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Lebanon's debt grows with political stalemate

A report by Merrill Lynch has downgraded Lebanon's financial standing because of its external debt and political paralysis.
A rainbow is seen over Zaytouna Bay in Beirut May 21, 2014.  REUTERS/Hasan Shaban (LEBANON - Tags: ENVIRONMENT) - RTR3Q94Q

The Lebanese political establishments, especially those who blocked the holding of parliamentary sessions to elect a president, are making a mistake by thinking that a presidential vacuum is a minor matter whose implications can be easily dealt with. A power vacuum generates more vacuums, and hits to constitutional procedures will eventually impose economic costs that we could have done without, to say the least.

The effects of the constitutional vacuum have started to appear in the reports of global financial and banking institutions, which have reclassified Lebanon’s financial standing given the high risks, the low growth expectations and the low probability for reform. The first of these indicators was the report by the global institution Merrill Lynch issued a few days ago. The report called for reclassifying Lebanon’s external debt from “market weight” to “under weight” because the macroeconomic fundamentals are weakening and because of the deteriorating political situation.

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