Greek Crisis vs Lebanese Stability

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From right to left Greek, National Bank of Greece and European Union flags wave at the headquarters of the National Bank of Greece, the biggest bank in the country, in Athens, Thursday, April 29, 2010. The European Union said Thursday it expects to conclude talks with the IMF and Greek officials on a deal to lift Greece out of its "debt spiral" by the weekend. (AP Photo via Daylife)

The Daily Star points out the possibility for comparisons and/or contagion effects between the crisis in Greece and the stability in Lebanon:

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The crisis in Greece prompted the EU to inject close to $1 trillion into the market to shore up the euro and avoid an economic pitfall.

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Lebanon, which imports most of its goods from Europe, may benefit in a short term if prices of commodities fell.

But there is growing concern that the Greek example would spread to other countries in the long term and Lebanon may not be immune from this crisis.

“Greece’s debt to GDP is 113 percent while in Lebanon it stands at 148 percent. This should be wakeup call for the Lebanese. We can’t count on remittances alone. We need to act to avoid a big crisis in the future,” former finance minister George Corm said.

Lebanon has managed so far to weather most of the financial crises that struck the United States, Europe and the oil-rich Arab states thanks to the massive cash inflow from Lebanese working abroad.

The other factor which helped the Lebanese economy stand on its feet is the fact that the capital market is not too exposed to the volatile stock markets around the world.

In addition, most of the government’s debt is held by Lebanese banks.

“We are fortunate because we don’t owe the outside world a lot, but nevertheless we should not take things for granted,” Corm said.

He added that even the massive liquidity may not be an added bonus to the Lebanese economy. “We should not forget that interest rates in Europe are near zero while the Lebanese government borrows at interest rates between 8 to 9 percent,” Corm said.

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