Egypt Falls Out With Obama Dealing With Sputtering Growth

Cairo University echoed with cheers in June 2009 when President Barack Obama addressed his audience with the Muslim greeting, assalamu aleikum, peace be upon you.

The goodwill didn’t last. Four years later, Egyptians increasingly assail the U.S. for backing Islamist President Mohamed Morsi, the nation’s first democratically elected leader, as they did when Hosni Mubarak ran Egypt with American support.

In Cairo’s Tahrir Square, blood-red letters on a white banner read: “Obama Supports The Dictator Morsi.” A sign on the speakers’ platform adds: “Down with Mursi, America’s agent.”

Obama’s talk of a “new beginning” between Muslims and the U.S. has been swamped in Egypt by economic dysfunction and political polarization between Islamist and secular leaders. As investors flee and Egyptians suffer, what the president called a “cycle of suspicion and discord” has delayed financial aid and left Egypt drifting toward bankruptcy.

“People are frustrated here, full of anger, especially youngsters,” said Anwar Sadat, the nephew of the Egyptian president assassinated in 1981 and the leader of a minor opposition party. “The truth is we are in trouble.”

U.S. Doubt

In the U.S., lawmakers who doubt Morsi’s commitment to democracy are concerned that new arms shipments could be turned against Israel. In Egypt, the president welcomed in 2009 with a cry of “Barack Obama, we love you,” is now seen by many as just another leader who puts American interests above Egypt’s needs. A Gallup survey released March 13 showed Egyptians disapprove of U.S. leadership by a 62 percent to 17 percent margin.

Optimism that Mubarak’s overthrow would bring the country’s 83 million people a better life is unraveling. As part of a broad cost-cutting initiative, the government announced March 19 plans to effectively ration supplies of subsidized bread, a dietary staple, and cooking fuel. A similar move sparked deadly riots during an abortive 1977 economic-liberalization campaign.

Mursi’s failure to deliver stability and rising living standards also has buffeted investors. Egypt’s benchmark EGX30 stock index is down more than 20 percent since the January 2011 uprising that toppled Mubarak. The premium investors demand for holding Egyptian government debt has roughly doubled. And foreign investment has sagged to $2.1 billion from its $13.2 billion peak five years ago.

U.S. Stake

The U.S. has a big stake in Egypt’s transition. The North African country and Jordan remain the only Arab nations with formal peace treaties with Israel, and the Egyptian military polices the strategic Sinai Peninsula. Egypt grants preferential passage to the U.S. Navy through the Suez Canal, giving American warships in the Mediterranean a shortcut to the Persian Gulf. Morsi and the Brotherhood have repeatedly said they would honor Egypt’s international agreements.

Both the prospects for democracy in the Arab world’s most- populous nation and the U.S. goal of defusing regional tensions hinge on Egypt’s economy. Gross domestic product has grown less than 2 percent the last two years, its slowest pace in two decades. Unemployment is 13 percent, and inflation has almost doubled since November to 8.2 percent, according to the central bank.

Chronic violence and polarization has undercut growth efforts, prompting Mursi yesterday to say he may have to take action “to protect this country.”

Military Aid

Though Egypt is the fifth-largest recipient of American foreign assistance, more than 80 percent of the $1.56 billion total U.S. aid goes to the Egyptian military, including F-16 fighters and M1A1 tanks manufactured by General Dynamics Corp. (GD)

This year’s help also was delayed. Only this month did the U.S. release $250 million in economic support. Since Morsi’s June 2012 election, Congress has grown increasingly skeptical of Egypt’s embrace of democracy and reliability as a security partner. Lawmakers’ worries mirror those of many Egyptians who say the U.S. isn’t doing enough to curb the Islamist government’s authoritarian leanings.

Morsi’s Nov. 22 claim of temporary immunity from judicial review and his efforts to seize control of the independent labor movement and punish journalists have sparked talk of renewed dictatorship. Senator James Inhofe of Oklahoma, the top Republican on the Armed Services Committee, in January labeled Egypt’s president “an enemy.”

In a March 5 interview with NPR, Secretary of State John Kerry described U.S. economic aid as “minuscule,” adding: “We could pay a much higher price down the road if Egypt is in turmoil and chaos and the region feels those implications.”