NEWSMAKER - New prime minister exposes divisions in Egypt

CAIRO Sat Nov 26, 2011 2:15am IST

Egyptian new Prime Minister Kamal Ganzouri speaks at a news conference at the Defense Ministry in Cairo November 25, 2011. REUTERS/Middle East News Agency (MENA)/Handout

Egyptian new Prime Minister Kamal Ganzouri speaks at a news conference at the Defense Ministry in Cairo November 25, 2011.

Credit: Reuters/Middle East News Agency (MENA)/Handout

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CAIRO (Reuters) - The army's choice of prime minister has polarised debate in Egypt, riling protesters in Tahrir Square who see him as a throwback to Hosni Mubarak's rule and pleasing others who view him as a "clean pair of hands" with the skills to restore order.

The divisions over Kamal Ganzouri, 78, may serve to highlight the army's argument that protesters in central Cairo, demanding an immediate end to military rule, do not represent the whole nation of 80 million people.

But the military may also have found there were few people willing to take on the job of guiding government in a country convulsed by violence and protests on the eve of its first free election in decades, and heading into a deep economic crisis.

Ganzouri, who was prime minister for almost four years between 1996 and 1999, acknowledged it would be a thankless job.

"The person who takes responsibility now faces a big challenge because right now it is better for any official to stay at home," he said in his first public statement on Friday.

He asked the army for "a little time" to form a cabinet.

Friday's response from Tahrir, where protesters have stayed for a week and often clashed violently with police in nearby streets, was swift. One of the chants in the square was: "Egypt is in a revolution against the military council and Ganzouri."

For protesters, the appointment deepened their distrust of the generals: instead of responding to calls for a deep purge, they had revived an old face.

"Why are they picking Ganzouri now? This shows that the army is unwilling to let go of any power by recycling a former ally. This government won't have any powers, why else pick someone that is loyal to them," said protester Mohamed El Meligy, 20.

Some in the square had wanted Mohamed ElBaradei, the former U.N. diplomat, or Abdel Moneim Abul Futuh, an Islamist -- both presidential candidates.

Even if offered the job, activists said it was unlikely they would have accepted terms offered by the army that could have limited their power or undermined their future political plans.

ECONOMIC LIBERALISER

The army, however, has said those in Tahrir do not represent all of Egypt. Outside the square, many Egyptians backed Ganzouri, saying he was not a Mubarak lackey and had been driven out.

"It is the government (of Mubarak) that pushed (Ganzouri) away. They were threatened by him ... He is trustworthy and he has a good economic and administrative background to deal with issues such as budget deficits," said Waleed Shaffai, 25.

Shortly before Mubarak quit, the state daily Al-Gomhuriya, a newspaper loyal to the president, accused Ganzouri's cabinet of "weak management, arrogance, aloofness, paralysis and self-love."

The new prime minister was an economic liberaliser but far more cautious than the government of Ahmed Nazif, who headed the cabinet in Mubarak's final years in office.

Ganzouri virtually balanced the budget -- the deficit has now expanded sharply -- and reined in inflation to a modest 3.6 percent. One of today's biggest public grumbles is surging prices.

But foreign investors criticised Ganzouri at the time for not moving faster in selling off state assets and other policies. Nazif did move more swiftly, and angered many Egyptians who blamed his cabinet for lining the pockets of the rich at the expense of the poor.

Egypt desperately needs a government with economic credibility. Economists say the country is heading rapidly towards a currency crisis.

Foreign reserves have tumbled $14 billion since the end of 2010 to $22 billion in October, as the uprising has sapped confidence. The Egyptian pound has slid to its weakest to the U.S. dollar since January 2005. Shares have been battered.

In the summer, Egypt turned down a $3.2 billion facility from the International Monetary Fund, saying it could fund its needs at home. It has now changed tack and is requesting cash. The new prime minister's experience could prove an asset.

PRIORITIES

"Ganzouri ... played a key role in improving relations with the IMF and World Bank. So, given the fact that Egypt is in urgent need of external funding from the IMF, or elsewhere, he appears to be an ideal candidate," wrote Said Hirsh of London-based Capital Economics.

But Hirsh said much depended on whether Ganzouri was given full powers to act by the army, though it may still be too late to avert an economic crunch.

"With elections due next Monday, we don't think that the appointment of Ganzouri alone will help Egypt to avoid a full-blown political and economic crisis," he wrote, adding that investors wanted assurances that streets were calming down.

Ganzouri said one of his priorities would be to re-establish security and revive the battered economy. Egypt starts the first stage of a parliamentary election on Monday and many fear it will be plagued by violence.

"He will be facing major challenges to restore security and economic stability and then growth, as well as reach an agreement with political forces," said Mustapha el-Sayed, political science professor at Cairo University.

"He is a good man with a clean record but how far will he be able to steer the ship is the question," he said.

Ganzouri has said his powers would be stronger than those given to previous prime ministers. Many blamed an overbearing army council for poor economic policies.

(Additional reporting by Shaimaa Fayed, Marwa Awad, Tamim Elyan and Mohamed Abdellah, editing by Rosalind Russell)

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