Obama urging aid for Egypt’s economy

WASHINGTON – Amid calls in Washington for sharp cuts in foreign aid, the Obama administration is seeking an emergency financial package for Egypt, fearing that further strains on its economy could thwart Cairo’s fledgling reform effort almost before it begins.

U.S. officials have been working international partners to seek pledges for a package, probably worth several hundred million dollars, as well as money to help build political parties and other democratic institutions, say U.S. and foreign diplomats.

Public anxiety over Egypt’s struggling economy, including high unemployment and rising prices, was one of the key drivers of an 18-day uprising that toppled former President Hosni Mubarak, who resigned on Friday. Now that Mubarak is gone, analysts say Egyptians may be overly optimistic in expecting rapid economic improvements.

Michele Dunne, a Mideast specialist who has advised the Obama administration on Egypt in recent weeks, said the economy is “one of the greatest vulnerabilities for a country that’s in a transition like this.”

The Egyptian finance ministry has estimated that the unrest cost the economy about $310 million a day, and some private analysts have estimated that investors have been withdrawing investment at a rate of about $1 billion a day. Annual economic growth of 5 percent was predicted for Egypt before the demonstrations; now the consensus is closer to 1 percent.

U.S. officials, who have been consulting widely on Egypt in recent days, declined to discuss their aid goals in detail, saying they are in the early stages of discussions. They said they expect international development banks may also play a part in the aid.

The U.S. currently gives Egypt about $1.5 billion per year, most of it going to the Egyptian military.

At a news conference Tuesday, President Barack Obama said that he had told U.S. allies as well as foes in the Middle East that they must “get out ahead of” growing demands for reform, or risk the fates of the deposed presidents of Egypt and Tunisia.

As an unprecedented wave of street protests continued to spread, notably in the strategic Persian Gulf kingdom of Bahrain, Obama used a news conference to lay down the first outlines of a broader U.S. response, now that it seems clear that the turmoil will extend well beyond the 18-day revolution that toppled Egypt’s Hosni Mubarak.

He defended his handling of Mubarak’s downfall, acknowledged that prospects for Arab-Israeli peace talks could be complicated and had tough words for Iran’s leaders, who’ve responded harshly to a reborn protest movement in that country.

Obama said his message to leaders across the Middle East was that “the world is changing, that you have a young, vibrant generation … that is looking for greater opportunity, and that if you are governing these countries, you’ve got to get out ahead of change. You can’t be behind the curve.”