Egypt's economic problems will make Morsi think twice

Can the Muslim Brotherhood and its allies rule with enough flexibility and appeal to the majority to make democracy work? They might have no choice.

In defiance of all appearances, Egypt's President Mohammed Morsi has declared "the dawn of a new Egypt" following the implementation of the new constitution. For him, Egypt will now be fairer, more closely in touch with its Islamic roots and open for development without the stifling cronyism of the Mubarak era.

The reality of what awaits the country is likely to be far harsher: galloping economic decline that the Muslim Brotherhood, the former underground movement that now holds power, will be ill equipped to control. In truth, Mr Morsi may live to regret the Brotherhood's decision to grasp power so soon and so completely, rather than sharing the burden of responsibility more widely.

In fairness to Mr Morsi, almost two-thirds of ballots - 65 per cent - were cast in favour of the constitution that he rushed through the referendum process despite angry and sometimes violent protests. It provides some clarity as to who rules: some of the Mubarak-era appointees of the supreme constitutional court that had threatened to veto the constitution-drafting process have been purged. Those looking for effective government after the conflict-ridden limbo of the constitutional process can hope that an administration will be able to tackle the country's budget crisis next year.

But that is only half the story. Only one third of the electorate took part in the vote, which is pitifully small for a document as key to Egypt's future as this one. That leaves a large contingent of the population - secular, leftist or wedded to the old regime - that is not in favour.

The main criticisms of the constitution are that it was drawn up by the Muslim Brotherhood with its more puritanical allies, the Salafists. It provides no guarantees for the Coptic Christian minority, and enshrines a role in the legal system for Al Azhar, the mosque and university which is considered the supreme authority in Sunni Islam. Legislation on, say, the role of women could therefore be determined by Muslim clerics.

While the import of such clauses remains to be seen, the opposition charge that the Muslim Brotherhood, whose role in toppling Mubarak was marginal, has carried out a power grab is not denied. The charge is even more cogent since Mr Morsi, at moments of crisis, has done nothing to show that he is the president of all Egyptians, appearing more to be the messenger of the Brotherhood.

Students of revolutions should not be surprised. When there is a power vacuum, it is the best organised forces that seize control. The opposition must share the blame: divided and tainted by the presence of old regime figures in its ranks, it has failed to portray itself as the standard bearers of the heroes of Tahrir Square.

Mr Morsi, in his hour of victory, has said the right things: he has called for national dialogue and accepted that an "active patriotic opposition" will be part of Egyptian political life, in place of the "fake majorities" of the old era. But most probably, the time when the Brotherhood could bring the opposition into coalition has passed. Instead, the future is likely to be a political battle over who stole the revolution.

These developments matter for several reasons. Egypt is watched as the laboratory for Middle East democracy following the Arab revolutions. If a democratic Egypt cannot give stability and prosperity to its people, then what country in the region can? Those who are nostalgic for the stability of the old security states, based on military and police rule, are looking for an excuse to close the Arab democratic window.

It is no secret that Washington wants, amid all the regional turmoil, to scale back its involvement in the Middle East and focus on the Asia-Pacific region. Without a stable Egypt, this is a pipe dream.

In one sense Mr Morsi is right that Egypt is entering a new era, although not the shining dawn he has spoken of. The economic crisis will force the government to take unpleasant decisions, and thus the crux of the debate will not be how Islamist the state will be, but rather where the pain of austerity will fall.

A promised $4.8 billion (Dh17.6 billion) loan from the International Monetary Fund is on hold while the government steels itself to cut subsidies on fuel and food. There will, of course, be tax rises for the rich. But in a country such as Egypt, where the wealthy are few and have many ways to avoid tax, the most effective way to cut the budget deficit is to rein in subsidies that provide the masses with a cushion.

The Brotherhood is already under attack for not thinking of an economic policy which differs radically from Mubarak's. These charges will only grow. One of the motivating forces of the original Tahrir protests were, after all, demands for better pay and welfare, and more freedom to strike. Instead, the government will find itself obliged clamp down on pay rates and limit the power to strike - to encourage foreign investment - and generally reduce government spending.

In a globalised world, there are few alternative paths to prosperity, barring vast agricultural or mineral reserves, neither of which Egypt has. But that does not make the course over the next few years any easier. Egypt has to stay on the right side of the global financial institutions, even as the rating agencies downgrade its creditworthiness and banks limit the amount of currency which can be converted into cash.

With financial freedom of action so limited, the government will find it easier to make its mark on social policy, with some high-profile pieces of gesture politics designed to give the impression of re-Islamising society. The goal of making Egypt fairer and more prosperous will be much harder.

The real issue, then, is whether the Muslim Brotherhood and its allies can rule with enough flexibility and appeal to the majority to make democracy work. They have not so far shown much aptitude. The alternative is not pleasant: a new strongman - perhaps from the military, perhaps one with the army behind him - to restore order.

On Twitter: @aphilps