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Donors pledge $7.6 billion for Lebanon

International donors pledged $7.6 billion in aid and loans at a conference Thursday to raise money for Lebanon’s U.S.-backed prime minister and his economic reform program for the war-scarred country.
/ Source: The Associated Press

International donors pledged $7.6 billion in aid and loans at a conference Thursday to raise money for Lebanon’s U.S.-backed prime minister and his economic reform program for the war-scarred country.

Conference host French President Jacques Chirac announced the figure after more than 40 nations and financial institutions took turns announcing their contributions. Donors also sent strong messages of political support for Prime Minister Fuad Saniora’s fragile elected government.

“Everyone knows that Lebanon’s stability is decisive for the entire region’s stability,” Chirac said.

Escalating violence between pro- and anti-government factions in Lebanon added a sense of urgency to the conference. On Thursday, government and opposition supporters clashed at a Beirut university campus, battering each other with sticks, stones and pieces of furniture. One person was reported killed.

Saudi Foreign Minister Prince Saud al-Faisal said his country would channel $1 billion in development funding and give another $100 million grant to the Lebanese government.

The U.S. said it plans to more than triple economic aid. Secretary of State Condoleezza Rice said on the eve of the meeting that the Bush administration is seeking $770 million in new aid for Lebanon. The money, which must be approved by Congress, would finance long-term redevelopment and immediate rebuilding from the summer war between Hezbollah militants and Israel.

Rice: 'Beyond the wildest dreams'
Rice said the total pledged was much higher than expected.

“I think this goes beyond the wildest dreams of everyone for the success of the conference,” she told a news conference. “I think when people really started thinking about what was at stake here ... they decided that this statement had to be made.”

Earlier, Rice would not speculate on the fate of the donation should Hezbollah militants take power.

“This is a package that is for Lebanon,” she said when asked if the money is contingent on the survival of a U.S.-backed government in Beirut. “Lebanon is a democracy.”

Saniora told the conference his country was “on the verge of a deep recession” because of the recent war.

“Your support will be essential in seeing Lebanon through,” he said. “The cost of failure is too great to contemplate.”

The conference comes as Saniora’s government is locked in confrontation with Iranian-backed Hezbollah and its allies, struggling under mountains of debt in addition to rebuilding parts of southern Lebanon in ruins after the latest war.

Chirac said half of a new $650 million loan from France would be extended this year. The European Commission, the EU’s executive arm, pledged some $649 million in loans or aid.

Lebanon has $40 billion in state debt, equivalent to about 185 percent of its annual economic output, making it one of the world’s most indebted nations.

The United States and other donor nations back Saniora and say Lebanon must be defended from meddling by Iran and neighboring Syria, which occupied the country for nearly 30 years before withdrawing in 2005.

British Foreign Secretary Margaret Beckett said the conference sent a signal of political as well as economic support for Saniora’s government and his proposals to reduce public debt.

“This government does have a credible reform program,” she told reporters.

Saniora’s critics said donors would worsen Lebanon’s debt and be pouring good money after bad.

On the brink of chaos
This week’s clashes in Lebanon between pro- and anti-government factions harked back to the country’s civil war days and offered a stark glimpse of how quickly events could spiral out of control if the confrontation between Saniora’s government and Hezbollah and its allies is not resolved.

Hezbollah gained new public support in its war with Israel and is thought to have given out many millions of dollars worth of aid to residents in areas devastated by the fighting. Western powers hope to counter that influence by pouring in more funding of their own.

World Bank President Paul Wolfowitz said the summer war caused $2.4 billion in direct damages, and $700 million to $800 million in indirect damages. He said Lebanon’s economy, instead of growing as expected last year, contracted by 6 percent.

No Hezbollah representatives were invited to the Paris conference. France and other donors said they were working only with the elected Saniora government, and it was up to him to work with opponents at home.

The worsening political turmoil has raised concerns that the government may be too paralyzed to fully rebuild even with newly injected funds. Aid will come with conditions — mainly assurances that Saniora’s government will make good on the economic and structural reforms announced this month, which have infuriated labor unions and Hezbollah supporters.

The reforms include contested plans for tax hikes and privatizations.