Beirut’s banking stalemate reveals the desperation of the economic crisis


BEIRUT (AP) — A judge ordered a gunman who took up to 10 hostages at a Beirut bank to force the release of his trapped savings to remain behind bars on Friday, apparently in an effort to stave off copycats as desperation deepens over Lebanon’s economic collapse.

A few dozen relatives of Bassam al-Sheikh Hussein briefly closed a major road in Beirut, believing that the continued imprisonment violates an agreement reached on Thursday. The 42-year-old food delivery driver turned himself in after a seven-hour standoff in exchange for $35,000 of his money and promised he would only be questioned and then released. No one was hurt.

It was the latest reminder of the pain created by Lebanon’s nearly three-year-long economic and financial crisis, described by the World Bank as one of the world’s worst since the 1850s. Three-quarters of the population live in the poverty, corruption is endemic and many are losing hope for quick fixes.

Like most Lebanese, Hussein had no access to his money due to the banks’ informal controls on the flow of money. He had $210,000 in the Federal Bank of Beirut and struggled to withdraw it to pay his father’s medical bills and other expenses.

Because the hostage-taking freed up some of Hussein’s savings, his release without charge could inspire others to follow suit as people face soaring inflation and a lack of opportunity. employment. Many celebrated him as a hero, but it was unclear whether his actions would lead to wider protests against the banks.

“They want to send a message to people that this won’t pass easily,” said Paul Morcos, founder and owner of Justicia Consulting Law firm in Beirut, of Hussein’s arrest.

The penalty for taking hostages and threatening people with weapons is usually three months to two years in prison, but could be up to life in prison if it was for the purpose of obtaining money, Morcos said. But he expects Hussein to be released within days or weeks, once people have forgotten what happened.

The international community demanded reforms to ease Lebanon’s economic crisis, but entrenched political elites, blamed for decades of corruption and mismanagement, resisted. Talks with the International Monetary Fund have moved slowly as parliament prepares IMF-required legislation for a bailout, including capital control laws and those targeting money laundering.

Many of those in power are former warlords and militia commanders from the 1975-90 civil war. Ruling factions use state institutions to accumulate wealth and distribute aid to supporters. Corruption is often ignored and institutions are underdeveloped. As a result, power outages are frequent, trash often goes uncollected, and tap water is largely undrinkable.

Poverty is increasing as prices soar and the Lebanese pound has lost more than 90% of its value since October 2019. Most people can only withdraw small amounts of money each month from banks at an exchange rate much lower than the unofficial market.

The situation began to deteriorate dramatically last year after the state lifted fuel subsidies, leading to soaring prices for nearly every commodity. It came at a time when blackouts were lasting 22 hours a day, putting private generators out of reach for many as people now have to pay for fuel in US dollars.

Judicial authorities said the judge decided to keep Hussein under arrest because he had committed crimes such as taking hostages and threatening weapons. Officials, who spoke on condition of anonymity in accordance with regulations, said it was unclear how long Hussein would be detained.

Hussein’s lawyer, Rafik Ghraizi, who witnessed the interrogation, told local Al-Jadeed TV that his client did not point his gun at anyone and had no intention of harming the employees. . He said all Hussein needed was to get his money back.

In January, a cafe owner withdrew $50,000 trapped in a bank in eastern Lebanon after he took employees hostage and threatened to kill them. He was released two weeks later.

When anti-government protests erupted in late 2019, protesters attacked banks, sometimes with Molotov cocktails, and lenders reinforced their branches. At one time police patrolled outside every bank branch, but that changed after the protests waned.

Acting Deputy Prime Minister Saadeh Shami on Friday called on parliament to quickly approve a capital control law. Last year, he estimated financial sector losses at $69 billion.

“Lebanon is at a crossroads: Reforms and improvement or more collapse. It’s up to us to decide,” Shami, who is leading the talks with the IMF, said in a statement.

Lebanese banks have made huge profits over the past decades by investing much of their money in government treasury bonds which paid high interest rates and resulted in one of the highest debt ratios in the world. world. This has led the Lebanese diaspora and many foreigners to place their savings in Lebanese banks and earn higher interest rates compared to international markets.

Banks have been criticized for years for making risky investments despite widely known corruption in Lebanon. In March 2020, Lebanon defaulted for the first time on the repayment of its debt, which then reached 90 billion dollars, or 170% of gross domestic product.

“Excessive debt accumulation has been used to create the illusion of stability and bolster confidence in the macro-financial system to keep deposits flowing,” according to a World Bank report released this month and titled “Lebanon Public Finance Review: Ponzi Finance?”

An economist said the banks were to blame, not Hussein.

“Banks, with the help of politicians, financial and judicial authorities are holding people hostage. This is not a depositor who takes hostages in a bank,” tweeted economist Mounir Younes.


Comments are closed.