Egyptians fret over economy after rancorous vote on constitution

Shaimaa Fayed and Tamim Elyan
Reuters Middle East

CAIRO, Dec 25 (Reuters) - Egypt prepared to announce on

Tuesday the result of a vote on a new constitution that Islamist

President Mohamed Mursi hails as a step toward stability in a

country beset by political and economic crisis.

But critics say that by ramming through the basic law, Mursi

has angered his liberal, leftist and Christian opponents, and

may have squandered any chance of building a broad consensus on

tax rises needed to rein in a crushing budget deficit.

Unofficial tallies from Mursi's Muslim Brotherhood showed

the charter was approved by a 64 percent majority. The electoral

commission will announce the official result at 1700 GMT, with

the final numbers widely expected to confirm earlier estimates.

Mursi believes the constitution will end a protracted period

of turmoil that has haunted the most populous Arab nation since

the fall of military-backed strongman Hosni Mubarak in 2011.

But ordinary people and some commentators worry that Mursi's

approach in pushing through the contentious text will only

galvanise his rivals to capitalise on any public backlash

against austerity rather than help sell reforms to the nation.

Hossam El-Din Ali, a 35-year-old newspaper vendor in central

Cairo, said he agreed the new constitution would help bring some

political stability but like many others he feared the possible

austerity measures lying ahead.

"People don't want higher prices. People are upset about

this," he said. "There is recession, things are not moving. But

I am wishing for the best, God willing."

If the "yes" vote is confirmed, a parliamentary election

will follow in about two months, setting the stage for Islamists

to renew their struggle with more liberal-minded opponents.

On the political front, tensions remain high. The opposition

says the constitution, crafted mostly by Mursi's Islamist

allies, fails to guarantee personal freedoms and the rights of

women and minorities. The government denies this.


Once a darling of emerging market investors, Egypt's economy

has taken a hammering since Mubarak's fall.

The budget deficit surged to a crippling 11 percent of gross

domestic product in the financial year that ended in June 2012

and is forecast to exceed 10 percent this year.

In a further worrying sign, Egypt has made it illegal for

travellers to carry more than $10,000 in cash in or out of the

country amid growing fears the government may not be able to get

its fragile finances under control.

Reflecting investor concerns, Standard and Poor's cut

Egypt's long-term credit rating this week and said another cut

was possible if political turbulence worsened.

Adding fuel to people's worries, the central bank also said

it was taking steps to safeguard bank deposits, in a statement

which emerged after some Egyptians said they had taken out cash

out of concern their accounts would be frozen by authorities.

Without broad support, Mursi will find it hard to implement

reforms needed to secure a $4.8 billion loan from the

International Monetary Fund.

Shortly before the referendum, Mursi enraged many by

introducing hikes on the sales tax on goods and services that

ranged from alcoholic beverages, cigarettes and mobile phone

calls to automobile licences and quarrying permits.

In an embarrassing policy U-turn, he withdrew them within

hours under criticism from his opponents and the media.

Facing public anger, the Muslim Brotherhood's party, which

propelled Mursi to office in an election earlier this year, may

now also face a tougher fight in the parliamentary election.

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