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HomeEconomyDragging over the central bank chief underscores Lebanon's dysfunction

Dragging over the central bank chief underscores Lebanon’s dysfunction


It took almost a week for Lebanon’s outgoing cabinet to meet to discuss the news that the governor of the country’s central bank had become a wanted man.

Instead of agreeing on decisive action after French and German courts issued arrest warrants for Riad Salameh late last month, ministers squabbled over technical details and downplayed the seriousness of the situation, according to two people with knowledge of the discussions. Few sought Salameh’s resignation, while others defended him despite allegations that he has committed financial crimes, the people said.

“It’s shocking,” said Deputy Prime Minister Saade Chami, one of the few senior politicians to publicly call on Salameh to quit, speaking to the FT in the days following the cabinet meeting. “It is not acceptable in any country for the central bank governor to be accused of such grave crimes and to remain in office.”

The dragging of the foot is symbolic of the chronic political dysfunction that has plagued Lebanon for years, leaving it in an unprecedented economic collapse and leadership vacuum. A year after the national elections, the country still has no government, only a caretaker government and has been without a president for seven months.

Leaving behind a man charged with corruption, money laundering and embezzlement in charge of monetary policy has pushed Lebanon’s credibility to a new low, officials and analysts said.

“It is better for him to resign or at least leave until the end of his term,” said Chami. “The government cannot continue with business as usual. Something needs to be done to preserve the residual credibility we have in the eyes of the world.”

Salameh, whose photo now appears on Interpol’s website, has denied any allegations. The governor of the Banque du Liban has said he would only resign if convicted in court and denounced the “unfair” investigations against him at home and abroad.

French and German courts have issued arrest warrants for the veteran governor of the Banque du Liban, Riad Salameh © Reuters

French prosecutors and an investigating judge have investigated allegations that Salameh, along with his brother and an associate, unlawfully enriched himself and laundered hundreds of millions of dollars in public funds for personal gain. Salameh is also under investigation in Lebanon and at least four other European countries for alleged financial crimes.

His term expires at the end of July and after three decades in office, the 72-year-old has said he does not want to look for a new one.

The BdL governor was once hailed as a financial mastermind who stabilized Lebanon’s precarious finances during years of instability. He has retained the support of many in Lebanon’s powerful political elite despite being widely blamed for the country’s devastating financial collapse in 2019, which pushed three-quarters of the population into poverty.

Analysts and political insiders suggest that this is because Salameh knows the secrets of the Lebanese political class.

The Lebanese pound has lost more than 98 percent of its value against the dollar since 2019, while annual inflation rose to 269 percent in April.

Finance Minister Youssef Khalil, who has publicly supported Salameh, and Justice Minister Henry Khoury are deputed to assess the implications of the arrest warrants for state affairs. But with no further planned cabinet meetings and no political unanimity, Chami said the ministers’ work “will not change anything”.

Lebanon has a history of not extraditing its citizens and Salameh is not expected to be sent to France. Other options include forcing his resignation or allowing him to complete his term.

“I don’t see any urgency,” said a senior politician in Beirut. “Instead of trying to fix this mess, the different parties trade over . . . suggested replacements.”

There is no consensus on a successor, with political parties arguing over whether the caretaker government has the authority to appoint one, members of the government said.

Protesters in Tire carry a poster depicting Riad Salameh in 2019. Many blame the Lebanese central bank chief for the country’s financial collapse © Aziz Taher/Reuters

One candidate, former Labor Secretary Camille Abousleiman, has recently emerged as a favorite to replace Salameh. But negotiations have stalled amid the factionalism and horse-trading that have long dogged Lebanese politics.

Salameh’s succession is tied to negotiations over the choice of the president, which are far from resolved, political insiders and analysts said.

Under Lebanon’s denominational political system, the presidency is reserved for a Maronite Christian. Suleiman Franjieh, a friend of Syrian leader Bashar al-Assad, is favored by Hezbollah, the Iranian-backed Shia political party and militant group that wields significant influence in Lebanon, and its ally Amal. Together they have an effective right of veto over cabinet appointments.

However, Franjieh does not have widespread support among Lebanese Christians and despite intense lobbying from long-time Lebanese ally France, he has yet to win the nomination.

“France’s support for Franjieh is first and foremost about expediency,” with some in Paris believing his proximity to Assad could be useful, said Rym Momtaz, a consultant research fellow at the IISS think tank and an expert on French foreign policy. “It is not prepared to challenge Hezbollah and Amal in this way, under the guise of avoiding a long institutional void in the presidency. . . it has accepted their terms.”

Sami Atallah, founder and director of the Beirut think tank The Policy Initiative, said the arrest warrants against Salameh came as a shock to Lebanese political leaders, “(in whose) imagination plays no part.”

But “rather than motivating them to clean up their behavior, they double down by keeping Salameh in place and launching attacks against journalists and the judiciary,” he said.

The political vacuum suited them because it left no way for reforms that could erode their power, he added, citing the lack of progress in economic and political measures demanded by the IMF to boost investment and release help.

The Lebanese civilians are having a hard time in the standoff. “These political leaders and this government are not ashamed,” said Marie, who did not want her last name published because she was ashamed of how low she had fallen.

“I used to be a teacher,” she said. “Now I beg for my children’s breakfast. . . while (the chiefs of Lebanon) sit in their golden palaces.”

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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