By MadaMasr –
This year saw Egypt and the European Union “elevate” their relations with a “strategic and comprehensive partnership” to the tune of 7.4 billion euros. An investment conference organized in the context of the new partnership is set to take place on June 29-30. EU sources say the idea is to seal the deal before then.
Set to be in effect from 2024 to 2027, the partnership comes at an economically critical moment for Egypt, with public debt reaching 96 percent of GDP and annual global inflation reaching 33.8 percent in 2023. Alongside a US$8 billion International Monetary Fund loan and a $35 billion investment deal from the United Arab Emirates, the EU assistance package comes to further narrow Egypt’s fiscal deficit.
But it also comes as a significant political boost for Egypt.
The new strategic partnership between Egypt and the EU is marked by the signing of an unprecedented Macro-Financial Assistance (MFA) agreement that will cover 5 billion euros of the overall 7.4 billion euro deal. Another 1.8 billion euros indicated in the partnership agreement are to be dispensed in the form of investments, while 600 million euros will be released as grants.
The EU grants MFAs to countries connected to it geographically or economically, such as bordering countries covered by the European Neighborhood Policy. They are usually granted as medium- or long-term loans or grants to countries facing a balance of payment issue and that are already benefiting from a disbursing IMF program.
This MFA is the first agreement reached by the EU and Egypt in the past four years, a senior EU diplomat says. According to a Europe-based analyst specializing in EU-Egypt relations, the EU was initially pushing for a programmatic assistance deal, which Egypt staunchly refused, demanding general budgetary support over which it could have more financial and political control. The EU was not inclined to engage in such budgetary assistance.
However, a previous deal with Tunisia deemed successful in curbing migration, alongside the eruption of the Sudan war and the increasingly rancorous rhetoric from Egyptian authorities about the cost of hosting refugees, changed that position, the source adds, noting rising concerns about Egypt’s stability (..).
EU parliamentary elections had also been looming in the background, and fostering the so-called externalization policies of the migration issue is a vote-winning card across the political spectrum, the source says. For the last three decades, the EU has adopted an externalization policy agenda by outsourcing border control to non-EU member states in order to prevent migrants from setting foot in Europe.
As such, the deal became a win-win, as described by most sources, with Egypt getting the budgetary support it wants amid its economic woes without making any political compromises, while the EU ensures some leverage in its stability and furthers its vote-grabbing plan to externalize migration policies.
The EU diplomat says the right time has come for such an agreement with Egypt, considering its financial crisis that burgeoned at the beginning of the year. They add that Egypt asked that the EU match a loan amount it was negotiating with the IMF, which is also recorded in the deal’s documents.
The European Commission’s proposal for the MFA, obtained by Mada Masr, specified that the financial package “will be provided in a challenging economic situation where Egypt continues to have sizable and unmet financing needs. In this context, Egyptian authorities requested support through macro-financial assistance from the EU on March 12, 2024, after an International Monetary Fund staff-level agreement on an augmented $8 billion Extended Fund Facility was announced on March 6, 2024.”
The original IMF loan to Egypt was approved in December 2022 and set at $3 billion. A $5 billion increase was announced in 2024, following the first formal IMF review mission to Cairo in January.
At that time, other negotiations were ongoing with Arab Gulf countries, and the UAE’s $35 billion investment deal in Ras al-Hikma had not yet come through, according to the diplomat. EU assistance “would help Egypt cover part of its overall external financing gap, which is estimated at around $17.7 billion in the context of the new IMF program over the period of 2024-2027,” the proposal further reads.
At the same time, according to the analyst, the UAE’s investment in Ras al-Hikma actually helped spearhead the EU deal. “When the UAE came through, the EU found itself in a position where something had to be given to the Egyptian government or else they risk losing favors with the country,” the analyst says.
The diplomatic source, as well as another diplomat from Brussels, say that the overall intention behind the MFA is to invest in Egypt’s stability, which has become more of a priority with the ongoing wars in Gaza and Sudan and the fragile political situation in Libya. The first source says the EU centers Egypt’s stability primarily around the Suez Canal. Several passages in the EU proposal documents obtained by Mada Masr refer to how the war in Gaza and the subsequent Iran-backed Houthi attacks on commercial vessels sailing through the Red Sea have affected movement and proceeds from the Suez Canal.
“Four years ago, Egypt was thought to be a sinking ship that the Gulf will always come through for and save,” the analyst tells Mada Masr. But with the Sudan and Gaza wars ongoing, “the one thing you’d constantly hear in EU meetings is that Egypt is the victim of geopolitics,” the source adds.
At the same time, the first diplomatic source made sure to add that the assistance package has nothing to do with the settlement of fleeing Palestinians from Gaza, as the EU “stands staunchly against the displacement of Palestinians.” Egypt too has made confident references to its rejection of any scheme to displace Palestinians to Egypt and has recently been repeatedly referencing the 9 million foreigners it “hosts despite economic challenges,” of whom over 570,000 are asylum seekers.
This discourse has resonated. During one of his visits to Egypt a year ago, EU High Representative for Foreign Affairs and Security Policy Josep Borrell discussed with officials the situation in Sudan and the impact new arrivals of refugees have on the socioeconomic situation in Egypt. “Egypt has shown great solidarity with Sudanese refugees during this crisis. We praise and recognise this admirable effort,” Borrell said to Mada Masr in an email interview shortly after his July visit last year.
While Egypt’s stability seems to be the more strategic aim behind the partnership, its role in curbing migration to Europe plays a role, at least on the level of European inward consumption.
The source admitted that the deal being negotiated under the term of European Commission President Ursula von der Leyen, with the EU Parliament elections in the backdrop, may have played a role. Von der Leyen was just reinstated for a second five-year term, and her center-right European People’s Party secured 26 percent of the seats during this month’s poll, making it the largest group in Parliament.
In the EU Parliament electoral context, the deal with Egypt is considered part of a series of similar deals aimed at curbing irregular migration, including with Tunisia, Mauritania and an upcoming one with Morocco. The deals have faced several pushbacks from EU parliamentarians opposing the dispensing of large amounts of money to authoritarian leaders.
While the 5 billion euros are granted to Egypt in soft loans, with Egypt having complete freedom to use the funds in the way it sees fit, there are certain thematic components to the agreement that reflect European interests, including curbing migration through its broader policy of externalization. Moreover, outside the MFA, the 600 million euros in grants have 200 million euros earmarked for migration management.
In this context, strengthening border management and combating smuggling are considered priorities. The agreement, according to the first EU source, will also be used as a framework for pushing Egypt to complete a draft asylum seekers law that the government had put together in 2023. The law establishes a Permanent Committee for Refugee Affairs that is tasked with data collection and service provision for refugees. The source says that the EU will be providing technical assistance in that regard through the Malta-based European Union Agency for Asylum.
The discourse governing curbing migration from its countries of origin has been centered on addressing smuggling networks. “The business model has to be destroyed,” outgoing ambassador of the EU to Egypt, Christian Berger, told Mada Masr in an interview in October of last year, referring to combating smuggling. “Money gained from smuggling is also used for other crimes, such as terrorism.” To combat migrant smuggling, Egypt adopted legislation in 2022 centered on staunch punishment of smuggling networks.
“These are the criminals who exploit people’s hopes for a better life and lead them to great dangers and, in the most tragic episodes, death. We already have ongoing good cooperation on border management, search and rescue and anti-smuggling operations with Egypt. But the challenges related to irregular migration are daunting and require a joint approach by countries of origin, transit and arrival,” Borell said.
Speaking before the EU deal’s finalization, Berger told Mada Masr that the priorities listed for 2021 to 2027 in the EU-Egypt partnership “had a robust section on migration. In 2016, 300 boats left from Egypt to Italy, with unaccompanied minors asking for family reunification. Hence, migration remains a big concern.” European data show that Egyptians applying for asylum in the EU have reached the highest numbers in 2022 since 2014.
Besides border control and countering smuggling, Berger added that offering alternatives to those desiring migration is equally important. “There should be efforts toward increasing the possibility of people traveling legally,” he said, pointing to such initiatives as the pre-positioning work to facilitate job searches abroad and seasonal worker agreements with Greece.
Nevertheless, Egyptian migration to Europe, which amounted to around 20,000 migrants in 2022, cannot be seen as the most considerable issue in the EU’s deliberations with Egypt over the partnership, as signaled by another European diplomat based in Cairo. According to the analyst, migration by Egyptians and from Egypt is not a big issue in Europe, perhaps in Italy, but less so in the whole of Europe. There is often an issue with Egyptian smugglers, he said, and hence the focus on combating smuggling. “Egypt was quick at using this card, signaling to Europe that it can be a helpful partner there, but it needs to be paid up,” he added.
General stability in Egypt and the dual political use of the migration question by both Egyptian and European politicians have led to the striking of the deal, with two small exceptions made for Egypt.
This the first EU MFA signed with a neighboring country where the political precondition is not fulfilled, a fourth source within the EU in Brussels said. They said the political precondition includes developing respect for human rights and effective democratic mechanisms.
The way the commission’s proposal for the MFA reasoned with Egypt not meeting the political precondition is that, while human rights challenges remain “significant,” Egypt “has taken several steps in putting greater emphasis on the importance of respecting human rights; it abolished the state of emergency (apart from areas in Sinai), launched the first ever National Strategy for Human Rights, relaunched the Presidential Amnesty Committee, releasing over 1000 political prisoners, and embarked on the National Dialogue.”
The document added that “Egypt has further declared in its National Strategy for Human Rights its intention to reform the law on pre-trial detention, ameliorate detention conditions, limit the number of crimes punishable by death and enhance the culture of human rights across all government institutions.”
The first tranche of the MFA, 1 billion euros, is expected to be dispensed before the end of the year and was framed as short-term financial assistance in view of Egypt’s liquidity needs, the fourth diplomatic source said, leading to the second exception made for Egypt. The tranche, to be released without EU parliamentary approval as it is deemed a case in urgent need of funding, will have to be followed by a progress review on the level of economic reforms and the political precondition, according to the source. The European Parliament will also have to approve the remaining 4 billion euros of the MFA.
However, the Europe-based analyst said that the IMF’s recommendation to the EU member states is to focus on the political precondition, as its attention is more veered toward monitoring economic progress considering it does not have a mandate to negotiate political conditions.
Some Egyptian and international human rights groups addressed a letter on June 13 to the EU, commenting on the partnership. “From February 2024 onwards, Egypt’s donors, including the United Arab Emirates, the International Monetary Fund, the World Bank, the United Kingdom and the European Union provided or pledged around $57 billion in grants and loans. As part of this process, donors should ensure that the Egyptian authorities pursue and effectively implement reforms that improve respect for human rights alongside greater transparency and accountability.”
“We find the assessment adopted for Egypt’s case to demonstrate that it made credible steps toward respecting human rights that are not grounded in reality,” Hussein Baoumi, Middle East advocacy officer with Amnesty International and one of the letter’s signatories, tells Mada Masr. “There are a number of minimum steps that Egypt should take, such as lifting arbitrary detentions and restrictions on civil society for them to be able to operate freely. We are calling on the EU to agree within the memorandum of understanding with Egypt to take these steps as minimum guarantees for the respect of human rights.”
The human rights groups made demands for short-term reforms that include lifting media censorship, allowing NGOs to operate outside the frame of draconian laws, releasing people arbitrarily detained for expressing their opinion and those who exceed legal terms of pretrial detention without prosecution, removing journalists, activists and human rights defenders from terrorist, asset freeze and travel ban lists, and stopping practices of arbitrary detention, use of anti-terror legislation and bogus charges.
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