Gemayel Slams Lack of 'Measures, Reforms' in Diab's Default Speech

Kataeb Party chief MP Sami Gemayel has criticized a speech delivered by Prime Minister Hassan Diab in which he announced that Lebanon will default on its March 9 Eurobond debt.

“No legal measures were announced, no practical and instant reforms were announced, no economic and social steps for rescue were announced and no containment measures were announced to confront the repercussions from the default decision,” Gemayel lamented in a tweet.

“All what we heard was a declaration of the state’s bankruptcy and a disclosure of the reality of net foreign currency reserves at the central bank,” he added.

On Saturday, Diab said that "the Lebanese state will seek to restructure its debts, in a manner consistent with the national interest" through negotiations with creditors.

Diab's government was nominated in January to handle the economic crisis amid unprecedented protests that began in October demanding a complete overhaul of the political class.

He said a default -- the first decision taken by his government -- was the "only way" to stop reserves from depleting.

In taking this path, Diab's administration is in effect overruling objections from banks who say it would pile added pressure on domestic lenders and compromise ties with foreign creditors.

The move also exposes the country to legal action by creditors.

"How could we pay creditors while the Lebanese people are unable to access their own money in their bank accounts?" Diab said.

Despite a series of crises, the country has never before defaulted, but in recent months it has grappled with its worst economic turmoil since the 1975-1990 civil war.

Foreign currency has become increasingly scarce, Lebanon's pound has plunged in value and banks have imposed tough restrictions on dollar withdrawals and transfers.

Diab said debt restructuring is part of a wider economic rescue plan, that seeks to cut state spending and save more than $350 million annually.

He said downsizing the banking sector is part of the reform plan.

Seeking to assuage public concern, the prime minister pledged to protect bank deposits, especially those of small depositors.

He assured foreign backers of Lebanon's commitment to reforms pledged at a conference dubbed CEDRE in Paris in April 2018.

But an $11 billion (10 billion euro) aid package pledged at the conference has not been unlocked by donors due to a lack of commitment to reforms.

Diab said Lebanon must now enter into debt restructuring negotiations, which "will take time, effort, and will require painful measures."