Lebanon has a mark to market problem

Lebanon: coronavirus is showing corrupt elites the scale of the damage they have caused

Lebanon is a country that has received little attention during the Covid-19 crisis. As of Monday, the country officially had over 250 coronavirus cases, with four confirmed fatalities. People in Beirut estimate the real number of infections to be four to five times that number, and the government’s decision to deploy the army to prevent people from violating quarantine rules reinforces that view.
For now, the disease still appears to be under control. However, the fear is that if things were to get out of hand, the public health system would be overwhelmed. What makes Lebanon more vulnerable than many other places is that the country is going through a major economic crisis. The state is bankrupt and its ability to withstand a long lockdown, or to import material to address the health emergency, is limited.
The shutdown, which began in mid-March and involves people remaining at home while most commerce is suspended, will also have severe consequences for a county that cannot afford to be idle. In the past five months, Lebanon’s economy has been in free fall, with banks reacting by severely limiting withdrawals or transfers abroad. This has forced many businesses to close, leaving tens of thousands unemployed.
The downward slide began last October, when demonstrations took place against the corruption of the political class and increasingly stringent economic measures. As protests continued, banks introduced de facto capital controls in the realisation that the angry mood had undermined the system the state had set up to finance its ballooning public debt. Many refer to it as a Ponzi scheme that has come to an end. Banks had offered interest rates on deposits that were much higher than the global average, paying these off by attracting new deposits into the system. With confidence gone, the banks feared account holders would rush to withdraw money, leading to the banking system’s collapse.
Foreign assistance to Lebanon has been conditional upon the introduction of reforms. Yet the country’s political class has resisted this, as it would reduce their share of the rents they are extracting from the state. Indeed, Hezbollah was one of the parties initially opposed to a bailout from the International Monetary Fund. The party feared that this would cut into its own revenues, while also weakening the political class it has propped up to solidify its position in the country.

The elites have eaten the market, its gone. In sandbox that is the S/L going to market share zero. Citizens will need to run on the Euro while government is moribund.