Central Bank governor Tahmasb Mazaheri, who Ahmadinejad replaced in September.

Property prices have also dropped by up to 40 percent in some upmarket parts of Tehran according to a Western diplomat, bringing relief for those who plan to buy for the first time or rent, and officials say inflation will fall further.

Presidential contender Mirhossein Mousavi, a moderate, says he would control price rises through monetary policies and by boosting production.

UNEMPLOYMENT

Critics say government spending has failed to dent a jobless rate of around 10 percent. An Iranian development economist said official figures exclude those who would like to work more, for example many housewives and students. About 800,000 people enter the labor market each year, competing for only half that number of new jobs, he said on condition of anonymity.

OIL REVENUE

The world's fifth-largest crude exporter, Iran went on a spending and import spree while prices soared.

The price of crude has fallen nearly 60 percent over the last year. Oil accounts for 85 percent of state revenue.

Even though the price has roughly doubled from a December low, it remains below $75 a barrel, the price at which the International Monetary Fund (IMF) last year said Iran would incur current account deficits in the medium term.

Nevertheless, the head of the National Iranian Oil Company has said oil income reached $75 billion in the year to March 2009, a rise of some $7 billion on the previous year. The oil price peaked about four months into the fiscal year.

OIL INVESTMENT

Iran sits on 11 percent of the world's oil reserves and its second largest gas reserves.

Analysts say it needs more foreign investment and technology to expand production capacity, but U.N. and U.S. sanctions are deterring energy companies, especially Western ones. The state oil firm estimates annual investment needs at $25-30 billion in the oil and gas sector. On May 31, a subsidiary said Iran planned to issue $12.3 billion worth of foreign currency and rial-denominated bonds over the next three years to help finance development of its huge South Pars gas field.

The election may provide a signal for investors on the prospects of any thaw with the West, especially the United States, which is seeking to engage with Tehran after three decades of mutual hostility.

Ahmadinejad has taken an uncompromising line in the nuclear row, while Mousavi and reformist contender Mehdi Karoubi advocate detente with the West. "Even the indication of movement ... would be enough to encourage foreign investors," said Karabekir Akkoyunlu of risk consultancy AKE in London.

SANCTIONS

Iran has often shrugged off the impact of international sanctions, but analysts say the oil price fall could make them more painful.

The U.N. Security Council has imposed three rounds of relatively mild sanctions since late 2006. The United States has also imposed measures and pressured banks and companies from other countries to halt dealings with Iran.

Western businessmen say it has become more costly to do business in Iran, citing difficulties in transferring money and securing letters of credit.

The U.S. Congress is considering legislation to penalize companies that sell, ship, finance or insure petrol exports to Iran. Iran, which imports petrol as it lacks sufficient refining capacity, says it can deal quickly with any such U.S. step.

GROWTH

Lower oil prices and the global slowdown are expected to cut economic growth. In mid-2008, when oil was near its peak, the IMF predicted Gross Domestic Product would grow 4.9 percent in 2010-11, down from 5.2 percent in the previous year.

But a Western diplomat said in May that given declining construction and manufacturing sectors, any growth at all would be a good result. Ahmadinejad said on May 23 Iran was showing growth of 5-6 percent.

The Agriculture Ministry has said the country could produce enough wheat to meet domestic demand this year after imports jumped in 2008 due to a drought.

Mousavi says he would improve the business environment to boost the economy.

SUBSIDIES

Ahmadinejad's plan to reform the extensive subsidy system hit a snag in March when parliament rejected a key element. The president wanted to hike energy and utility prices, compensating low-income families with direct cash payments, but MPs feared this would stoke inflation. The dispute exposed objections to Ahmadinejad's economic policies from fellow conservatives in the assembly.

Mousavi has proposed targeting subsidies gradually, saying an abrupt change could cause an economic shock.

PRIVATISATION

The government wants to speed up privatization after the constitution was changed to encourage the sale of state assets outside upstream oil. Mousavi has also stressed the need for a strong private sector.

Iran has this year sold 5 percent stakes in two of its largest banks, Bank Mellat and Bank Tejarat, and plans divestment of others.

But with foreign investors wary, some analysts say firms to be sold off may simply end up being transferred within the country's vast public sector.

Photo: Uprising in Iran following the reduction in subsidy on imported gasoline

The Financial Times and New York Times on Wednesday reported that Hezbollah had held talks with the IMF and the European Union to secure financial support for Lebanon if its alliance won the election.

"The IMF has not negotiated with Hezbollah members or sympathizers in Lebanon over a possible loan," the IMF said in a statement.

It said an IMF mission visiting Beirut in March for annual consultations on economic policies met with the country's main political parties as part of standard outreach activities that also include talks with nongovernmental groups.

During the talks, it met with Abed Al-Halim Fadlalah, then deputy director of an economic research center that has close ties with Hezbollah, to explain the IMF's visit and "gather support toward economic reforms," the IMF said.

The IMF conducts annual economic consultations with all of its 185 member countries.

"The Fund has a long history of meetings with political parties and/or parliamentarians," the IMF said. "Many Fund missions do this as part of their outreach activities."

"By no means were future Fund arrangements discussed," it added.

Lebanon votes on June 7 in a poll that pits an alliance including Iranian- and Syrian-backed Hezbollah, which Washington classifies as a terrorist organization, against an anti-Syrian coalition now holding a majority in parliament.

Many experts predict gains for Hezbollah and its allies. Russia on Wednesday said the international community must recognize the result of Lebanon's general election regardless of who wins a majority.

Hezbollah is the only Lebanese faction to remain armed after Lebanon's 1975-90 civil war and that has involved itself in domestic politics.

In a statement at the end of the visit on April 15, the IMF mission said Lebanon's financial system had so far weathered the global financial crisis and shown a "remarkable resilience" to the global downturn.

The IMF has supported the country under an Emergency Post-conflict Assistance program since 2007.

Saad Azhari told Reuters BLOM Bank's assets grew by $612 million in the quarter to stand at $18.5 billion at end-March. Customer deposits went up $698 million to $15.7 billion.

"There were some expectations that we might see at the beginning of this year some slowdown, which did not occur. Until now, there are no signs of it occurring. There is still strong confidence, strong growth in deposits," he said.

"We are seeing better results than we were expecting."

BLOM Bank, the second largest bank in Lebanon in assets recorded net profit growth of 23 percent in 2008, mirroring the strong performance of a banking sector that has been largely shielded from the fallout of the global financial crisis by tight regulation and cautious risk management.

The sector benefited from a surge of deposits from expatriates who saw Lebanon's banks as relatively secure. Economists have warned deposit growth could slow as the world economy slows.

Azhari said the first quarter's strong performance had extended into April. "We are still witnessing a very strong growth in deposits," he said. "From what we can see until now, it looks like 2009 is going to be better than 2008."

Shares in BLOM Bank last traded up 0.2 percent on Thursday at $61.65 in thin volume. The broader BLOM stock index was up 1.0 percent at 1,085.38.
Growth in Lebanese banking sector deposits is seen as vital in helping the state to meet borrowing needs to finance a public debt equivalent to about 162 percent of gross domestic product.

Central bank governor Riad Salameh has projected overall bank deposit growth of between 7 percent and 10 percent for the year, against a rise of 15 percent in 2008. He has forecasted economic growth of 4 percent for the year.

Azhari said: "We were surprised by the strong activity we have witnessed in the first quarter ... in all sectors, commercial, industrial, tourism."
The global economic slowdown had yet to have "any important effect on business in Lebanon", he said.

BLOM Bank would be expanding its branch network in Syria, Lebanon and Egypt by a total of at least 10 branches in 2009. "It could even be more," Azhari said. Blom Bank Egypt currently operates 23 branches, while the bank has 16 branches in Syria.

BLOM Bank was expecting to open a private and investment banking operation in Saudi Arabia in May and a corporate bank in Qatar in June, he added.

The Lebanese bank's total assets stood at $5.86 billion at the end of March, 9.2 percent higher than a year earlier. Customer deposits and credit balances climbed by 9.8 percent to $4.06 billion.

Net loans and advances to customers stood at $1.36 billion -- 19 percent higher than a year earlier.

The bank posted a 50.7 percent increase in net profit in 2008 to $66.34 million, reflecting a strong performance by a Lebanese banking sector largely shielded from the global financial crisis by tight central bank regulation.

Bank of Beirut's shares (BOB.BY: Quote) last traded on February 23 at $18.10, holding on to gains of nearly 50 percent in 2008 that outperformed the broader banking sector.

Total assets stood at $11.6 billion at the end of March, the official told Reuters, compared to $11.23 billion at the end of 2008. Customer deposits climbed to $8.75 billion from $8.36 billion three months earlier.

Byblos Bank posted a net profit of $122.03 million in 2008, 23 percent higher than a year earlier, according to previously released unaudited results.

Byblos stock (BYB.BY) was up more than 4 % today. It closed at $1.7 per Share

Solidere's A-share traded at $15.50 on Friday, a fall of 60 percent since its July 2008 peak of $40.

"There is no doubt that Solidere's share, in spite of the share drop... its value is secure," Mounir Douaidy, Solidere's general manager and chief financial officer said in a speech at an economic conference in Beirut.

"And it will definitely bounce back in the coming period to reflect the real value of assets."

Douaidy also said that Solidere's projects outside of Lebanon are continuing. Solidere International, partly owned by Solidere, and the UAE emirate of Ajman are jointly developing the $60 billion Al Zorah project.

"We have no liquidity problems, we have no debt problems, we have very sound portfolio of sound receivables. We have a solid balance sheet," Douaidy said on the sidelines of the conference.

The real estate sector in the Gulf, especially Dubai, has been hit by falling property prices, and developers have slowed or canceled projects. Thousands of redundancies have already been slashed in the once-booming sector in Dubai.

Douaidy, however, said Solidere had not been hit by falling demand in real estate in Lebanon. "The element of demand basically comes to a large extent from inside Lebanon, or from Lebanese expatriates... Therefore the demand is there and permanent."

Goldman Sachs said on Wednesday that the UAE real estate market is likely to remain under pressure in the near term due to weaker economic activity, slower population growth and tight liquidity.

Douaidy said he also expected property prices to rise: "The reason why prices have not fallen in Lebanon goes back to the nature of developers, who generally fund a large part of their projects' cost from downpayments of first buyers.

"Therefore they have the ability and readiness to wait and hold on to their prices until they get the desired price, especially in light of permanent demand."

Solidere reported 2008 first-half net profit of $83 million, a 37 percent rise, and has said it expected its full-year profit to surpass 2007's $156 million.

Asked about the company's outlook for 2009, Douaidy said:

"We will continue to build our profits and good results as we go forward and I think the potential is always there."

Siniora also told Reuters his government was seeking to accelerate implementation of new infrastructure projects to boost confidence in an economy forecast to grow by 4 per cent this year despite a global slowdown.

“In the coming two years, we have at least $3 billion worth of projects that are going to be executed,” he said.

A former finance minister, Siniora is a close ally of billionaire politician Saad Al Hariri. Siniora’s cabinet has enjoyed financial and political backing from many Western and Arab governments.

He said Lebanon’s new administration would have to immediately “send the right messages to the world” on the economy. Lebanon has one of the heftiest public debt burdens in the world.

“Because if they don’t send the right messages, then definitely they will be speculating at a time that Lebanon cannot afford to have a speculative type of thinking,” said Siniora, prime minister since 2005.

“It is very important to send the right messages that can inspire confidence about the prudent policies... that we are committed to reform,” Siniora said. “There is no other way, other than adopting the same policies.”

Siniora has sought to move ahead with major reforms, including the sale of two state-owned mobile phone firms. The sale, initially held up by a political crisis, has now been postponed because of poor market conditions.

Reforms are seen as vital to putting Lebanon’s public finances on a sustainable path.

Privatisation proceeds are to be used to pay off some of the public debt, which stood at some $47 billion in December, equivalent to around 160 per cent of gross domestic product (GDP). The ratio was as high as 180 per cent in 2006.

“This tells you how much progress we have managed to achieve,” Siniora said. The next government must respect the existing approach to debt management. “That’s how things are going to be done. Otherwise it is not in the interests of the Lebanese,” he said.

Moody’s Investors Service last week upgraded Lebanon’s credit ratings, citing a “substantial improvement” in the country’s external liquidity and the “proven resistance” of the public finances to shocks.

Lebanon will need to borrow more this year to finance a total deficit projected at some $4 billion.

Siniora said there was progress towards resolving a dispute that has held up approval of the 2009 budget, which has a deficit equal to around 12 per cent of GDP.

The job losses continue to be heavily concentrated in construction and manufacturing, which lost 126,000 jobs and 161,000 jobs in March, respectively. The job losses in construction were widely spread across sectors as the non-residential sector is now losing jobs even more rapidly than the residential sector. Construction employment has fallen by 1,264,000 since its peak in 2007, according to the establishment survey. The household survey shows a decline in construction employment of 2.3 million jobs, accounting for close to 40 percent of the drop in employment during the downturn. The difference is likely explained by undocumented workers who don't show up on payrolls.

The disproportionate job loss in construction and manufacturing is reflected in the sharp gap that has opened up between the unemployment rates for men and women. In March, the unemployment rate for men jumped by 0.7 percentage points to 8.8 percent. It is now 1.8 percentage points above the 7.0 percent unemployment rate for women. A year ago, the unemployment rates for men and women were an almost identical 4.6 percent and 4.5 percent, respectively. The employment rate for men is now 68.2 percent, far lower than at any other point in the post-war era. In the 1981-82 recession, it bottomed out at 70.5 percent.

While the most disadvantaged groups are feeling the effects of the downturn the hardest - the unemployment rate for African Americans is now 13.3 percent, which is also the rate for people without high school degrees - this recession is hitting everyone. The unemployment rate for workers with college degrees rose by 0.2 percentage points to 4.3 percent in March, almost a full percentage point above the peak for college grads in the last two recessions. While this rate is still just half of the overall average, it is double the 2.1 percent unemployment rate faced by college grads just a year ago. In other words, a college graduate is more than twice as likely to face unemployment today than a year ago.

Much of the impact of the downturn continues to be felt in shorter hours. The number of people involuntarily working part-time rose by another 400,000. Since the beginning of the downturn, this number has risen by 5.4 million workers. The reduction in hours is also reflected in the aggregate weekly hours series in the establishment data. This index dropped by 1.0 percent in March. It is down by 6.4 percent since the downturn began, the equivalent of the loss of 8.8 million jobs with no reduction in hours.

There is little basis for any real optimism in this report as job losses continue to spread across sectors with the rate of decline accelerating almost everywhere. The financial service sector lost 43,000 jobs in March. Trucking lost 14,900 jobs, bringing job losses since October to 74,500 or 5.4 percent of employment in the sector. Retail trade lost 47,800 jobs.

Jobs in employment services fell by 88,400 in March, roughly the same rate of job loss in the prior two months. This sector has shed 905,000 jobs since the beginning of the downturn. State and local employment fell by 12,000 in March, a number that would have been worse without the stimulus package. Even the health care sector is weakening, adding just 13,500 jobs, compared with a 35,000 monthly average over the last year.

The employment diffusion indexes (showing the percentage of industries where employers expect to add workers over various time periods) are all at or near their lowest levels since the series began in 1994. Many analysts had seized on the fact that several February data reports were somewhat better than the January reports as evidence of an incipient economic turnaround. The improvement was almost certainly due to unusually bad weather in January depressing activity. This report shows the economy continues to sink rapidly with little hope of any improvement in the immediate future.

*Dean Baker is Co-Director of the Center for Economic and Policy Research in Washington, D.C.

yubanet.com

The credit rating agency said the bond ratings were raised to B2 from B3 and that it also raised Lebanon's country ceiling for foreign currency bank deposits to B2 from B3. Lebanon's local currency ceilings remain at Ba1.

''Lebanon's public finances have proven remarkably resistant to serious political and economic shocks in recent years,'' Tristan Cooper, lead sovereign analyst for Lebanon within Moody's Sovereign Risk Group. ``This is due to the resilience of the country's banking system, which is the government's primary creditor.''

Lebanese officials have often voiced confidence in a nation known for its ability to rebuild after decades of sectarian strife, wars and political assassinations would emerge largely unscathed from the global financial crisis. Strict banking laws have limited the country's exposure to the kind of toxic assets that have hammered other nations.

Lebanon Central Bank may cut loan reserve requirement

In a related development Lebanon central bank Governor Riad Salameh ( pictured) said he plans to cut the loan reserve requirement for banks to help push down borrowing costs as economic growth slumps.

“The bank will allow the funding of any new project in 2009 or the extension of existing projects to be funded in the medium term and banks will have an exemption on their obligatory reserves against these types of credit,” Banque du Liban Governor Salameh said in an interview yesterday in Beirut. The move should help push lending rates to about 7.5 percent from 10 percent, he said.

Economic growth will probably slow to 4 percent this year after 8 percent in 2008, Salameh said. Lebanese banks have avoided the worst of the global credit crunch because of central bank guidelines that prohibited banks from investing in U.S. subprime mortgages. Banks are required to hold a third of their foreign currency deposits in cash and to have a capital adequacy that is more than 11 percent on average.

The central bank measures “are much-needed and will hopefully stimulate demand for loans and support economic growth,” said Nassib Ghobril, head of research at Byblos Bank in Beirut.

Salameh said so far there has been no noticeable slowdown in inflow of capital or remittances from Lebanese working in the Persian Gulf. Lebanon’s economy gets as much as $6 billion in remittances a year from about 10 million Lebanese living abroad. That represents about 20 percent of gross domestic product, according to a March 24 report by Standard Chartered Bank.

IMF Report

In a report last month, the International Monetary Fund said that as the global financial crisis takes its toll on the oil-rich economies of the Persian Gulf, capital inflows to Lebanon may weaken and the growth in commercial bank deposits slow.

So far, that hasn’t happened and the country’s credit market has been functioning “without any interruption,” said Salameh, 58. Deposits have been rising and may increase between 7 percent and 10 percent in 2009 from last year, he said.

Lebanon’s bank deposits rose by about 15 percent to $82 billion in 2008 from the year before, he said. More people are shifting their deposits from U.S. dollars to the Lebanese pound which has prompted the central bank to buy about $5 billion in dollars between October and March. The proportion of deposits denominated in dollars fell to 68 percent today from about 77 percent last year, said Salameh, who has served as central bank governor since 1993.

Fierce Competition

“Competition for deposits has become fierce in the region and across the world since last September,” Ghobril said. “Lebanese banks need to continue to attract deposits in order to maintain their high level of liquidity and meet the financing needs of the private and public sectors.”

Inflation will slow to below 4 percent from an average of 10.8 percent last year, the International Monetary Fund said in a report last month.

Moody’s Investors Service upgraded Lebanon’s local and foreign currency government bond ratings yesterday to B2, five levels below investment grade, from B3. The agency said the adjustment was due to “substantial improvement in external liquidity, the proven resistance of the public finances to shocks, and the willingness and ability of the country’s resilient banking system to finance fiscal deficits.”

Parliamentary Elections

In June, the country will hold parliamentary elections, after which a new government will be formed. Lebanon’s new cabinet will need to reduce a public debt of more than $47 billion that was amassed during reconstruction after the end of a 15-year civil war in 1990 and a monthlong conflict with Israel in 2006.

Salameh said the new government formed after the elections should rein in spending and bring the budget deficit under control.

“The government needs first of all to reduce the deficits in its budget,” said Salameh. “The recurring deficit is the point of vulnerability. We hope that the government will put its act together to bring that deficit gradually lower.”

Lebanon’s 2009 budget, which has not yet been approved, has a projected fiscal deficit of $4 billion or about 10.5 percent of GDP.