Summary: Two months after the presidential elections, Egypt finally entered a path of institutional and financial stabilization, while still facing serious economic challenges.
Government: A month after his election president Morsi named a low profile technocratic government with a limited presence of the Islamist FJP party. The government stands under the leadership of an independent technocrat, Hisham Qandil, a former minister of irrigation. A third of the posts were retained from the previous cabinet, named by the military. The conservative composition indicates a sense of caution and continuity as well as moderation by the Islamist FJP party. Yet a choice of a bureaucrat over an economist has caused some disappointment.
Security: The greatest security crisis in the Sinai so far left 16 Egyptian soldiers dead and led to the destruction of some 150 smuggling tunnels between Sinai and Gaza. The army raided presumed terrorists, yet the crisis had a serious political, rather than a security-related, aftermath.
Institutional consolidation: In a sweeping gesture and without major resistance, President Morsi assumed full presidential powers, hitherto shared with the SCAF. He retired both leading generals of the SCAF (Supreme Council of Armed Forces) that led the country after the fall of president Mubarak, as well scores of other generals and named new ministers of defense and new navy, air force and air defense commanders. In a welcome move, he named a prominent reform judge his vice- president.
Large presidential powers: President Morsi also abrogated the last constitutional declaration by which SCAF curtailed his powers and granted himself both full executive and legislative powers. In the absence of a legislative assembly, dissolved during the elections, he effectively concentrated greater powers than President Mubarak did.
Chances and dangers: While criticisms were voiced by Egypt’s liberals, generally it is believed that effective policy making will be favored by this move as it ended a detrimental tug of war between the army and the Islamists. The absence of a reaction points to a possible prior deal with the military or at least with the younger guard within the military. A working relationship between the two major power centers, the military and the almost hegemonic political group, is being reached. Whether Pres. Morsi develops an authoritarian style of governance remains to be seen.
Constitution: Meanwhile, work on the constitution writing process continues amid moderate arguments and the courts have made clear they do not wish to disturb the process with hastened proceedings of pending cases about the legality of the constitutional assembly. There is a good chance that by the end of September a constitution draft may be announced.
Finances: In the first show of policy making improvement after 18 months of erratic state leadership, Egypt secured a number of loans for infrastructure overhauls (French Development Agency, World Bank) and large direct budget injections (Saudi Arabia, Qatar). Above all, President Morsi formally requested a $4.8 billion loan from the IMF. The previous governments were in negotiations with the IMF but unable to attain this stage, let alone invest in the infrastructure. A loan from the IMF will help stabilize public sector finances. There is a good chance that in the mid-term perspective Egypt will avoid devaluation and will instead proceed to a slow, controlled weakening of the EGP.
Economy: In the short-term energy supply difficulties remain dire: power shortages spread throughout Egypt due to summer heat. Egypt’s state-owned energy importing company has difficulties supplying fuel due to worsened confidence in Egypt’s (EGSC) payment and has to resort to expensive letters of credit or to limited traders. Protests and large strikes continue in state owned textile.
Foreign Policy: President Morsi is also taking his first foreign policy steps. He met with US Defense Secretary Leon Panetta, the King of Saudi Arabia, Hillary Clinton, Tunisia’s Moncef Marzouki and plans to travel to Iran and the USA in September.
Freedoms: On the darker side of the power concentration, freedom of press continues to be challenged on political grounds. New editors-in-chief of state newspapers were named in the tradition of the past regime and an extreme right TV channel and a newspaper were closed down, resp. censored over criticism of the Muslim Brotherhood. In a calming gesture, President Morsi banned pre-trial custody of journalists, but freedom of press remains a test for the real level of authoritarianism of the new government.