Under pressure to secure a $4.8 billion IMF loan the Egyptian president yesterday legislated, by decree, massive tax hikes on steel, cement, soft drinks, beer and cigarettes and some services like mobile-phone services, air-conditioned transportation, cleaning and security.
He immediately came under fire even from his own Freedom and Justice Party:
The FJP reiterated its permanent position, rejecting any economic policies that increase the burden on low-income citizens.
The party certainly feared that the tax hikes, issued shortly before a referendum on the new constitution, would turn voters to vote no.
Today, at 2 am local time, the tax hike decree was annulled through another one issued via Morsi's Facebook account.
The Muslim Brotherhood's calvinball game continues with rules, laws and decrees made up whenever convenient only to again change a few moments later. False comprises are offered only after its aims have been achieved.
The FJP, of which Morsi was number two before becoming president, is a bourgeois party led by a billionaire. It is unlikely to drastically increase taxes on the rich. The new constitution, should it come into force, leaves the military, its huge assorted industrial empires and its income on its own. The parliament will have no financial control over it nor will it be able to tax it. With the pressure from the conservative Islamist right against alcohol, nighttime parties and other liberal attitudes the tourism that brought much to Egypt's foreign currency reserves is unlikely to revive. There will be little foreign investment as such, even from the Gulf, does not like to play under calvinball rules.
Egypt's foreign currency reserves are falling fast. Without the IMF loan Eygpt will soon have to default. The IMF is under Washington's control. The conditions under which it gives loans can be changed. If the U.S. wants Morsi to continue to rule, as I suspect, the IMF will give him the loan without demanding immediate tax increases. But that only means that those will come later, after the referendum and a new parliament election. Will the voters anticipate this?
The Muslim Brotherhood is in a bind. Its ideological contradictions, demanding social justice while also being somewhat neoliberal capitalists, are now for all to see. Its political ineptness is obvious.
If the unfortunately splintered opposition would point that out and present the referendum about the constitution, which it does not want to come into force, as a referendum about the Brotherhood and Morsi's rule it would probably have a good chance to turn it down. But so far the opposition has been just as political inept as the ruling party and it continues to insist on boycotting the referendum. Such boycotts have a record of backfiring.
New demonstrations from both sides have been announced for Tuesday and might well lead to new violent clashes. By decree Morsi gave the military power to intervene in them which is something it does not really want to do. The outcome will only be radicalization on both sides.
Unless something big happens the Muslim Brotherhood will likely win the referendum and the next parliament elections. When the economic pressure on the poor continues, as it inevitably will, Egypt may thereafter slide even further to the right. Egypt's current downward spiral will continue from there.