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A rival sits out Lebanon’s election. Now Hezbollah could fill the void

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© Reuters. FILE PHOTO: Lebanon’s leading Sunni Muslim politician and Former Prime Minister Saad Hariri gestures during a speech in Beirut, Lebanon January 24, 2022. REUTERS/Mohamed Azakir/File Photo

By Maya Gebeily

TRIPOLI, Lebanon (Reuters) – The stakes are high in Lebanon’s election. The heavily armed Hezbollah movement has seen one of its main rivals descend into disarray, handing it an opportunity to cement power over a divided country that’s sinking into poverty.

Abdallah al-Rahman will not be casting a ballot, though.

“I won’t vote for anyone,” said the wiry-haired sculptor and activist, dismissing the candidates whose pictures are plastered on buildings and giant billboards in Lebanon’s second city of Tripoli ahead of the national parliamentary election on May 15.

Rahman is from the Sunni Muslim community, one of the country’s main groupings and a traditional counterweight to Hezbollah, a powerful Iranian-backed Shi’ite group.

Yet like many of his fellow Sunnis, he is skipping the election following the shock withdrawal of his community’s longtime leader and figurehead, Saad al-Hariri, scion of a political dynasty.

Rami Harrouq, who lives in the Hariri stronghold of Bab al-Tebbaneh in northern Tripoli, will not be participating either. Alternative candidates have not impressed the 39-year-old factory worker, and he has been worn down by the country’s economic collapse.

“We carry a lot of resentment against politicians – especially in Tripoli. These last two years have been full of misfortune for us,” he said. “Of course I won’t vote.”

High abstentions among Sunnis – as well as a fragmentation of the Sunni vote as a result of Hariri turning his back on politics – could play into the hands of Hezbollah and its allies, who collectively won 71 of 128 seats when Lebanon last voted in 2018, according to some political experts.

“Because of what Saad Hariri did, Hezbollah now has two-thirds of the parliament within its sights,” said Ibrahim al-Jawhari, a political analyst who served as an adviser to former prime minister Hariri, referring to the threshold that would shield the group and its allies from vetoes.

Hezbollah gains would reverberate far beyond this small country of about 7 million people. Israel, Lebanon’s neighbour to the south, sees the group as a national security threat and has waged war against it in the past. Washington, London and much of Europe have classified it as a terrorist organization.

Such a political shift in the movement’s favour would affirm Lebanon’s position within the regional sphere of influence of Iran, which is waging a proxy battle with Sunni arch-rival Saudi Arabia across the Middle East and is at loggerheads with the United States.

Hezbollah is an organisation that occupies a unique place in Lebanese society. It commands a paramilitary wing that some experts estimate has a more potent arsenal than the national army, while also running hospitals and schools – earning it the frequent description of a “state within a state”.

The group itself has said it expects the make-up of the new parliament to differ little from the outgoing one and that it neither wants nor expects a two-thirds majority. Its main Christian ally, for one, is widely expected to lose seats.

    Yet any expanded grip on parliament could give Hezbollah more sway over presidential elections later this year and over economic reform bills required by the International Monetary Fund, and even allow for amendments to the constitution.

It could also isolate Lebanon at a time when it desperately needs international support. Three-quarters of the population are below the poverty line amid an economic meltdown that many people blame on political paralysis and corruption.

Political loyalties in the country mostly follow sectarian lines and power is shared between Muslim and Christian groups in a complex system aimed at preserving a balance between factions that have taken up arms against each other in the past.

‘FEELING LOST’

When Hariri announced in January he was stepping back from politics and that neither he nor the broader Future Movement would take part in upcoming elections, it was widely seen as a de facto boycott by the political heavyweight.

The move – which shocked supporters and rivals alike – capped years of political difficulties for Hariri. His waning fortunes have reflected a deterioration in relations with Riyadh, which cut ties with Hariri as Hezbollah’s grip tightened.

    “We shouldn’t forget that since 1992 in Beirut, people had one name on their lips – Hariri. Whether Rafik or Saad, it was Hariri,” said Fouad Makhzoumi, a Sunni businessman and member of parliament who is running again.

    “When it’s no longer around, what do you do?” he said. “There’s a sense of feeling lost.”

Rafik, also a former premier, was assassinated in 2005.

While the Future Movement has not officially called for a boycott, its strongholds in Beirut are dotted with posters encouraging people to skip the vote and supporters have tweeted similar messages.

    Turnout is expected to be particularly low in Lebanon’s Sunni majority districts, according to independent pollster Kamal Feghali.

    He told Reuters that about 30% of people who voted in those districts in 2018 have said they will not this year – with the highest level of disillusionment in Tripoli. That compares with a nationwide average of 20%.

    Future Movement founding member Mustafa Allouch told Reuters he understood the disdain on the streets, but said sitting on the sidelines was not the answer.

    The 64-year-old resigned from the party, delayed his retirement plans and chose to run as an independent because he feared the “vacuum” left by Hariri’s withdrawal would allow Hezbollah-backed lists to sweep in.

    “This is very dangerous, because it drops the electoral threshold and opens the door for those we talked about earlier, Hezbollah … to get seats and take control of the city,” he said.

    GRAND MUFTI CALL

    Sunnis and Shi’ites are estimated to account for just under a third of the population each, with Christians making up an estimated 40%. Under electoral law, candidates cannot run as individuals but must run in lists.

In Tripoli’s Sunni-majority northern district of Akkar, Future won five of seven seats in 2018. Four of the winning lawmakers are running again on two separate lists.

    As the vote nears, leading Sunni figures have focused on trying to boost voter turnout nationwide.

    Bahaa Hariri, Saad’s older brother and political rival, founded a movement known as “Together for Lebanon” that has been broadcasting advertisements across radio stations encouraging people to vote, without naming preferred candidates.

    In April, the religious head of Lebanon’s Sunni community, Grand Mufti Abdullatif Derian, declared in a sermon that all Lebanese should vote.

    Jawhari, the analyst, estimated the fragmented and disillusioned Sunni community could hand Hezbollah and its allies at least six, but up to eight, additional seats in parliament “without having to do anything”.

    They would need to get to 86 seats in order to secure two-thirds of parliament, which would shield them from any vetoes emanating from a “blocking third”.

    A Hezbollah source said the group had not yet decided who it would back as Lebanon’s next president and said it supported talks with the IMF but was against any “conditional” aid.

    The source added that Hariri’s withdrawal could be a boon to Hezbollah’s partners.

“It’s natural and logical,” the source said.

Economy

US Business Activity Softens as Inflation Tempers Demand

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(Bloomberg) — US business activity settled back to a four-month low in early May as costs ballooned and high selling prices tempered demand at service providers. 

The S&P Global (NYSE:SPGI) flash May composite purchasing managers index slipped 2.2 points to 53.8, the group reported Tuesday. Readings above 50 indicate growth. A measure of input prices edged up to the highest in data back to 2009, while output price growth slowed from the record pace seen in April.

The group’s gauge of new business at service providers fell to the lowest level since August 2020, indicating some customers are beginning to balk at higher prices. But costs continue to balloon for businesses amid rising wages, interest rates, fuel costs and material prices.

“Companies report that demand is coming under pressure from concerns over the cost of living, higher interest rates and a broader economic slowdown,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

In the euro area, services expanded at a solid pace and manufacturing growth slowed for a fourth straight month. While services activity was buoyed by tourism and recreation, factories were hampered by supply problems related to Russia’s invasion and Covid lockdowns in China.

While at a still-robust 57.5, the S&P Global index of US manufacturing settled back to a three-month low in May. The new orders gauge eased, and production growth cooled.

Order backlogs mounted amid persistent logistics challenges, and manufacturer output prices grew at the third-fastest pace in data back to 2007, though improved somewhat from April.

Meantime, a measure of factory hiring improved to the highest level since July.

“Manufacturers in particular also report that capacity continues to be constrained by supply shortages, though these bottlenecks showed further encouraging signs of easing,” Williamson said.

(Adds graphic)

©2022 Bloomberg L.P.

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Economy

Exclusive-Sri Lanka’s prime minister says will slash expenditure in new budget

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2/2

© Reuters. People wait in a line to buy domestic gas tanks near a distributor, amid the country’s economic crisis, in Colombo, Sri Lanka, May 24, 2022. REUTERS/Dinuka Liyanawatte

2/2

COLOMBO (Reuters) – Sri Lanka’s new Prime Minister Ranil Wickremesinghe said on Tuesday he will present an interim budget within six weeks, slashing down on infrastructure projects and re-routing funds into a two-year relief programme for the crisis-hit island nation.

“With the interim budget, it is just about cutting down expenditure, cutting to the bone where possible and transferring it to welfare,” Wickremesinghe, who took office two weeks ago, said in an interview.

Inflation in the country of 22 million people, which is being battered by its worst economic crisis since independence, could rise above and annual 40% as the government rolls back fuel subsidies and prints more money to keep the economy afloat, he said.

“We have no rupee revenue, and now we have to print another (one) trillion rupees,” he said.

Wickremesinghe added the country would appoint a new finance minister on Wednesday, who will lead negotiations with the International Monetary Fund for a loan package.

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Economy

U.S. new home sales hit two-year low; prices surge

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© Reuters. FILE PHOTO: A home under construction stands behind a “sold” sign in a new development in York County, South Carolina, U.S., February 29, 2020. REUTERS/Lucas Jackson

By Lucia Mutikani

WASHINGTON (Reuters) – Sales of new U.S. single-family homes tumbled to a two-year low in April likely as higher mortgage rates and soaring prices squeezed first-time buyers and those in search of entry-level properties out of the housing market.

New home sales plunged 16.6% to a seasonally adjusted annual rate of 591,000 units last month, the lowest level since April 2020, the Commerce Department said on Tuesday. March’s sales pace was revised down to 709,000 units from the previously reported 763,000 units.

Sales have now declined for four straight months. New home sales dropped 5.9% in the Northeast and tumbled 15.1% in the Midwest. They plummeted 19.8% in the densely populated South and decreased 13.8% in the Midwest.

Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 750,000 units. Sales dropped 26.9% on a year-on-year basis in April. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.

Graphic: New home sales – https://graphics.reuters.com/USA-STOCKS/xmvjoxblgpr/nhs.png 24ff62ed-9a34-4609-9aed-66836e66320f1

The housing market is the segment of the economy most sensitive to interest rates, and new home sales are a leading indicator for the sector as they are counted at the signing of a contract.

The 30-year fixed-rate mortgage jumped above 5% in April for the first time since February 2011, according to data from mortgage finance agency Freddie Mac (OTC:FMCC). It has surged, averaging 5.25% in the week ending May 19, as the Federal Reserve raises interest rates to cool domestic demand and lower high inflation.

Data last week showed sales of previously owned homes dropped to a two-year low in April, while single-family building permits were the lowest since last October. Single-family homebuilder confidence was near a two-year low in May.

Despite signs that demand for housing is slowing, a record shortage of homes will likely limit the decline in sales. The moderation in sales gains could allow supply to increase and slow double-digit price growth.

The median new house price in April soared 19.6% from a year ago to $450,600. Nearly all the houses sold last month were above the $200,000 price level. There were 444,000 new homes on the market at the end of April, up from 410,000 units in March. Houses under construction made up roughly 65% of the inventory, with homes yet to be built accounting for about 27%.

The backlog of homes approved for construction but yet to be started is at an all-time high as builders struggle with shortages and higher prices for inputs like lumber for framing, as well as cabinets, garage doors, countertops and appliances.

At April’s sales pace it would take 9.0 months to clear the supply of houses on the market, up from 6.9 months in March.

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