BEIRUT: The impact of the European financial crisis  on Lebanon has been minimal, but that doesn't mean Lebanon shouldn't learn from what has happened, economists say.
Although the effect is minimal compared with other Arab countries due to the relatively low rates of European investments and exports, in addition to the high rates of deposits in Lebanese banks, analysts believe it would be complacent to tout this as a success without learning lessons from some of Europe's worse-hit countries“ whose national debts and unemployment are similar to Lebanon's.
"Lebanon can't spend its way out of a slowdown. The solution so far to the European crisis has failed. Borrowing massively to create jobs has failed," said Nassib Ghobril, chief economist and head of research and analysis at Byblos Bank.
"The EU's response of coordinated lending and austerity measures only accentuated the problem of unemployment, and they couldn't recover from the recession," said Mounir Rached, vice president of the LEA, who previously worked with the International Monetary Fund.
"The Lebanese fiscal deficit is nearly 9 percent of gross domestic product. That's higher than any European Union country in crisis. There are no measures to decrease borrowing in Lebanon. Only Greece has a higher debt than Lebanon," Ghobril said.
"There's no excuse to have debt that's 139 percent of GDP," said the Byblos Bank analyst, who fears that if Lebanon continues on its path of not seriously addressing its massive debt, not reforming its public sector and allowing bureaucracy to impede private sector growth, it will suffer a similar fate as Greece, one of the worst-hit countries of the financial crisis.
"In Greece there are so many things constraining the private sector, such as the legal framework," he said.
Ironically it is Lebanon's red tape and inhospitable business environment that has allowed it to be only minimally affected by Europe's financial crisis" a blessing for now, but not in the long term.
According to the IMF, nearly 60 percent of exports from the Maghreb are destined for Europe. In comparison, around 10 percent of Lebanon's exports go to the continent. Lebanese exports to Europe have remained relatively steady since 2009.
More importantly, Lebanon's banking sector has been able to withstand shocks from both the U.S. and European financial crises. Only two Lebanese banks have European ownership" SGBL, with 19 percent of its shares belonging to Societe Generale, and Fransabank, with 6 percent of its shares belonging to Credit Agricole. Fortunately for Lebanon, the French economy has remained resilient.
˜We haven't seen any intentions by them sell shares. They're benefiting from stability of Lebanon's banking sector," Ghobril said.
Still, of all the EU countries, Greece demonstrated the most similarities" hardly a sign for Lebanon, but possibly a good way to learn some useful lessons in risk aversion.