The western reaction to Kais Saied’s sacking of the Tunisian government and suspension of parliament on 25 July 2021 was one of immediate condemnation. The “international community”, which is shorthand for western governments, think tanks and NGOs, voiced “concern” if not outright condemnation at what it perceived to be a return to the bad old days of “dictatorship”. Some used the word “coup”. In much of the world, silence prevailed. Not so among Tunisia’s immediate neighbours and across the Middle East where the mood was one of relief.

The president took the initiative at a time of growing unrest in Tunisia, as a video of a doctor collapsing in despair and crying from anger as he scrambled to find oxygen for his patients on the evening news, shocked the nation. Tunisians poured into the streets that night to thank their president for having, as they saw it, saved the country’s institutions from buckling. On 21 July he put the army in full control of the vaccination campaign. The prime minister had not been on speaking terms with his minister of health since the autumn of 2020. This slowed the vaccination campaign and weakened the hand of the Pasteur Institute in Tunis and other medical authorities as they shopped for vaccines around the world. As a result, thousands of Tunisians died. Instead, ministers and deputies engaged in endless squabbles, often coming to blows in parliament. The mismanagement of the Covid-19 pandemic had laid bare the precarious state of Tunisia’s democracy.

Since the revolt of 2011, Tunisia has suffered one body blow after another: massive recruitment of unqualified people to pad the already bloated civil service and the state-owned enterprises’ payroll; a refusal to reform what is, in essence, a pre-industrial corporatist state; terrorist attacks from Libya; and a pandemic. The result was a collapse of public investment in infrastructure, health and education; and growing bitterness among ordinary Tunisians who had risked their lives to confront Ben Ali. However, the causes of the Arab Spring revolt were not addressed in its aftermath. Growing regional disparities, one of the key factors behind the revolt, rampant corruption and declining living standards convinced the majority that democracy, at least in its Tunisian form, was a waste of time.

To unpack this state of affairs, this article will buck the trend of international scholarship on Tunisia by exposing the deeply corporatist nature of the country’s economic management. It will show how the EU failed to offer strong financial support to the country, forcing it to sign an agreement with the IMF that was not tailored to the needs of the economy and which successive governments had no intention of implementing. The Western response to Kais Saied’s action has denied the deep structural causes that led to this action. In an attempt to reframe the narrative, we conclude that the EU should commit greater political and economic capital to Tunisia. Short of such strategic thinking, the credibility of the EU’s Mediterranean policy will be seriously damaged.

Contrasting reactions to the president’s initiative

In its largely misguided response to the 25 July events, the main concern in the west was about “saving” Tunisian “democracy”. “Tunisia’s democracy verges on collapse as president moves to take control”, wrote the New York Times (NYT) on 26 July. “Trouble in Tunisia”, the NYT wrote on 4 August, although the title seemed to refer to Tunisian “democracy” rather than the Tunisians themselves who were going about their business as usual. Was a ten-year experiment in “democracy” not drawing to a close? On 27 July, the Financial Times encouraged “the US and the EU (to) deploy their leverage to oppose Kais Saied’s coup”. Such reactions fitted into the broadly-shared analysis among most think tanks, media and politicians that Tunisia was the only Arab country well on the road to democracy after the revolts that swept across the Arab lands in 2011.

As Jason Pack notes while commenting on the Arab Spring in Libya in his recent book (Libya and the Global Enduring Disorder, Hurst/Oxford University Press, 2021), western policymakers, tasked with devising the programme to facilitate the ‘post transit transitions in North Africa, were “primarily focused on moulding the implications of political regime change rather than assuring that economic regime transpired”. This has meant in Tunisia, Egypt, and Libya – all for slightly different reasons – that the underlying structural/economic causes of the uprisings have not been fundamentally addressed at all. Applying this realization to Tunisia, we unpack what transpired with Said’s move on 25 July.

Robert Parks and Tarek Kahlaoui suggest that “support for Saied can thus be viewed as citizens demanding that the 2011 revolution be implemented in a democratic framework where the definition of ´democratic´ goes further than minimalist elections and addresses deep-seated socio-economic grievances.” (MERIP, Populist Passions or Democratic Aspirations? Tunisia’s Democracy in Crisis, 10.26.2021).  Similarly, the west had misread the early post-Soviet Russia and post- Qadhafi-Libya years. Observers in Europe and the US seemed oblivious to the collapse of state authority and the deteriorating living conditions that characterised, to different degrees, Russia, Libya and Tunisia.

Most Tunisians reacted to such flattery with a mixture of scorn and disbelief. As many people were thronging the streets of every town and village in Tunisia on the night of 25 July -as they had the day Ben Ali fled the country eleven years earlier – expressed respect for a president whose strong moral stand against a corrupt political class cut across all classes, generations and regions. The conviction of mostly western observers that dictatorship was returning flew in the face of the conviction of 12 million people. Popular support for the president remains strong despite misgivings about the lack of an economic roadmap.

The West has a tradition of being surprised

Three parliamentary elections have been held in the eleven years since the fall of Ben Ali. They have not been tainted by fraud although abstention rates, particularly among young people, have risen dramatically. In 2011 Ennahda polled 38% of the votes and 49% of the seats in parliament and governed with two smaller parties, which have since disappeared. The first parliament (2011-14) was a National Constituent Assembly marked by bitter fighting over identity politics. In the second poll three years later, a newly-minted coalition, Nidaa trumped Ennahda’s 69 seats, winning with 86 seats. Nidaa reversed its pledge not to work with Ennahda, and the party became Nidaa’s junior coalition partner, to the dismay of many Nidaa supporters. Neither of the two leading parties was seriously committed to political liberalisation let alone deep economic reform. Ennahda won more seats than any other party in 2019 with 59 seats but lost votes. It faced a resurging Free Destour Party, launched by former pro-Ben Ali supporters. Shifting majorities made parliament increasingly volatile and handed power to the Speaker, the leader of Ennahda.

Kais Saied who was elected president in 2019 is a man of few words. He had no previous political experience but he quickly appropriated the slogans of the social movements of 2018. He confronted a fragmented parliament whose spokesman, the Ennahda leader, had enjoyed pulling the strings behind the scenes for ten years. The stage was therefore set for a confrontation as the constitution, approved by referendum in 2014, does not clearly define the respective powers of the head of state and parliament. The result was inertia. The desperately needed economic reforms promised by the successive governments and presidents to the IMF, the EU and Western governments failed to materialise. The challenge of reforming industrial and education policies and facing up to a growing regional divide was never taken on. Where many Western observers saw “democracy”, most Tunisians saw “kleptocracy.” Their perceptions were confirmed when an unreformed judicial system failed to bring those responsible for the 2013 murders of left-wing politicians Mohamed Brahmi and Chokri Belaid to justice. Inquiries into notorious cases of corruption seldom ended up in court.

Drafting a new constitution and holding three parliamentary and presidential elections did however allow the creation of a consensus narrative that rooted modern politics within the constitutional (Destour) tradition, which predates the French colonial occupation of 1881. As the Speaker of parliament tried to enter a closed down national assembly in the early hours of 26 July, he told a soldier guarding the gates that he was “upholding the constitution”. The young soldier told the politician that he was “defending the country (Watan)”. This exchange neatly sums up the horns of the dilemma Tunisia finds itself in. The small professional army, with senior officers who are often trained in the US, has no stake in the country’s economy, unlike its peers in neighbouring Algeria, Egypt and Libya under Qadhafi. It gave its support to the president and shows no sign of changing its mind. The top brass sees its duty as guaranteeing the perennity of the state, not upholding any given constitution. In most Arab countries the army is feared, in Tunisia, it is respected.

For many in the outside world, Tunisia was confirming at every election its status as a functioning democracy. In a recent interview with the business magazine “Leaders”, the president of the confederation of Tunisian industry (UTICA), Samir Majoul noted that while Tunisians seemed to have forgotten about the economy over the last eleven years, the economy had not forgotten them and had come back to bite hard. Successive leaders of the powerful UGTT union may have forgotten the economy too, as the political parties, acted as a powerful break in economic reform.

Major upsets in modern Tunisian politics often seem to catch the West by surprise. France and the EU were surprised by the “medical coup” of Ben Ali to remove Habib Bourguiba in November 1987. The US, Italy and Algeria were not as they had been forewarned. The swift fall of Ben Ali in 2011 took the French and the EU – less so the US – entirely by surprise. Having presented Tunisia since the 1990s as an economic miracle to be copied, the IMF, World Bank, Davos Forum and the EU, helps to explain why these organisations failed to appreciate how deep-seated the corporatist state was. The economic management of Tunisia is more akin to Ancien Regime France, a guild system reminiscent of Europe before the industrial revolution (*). Contrary to the 18^th century United Kingdom and its open elites, Tunisian elites are fairly closed. Control of the economy is vested in a tight network of influential families that spans towns from the richer coast to the poorer hinterland. The poorer hinterland sells its water, wheat, phosphates and labour to the coastal region, which monopolises political power and which, in turn, offers poorer western and southern fellow countrymen very little. The social fracture between the two Tunisias has worsened since 2011.

A World Bank Report entitled “The Unfinished Revolution” in 2014, underlined that democracy with no economic growth is not sustainable long term. Its conclusions went unheeded. In 2014, in another unusually candid report “All in the Family”, the World Bank owned up to its past mistakes but political leaders seized on the report to suggest that once the corruption of the Ben Ali family was rooted out, standards of living would rise. Irrespective of whether they believed in this form of magical economic thinking or not, many ordinary Tunisians did. When combined with fast growth in the informal sector, which pays no taxes, the exponential growth of contraband from neighbouring Libya, the body blow of terrorist attacks in 2015 and the effects of Covid-19, it is easy to understand why the country’s economic performance deteriorated.

To those external blows were added ones such as the creation of massive numbers of state jobs, many only on paper, by political parties such as Ennahda and UGTT. An inflated state wage bill has destroyed its capacity to invest in infrastructure. Tunisians have lost interest in what they see as “formal institutional democracy” when considering their daily lives, the buckling of the state, rampant corruption, an unreformed judicial system and a repressive legal system where some laws date back to colonial times or even earlier.

Why Tunisia was seen as an exception

Until the election of Kais Saied in 2019, the contrast between events in Tunisia and those which unfolded in Arab countries as diverse as Egypt, Libya, Algeria and Syria reinforced an optimistic take among casual outside observers. The economic and social costs of the revolts across Arab lands have been dismal but Tunisia appeared to duck this trend and was soon promoted as ”the Arab exception”. Others were less sanguine, remembering what the Chinese premier, Zhou Enlai, is famously reported to have observed in 1972 when asked about the impact of the French revolution – that it was “too early to say”. Despite the World Bank accepting that it had misread Tunisia (Francis Ghiles “The World Bank Easts Humble Pie”,  Cidob OPINION 270, October 2014) many Tunisians see the EU, the IMF, the World Bank and other western aid donors as complicit with those governments to whom they lent money in ignoring rampant corruption, tax evasion and capital flight. They note the continued emigration of educated Tunisians and the entrenched nature of privilege.

Enduring disorder in Libya

The same year Tunisia broke with its troubled past in an attempt to create a new regime to address fundamental structural, economic, and political deficiencies, Libya saw its destiny transformed by the imposition of a NATO no-fly zone at the instigation of France and other countries. This created a significant security challenge for Tunisia. Its military spending has doubled to an estimated US$1bn a year since 2011. The current budget figures suggest security accounts for 19% of all expenditure. In the context of a fully-fledged financial crisis, Tunisian leaders should ensure their EU partners understand the importance of the overall stability of Tunisia whose security is of paramount importance not just to 12 million Tunisians but to Europeans.

This realisation of the interconnectedness of the European and North African economies and security environments is even more pertinent when applied to Libya. Jason Pack eloquently describes the disastrous US-EU-UN mismanagement of the post-Qadhafi transition in his book. His work explores how the failure of collective action, a lack of willingness to invest sufficient political capital in Libya, and endless infighting between European governments led to an eminently avoidable substandard outcome playing out on the ground in Libya.  The current uncertainty in Tunisia does not mirror the truly enduring disorder in Libya but, to a greater or lesser degree, both are products of a failure of global coordination.

Amid this inability to coordinate on larger, forward-looking goals like state-building and economic growth, some states have been willing to lead on essential policies like counterterrorism. Algeria and the US have more than the EU or any single European state, helped Tunisia fight Jihadism. From 2014 to 2017, most ISIS fighters in Libya came from Tunisia. It was a US airstrike on Sabratha, east of Tripoli that successfully targeted those accused of having organised two terrorist attacks on Le Bardo Museum and the beach resort of Sousse in 2015. US and Algerian support helped make Tunisian security institutions and the army more robust institutions. These were steps in the right direction but because there was no coordinated follow up they did not address the root causes of Jihadism – ungoverned spaces and economic failures leading to mass unemployment.

Economic and financial woes

It is worth remembering that, financially and economically, things started going wrong in Tunisia from early 2011. Eleven years later, the country faces a fully-fledged financial and debt crisis. Annual GDP growth of 2.6% at the time of Ben Ali’s fall has turned into a decline of 2% last year Unemployment has increased to 15% pre-pandemic, a figure that increases to 40% among Tunisians under the age of 25 in the poorer hinterland towns. One-third of university graduates are unemployed according to a 2014 IMF study. The response of the successive government has been to increase the number of public employees: 100,000 alone were added in the two years following Ben Ali’s fall to reach 550,000. That number is 620,000 today, or 820,000 if one includes state-owned enterprises. Salary increases in 2011-12 alone were 20%, followed by others. The ratio of public servants to GDP is one of the highest in the world. Tunis Air employs more staff per plane than any other state carrier in the world.

Income from tourism, both direct and indirect, accounts for 15% of GDP. It was hit hard by the terrorist attacks of 2015. External balances deteriorated and the Dinar depreciated further. Foreign exchange reserves dropped from US$7.3bn in mid-2015 to US$5.6bn in 2018. The increase in foreign debt can also be attributed to the way the debt is structured, 70% of which is labelled in foreign currencies. As the Tunisian Dinar (TD) weakens, the debt increases. The vicious cycle of rising inflation feeding into a weaker TD impacts debt levels and is inescapable. This has forced interest rates up since 2015: as the Central Bank (BT) fights to keep hard currency reserves and fight inflation, it chokes off economic activity and private investment. Interest rates have more than doubled to 9% since 2011.

Covid-19 resulted in a collapse of economic activity which impacted imports very significantly.  This improved the trade deficit and allowed a recovery of currency reserves until the end of 2020.  However, this was a short-lived relief. The latest central bank report shows decreased reserves at the end of 2021 – hence the impatience expressed earlier this year by the BT about the slow pace of negotiations with the IMF. Failure to act quickly would increase pressure on the BT as a combination of high interest rates, weak GDP growth, high unemployment and rising public debt is unsustainable. The president has vowed to put institutional ahead of economic reform, but that stance may not be sustainable for much longer.

Saied’s predecessor, Beji Caid Essebsi was not in favour of economic reform despite his party, Nidaa, riding to power in 2014 on its claim to conquer economic issues. His long-standing prime minister, Youssef Chahed, undermined the economic reforms he publicly claimed he was implementing. Back in 2017, the resignation of a respected minister of finance, Fadhel Abdelkefi, was described by a member of the World Bank staff in Tunis as a “coup d’état économique’ (Francis Ghiles  ”Tunisia, slow progress in a turbulent world” Cidob NOTES 181, October 2017). Abdelkeki’s attempt to sack senior customs officials at the notoriously corrupt port of Rades, outside Tunis was thwarted by the prime minister. Chahed was forced to sign a US$2.9bn four-year Extended Fund Facility (EFF) with the IMF because access to capital markets on favourable terms had dried up after 2011, successive Tunisian governments were loath to tackle tax evasion and illegal capital transfers, and the EU was unwilling to put its money where its mouth was. Brave words extolling the virtues of democracy emanating from EU politicians, think tanks, and the media were no substitute for hard cash.

Some MPs did have reservations about the terms of the EFF that targeted the streamlining of the public sector predicated on the devaluation of the Tunisian Dinar, which has fallen by a third since then. Parks and Kahlaoui note that policy had “the unanticipated effect of hurting the local industry that assembles imported parts into final products for the export sector, thus exasperating the trade deficit.”  They add that a policy aimed at reducing the budget deficit by cutting subsidies, freezing public sector wages and increasing VAT on many basic consumer items was “viewed as indirect subsidies to the wealthy” by taking from the poor and the middle classes. Discontent was further fuelled because the government did nothing to prevent widespread tax evasion by the professional classes.

The social movements which erupted in 2018 – Fech Nestannou (“what are we waiting for”) and Manich Msamah (“I will not forgive”) offered clear warning signs of the irritation felt by many Tunisians.  The election of Kais Saied to the presidency in October 2019 should have set alarm bells ringing if only because a clean sweep of the poll by a rigid moralist law professor of few words sent a clear message of defiance to existing parties. Young Tunisians understood that the revolt of 2011 had decapitated a system but not ushered in a revolution.

The question today remains how the president will spend the political capital he still enjoys? Has he convinced himself that a new constitution is a key to avoiding a new disaster? He might need a wake-up call on economics and finance. Let us recall James Carville’s famous quip “it is the economy stupid” which won Bill Clinton the presidency in 1992. For all outsiders know, he might be engaged in secret negotiations with the IMF. The BT and ministers are tighter lipped than at any time in the history of Tunisia since independence in 1956.

Until Saied took all powers upon himself, the politics of consensus in Tunisia seemed to work. Preserving the consensus was paramount. The smallest number of choices and the largest number of satisfied voters were the order of the day. Social peace was the litmus test of democratic governance, but stronger medicine is required, and Tunisians might not like its bitter taste.

The EU should be bold

Kais Saied may underestimate the need to come up with an economic road map sooner rather than later, he may also not appreciate that he needs to trust more senior Tunisians in the political and business class, many of whom have the interests of the country as much at heart as he does to defend his policies. He needs to engage more with Tunisia’s foreign partners many of whom remain puzzled at the level of support he retains.

Had the EU understood the real nature of the corporatist governance of Tunisia and not been so beholden to the IMF and the World Bank’s economic analyses when assessing the country, it might have been more imaginative in its response. The Washington Consensus is dead. There is a need for Tunisians and others to come up with a blueprint that drags Tunisia out of its Ancien Regime economic management in which the web of state-private sector Gordian knots are cut.

But this needs to be done in the context of a world recovering from Covid-19 which has seen debt levels increase significantly. The recovery in emerging markets is much weaker than in richer countries where the economic rebound is stronger. Inflation pressures are challenging monetary policies in richer countries with the expectation of higher interest rates. In emerging economies, debt levels are unsustainable and the president of the World Bank himself has warned of “disorderly defaults”. Rating agencies are sounding the same alarm bells. In such a stormy climate, Tunisia cannot afford to wait. Kais Saied does not have the luxury of hardly engaging with Tunisia’s major lenders and commercial partners.

The EU should not underestimate the mixture of nationalism and quiet despair that pervades Tunisia today. It underestimated the key role economic reforms and a thriving economy play in building democracy. Institutions that parrot their western equivalents are no substitute for serious parliaments, parties that are not articulate on real interests or social groups offer little in the form of real debate, ministerial portfolios that change week after week are a recipe for disaster.  Maybe it is time for Europe to offer Tunisia a partnership in security and immigration where it shoulders a significant share of the financial burden. Further turmoil in Tunisia as the country fails to reform and falls into deeper poverty would only accelerate the strategic shrinkage already evident in relations between the EU and Maghreb countries.

The withdrawal of American hegemony across the region has resulted in the EU and France, arguably the key player in North Africa, failing to coordinate their responses to the interlinked crisis from Mali to Libya. America’s selective disengagement from the broader Middle East is the first factor contributing to Europe’s weaker leverage because of the myriad internal divisions within the EU and its obsession with blocking migration rather than addressing the root causes. This has cost the EU much of its diplomatic leverage in Libya. In Tunisia, where the state, however weak is standing, a united and generous response might be the most intelligent strategic gesture the EU can offer, one which will avoid even more painful and expensive policies a few years from now. This response can only emerge from a correct understanding of the structural conditions that first led to the Arab Spring uprisings, the failures of the post-dictatorship transitional processes, and the re-emergence of the very same symptoms that kickstarted the uprisings in the first place.

*   The devil is in the detail and nowhere is this better illustrated than in the corporatist nature of economic management in Tunisia.

(a)        A small group of families, usually with stakes in many sectors of the economy, sit on the board of several banks where they influence loan policy. Their implicit agreement becomes explicit when they decide to offer interest on deposits below the market rate. The former minister of finance and founder of the country’s leading private bank BIAT, Mansour Moalla, has openly criticised this “cartelisation” of the banking system. Among its many consequences has been a huge overhang on loans to certain sectors of the economy such as tourism, which are unlikely to be recovered, and the exclusion of young entrepreneurs from acquiring loans for start-ups and small companies. The state finances any number of special intermediary bodies such as the Agence de Promotion des investissements, the Office du Commerce, private companies, the leading trade union UGTT and even sports clubs in an opaque fashion, with no audits required. Parliament has no means of checking how these loans are used. Ministers who come and go are often oblivious of what the administration they nominally head is up to. This maze of obscure financing explains why Tunisia has never allocated credit according to any rational market criteria. The sheer number of often undercapitalised banks stand in contrast to the small number of efficient and competitive Moroccan ones.

(b)        Tunisia has pursued a farming policy since independence servicing certain private interests but not those of the general population. Powerful state bodies such as the Office des Cereales, the Office de l Huile and the Groupement Interprofessionel des Dattes are financed by taxing production, imports and exports in the sectors they represent. Private companies in each sector regulate their industries, which allows them to keep competitors at bay – like medieval guilds. The man who heads the Chambre Syndicale des Industries Laitieres de Tunisie at the employers’ federation UTICA sits on the board of GIVLAIT. This company holds 66% of the market in milk and milk-related products. GIDattes offers another example of a sector where a few powerful entrepreneurs choose to keep out the competition and establish rules that suit their interests. The price for durum paid to Tunisian producers for decades has been below world prices. Local production is either discouraged or regulated to benefit a few operators. Meanwhile, the price of certain staple foods is subsidised, with much of the best farming land in Tunisia in the hands of cooperatives, in other words, the state. The result is that income for smallholder farmers declined and Tunisia failed, except for olive oil, where exports were liberalised in the 1990s to increase exports. The confusion between regulators and producers who have invested in the regulatory system for personal benefit has increased in recent decades. This situation explains why most families in the farming hinterland have seen their incomes decline and why the fracture between a richer coast and a poorer west and south has increased.

(c)       Tunisia has one of the highest ratios of state employees/population in the world. Successive governments have created ever more jobs that resulted in a near paralysis of economic management. A bonfire of regulations and state authorisations is what Tunisia needs. The country is more than a case study of state capture, as the World Bank would have us believe. It is a case of the state devouring the real economy and robbing the country of its future.

Francis Ghiles is a Senior Research Associate at CIDOP (Barcelona Centre for International Affairs), former Financial Times correspondant for North Africa (1981-1995) and regular contributor to the BBC Workd Service

Bassem Snaije is a Finance and Economics Consultant, adjunct professor at SciencesPo in Paris and Member of IREMMO institute a think tank, in Paris

Photo credits: euromesco.net

This article does not necessarily reflect the position of RLS