G8 Leaders Vow $20 Billion in Aid to Egypt and Tunisia

Jessica Rettig

With the so-called "Arab Spring" heating up into what some are now calling the "Arab Summer," leaders of the Group of Eight, more commonly known as the G8, have committed to help grow free economies and jobs in the region. Yet with several countries in the Middle East still engaged in serious conflict and uncertain political futures, the prospect for noticeable employment growth there could be just as dim as it has been for years in the G8 leaders' own backyards.

The G8 summit culminated with a declaration that had, nearly at the top of its list, a commitment "to support democratic reform around the world and to respond to the aspirations for freedom, including freedom of religion, and empowerment, particularly for women and youth," referring especially to nations in the Middle East and North Africa.

For the G8 nations, Egypt, Tunisia, and the Arab Spring as a whole introduce an opportunity to support democratic ideals in the region, both in spirit and financially. The G8 heads met with prime ministers of both Egypt and Tunisia to discuss the needs of the countries with a democratic transition process already underway. Indeed, as part of what they call the "Deauville Partnership," the leaders of the G8, along with their multilateral bank partners, are hoping to provide as much as $40 billion to prop up the two countries, which continue to recover from the throes of revolution.

According to the International Monetary Fund, which recently released a report on the transformations occurring in the Middle East and North Africa, the stability of the region depends directly on the creation of jobs, as well as a "fair and inclusive" economic model. "What has happened essentially is that a whole set of grievances that are economic, cultural, and political, and so forth have all been wrapped up in a demand for fundamental political reconstruction," says Nathan Brown, a Middle East expert at the George Washington University Elliot School of International Affairs. "In one sense, the immediate agenda of these moves for change is political ... but what's underlying them is a sense that the old political systems didn't work on any level, including economics."

In his closely watched speech on the Middle East, President Obama committed at least $2 billion in debt relief, investment, and loan guarantees to Egypt and Tunisia. Also preceding the G8 summit, the World Bank promised $6 billion for the two countries over the next two years, under conditions of proper governance and reform. Now, the rest of the G8 and the group's other multilateral partners are also pooling their assistance. According to a G8 statement, the multilateral development banks could offer around $20 billion in aid through 2013 to help reform efforts. "Our support, and that of others, can sustain momentum and accelerate progress, but only if coupled with real reform," World Bank President Robert Zoellick said earlier this week.

The aid, according to Brown, is most important in the short term, as these nations struggle to recover from setbacks that arose from the conflicts, such as declines in tourism in Egypt, for example. However, the promises for assistance in future phases of transition should come with warning, as the political and economic climate in the United States and in the European Union may not give way easily to greater giveaways for the Middle East, he says.

Likewise, according to Inder Sud, an expert on regional aid also from the Elliot School, given the unsuccessful history of aid in Egypt, it's unclear if and how the structures of its new government will be able to spend the money any better than the ousted regime of Hosni Mubarak did. Even before popular protests erupted through the region, Egypt had been one of the top recipients of U.S. foreign aid for years. "If G8 makes aid as a front-end for the reforms in the Middle East, there's a huge downside," says Sud. "My observation, in Egypt particularly, has been that aid, without domestic ownership and commitment and reform, is likely to fail or not be effective ... It could be very helpful, but it has a danger of being seen as aid the old-fashioned way."

Sud adds that, along with the foreign aid promises, it's up to leaders both in the region and around the world to make clear that the path to real economic growth will be a long and difficult one, so not to raise expectations that the aid alone will be a solution to the region's problems.

The G8 declaration from Deauville also made clear that Libyan leader, Col. Muammar Qadhafi, who has lashed out violently against opposition in his country over the past few months, has "no future in a free, democratic Libya" and "must go." The leaders also put pressure on Syria's leader to stop the use of force against his country's people and on Iran to halt its nuclear activities.

The effect of the G8 commitments will be difficult to gauge in the short term, experts say, but if democracy and economic growth does catch hold in the region, the actions this week could define the significance of the group itself moving forward.

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