International Relations and Diplomacy (ISSN2328-2134) Volume 7, Number 7,2019

International Relations
and Diplomacy
Volume 7, Number 7, July 2019 (Serial Number 70)
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Editorial Board Members of International Relations and Diplomacy:

★Abdel-Hady (Qatar University, Qatar); ★Martha Mutisi (African Centre for the Constructive
★Abosede Omowumi Bababtunde (National Open Resolution of Disputes, South Africa);
University of Nigeria, Nigeria); ★Menderes Koyuncu (Univercity of Yuzuncu Yil-Van,
★Adriana Lukaszewicz (University of Warsaw, Poland); Turkey);
★Ahmed Y. Zohny (Coppin State University, USA) ★Myroslava Antonovych (University of Kyiv-Mohyla
★Alessandro Vagnini (Sapienza University of Rome, Academy, Ukraine);
Rome); ★Nazreen Shaik-Peremanov (University of Cambridge,
★Ali Bilgiç (Bilkent University, Turkey); UK);
★András Mérei (University of Pécs, Hungary); ★Nermin Allam (University of Alberta, Edmonton,
★Anna Rosario D. Malindog (Ateneo De Manila University, Canada);
Philippines); ★Nadejda Komendantova (International Institute for
★Basia Spalek (Kingston University, UK); Applied Systems Analysis, Austria);
★Beata Przybylska-Maszner (Adam Mickiewicz University, ★Ngozi C. Kamalu (Fayetteville State University, USA);
Poland); ★Niklas Eklund (Umeå University, Sweden);
★Brian Leonard Hocking (University of London, UK); ★Phua Chao Rong, Charles (Lee Kuan Yew School of
★Chandra Lal Pandey (University of Waikato, New Public Policy, Singapore);
Zealand); ★Peter A. Mattsson (Swedish Defense College, Sweden);
★Constanze Bauer (Western Institute of Technology of ★Peter Simon Sapaty (National Academy of Sciences of
Taranaki, New Zealand); Ukraine, Ukraine);
★Christian Henrich-Franke (Universität Siegen, Germany); ★Raymond LAU (The University of Queensland,
★Christos Kourtelis (King’s College London, UK); Australia);
★David J. Plazek (Johnson State College, USA); ★Raphael Cohen Almagor (The University of Hull, UK);
★Dimitris Tsarouhas (Bilkent University, Turkey); ★Satoru Nagao (Gakushuin University, Japan);
★Fatima Sadiqi (International Institute for Languages and ★Sanjay Singh (Ram Manohar Lohiya National Law
Cultures, Morocco); University, India);
★Ghadah AlMurshidi (Michigan State University, USA); ★Shkumbin Misini (Public University, Kosovo);
★Guseletov Boris (Just World Institute, Russia); ★Sotiris Serbos (Democritus University of Thrace,Greece);
★Hanako Koyama (The University of Morioka, Japan); ★Stéphanie A. H. Bélanger (Royal Military College of
★Kyeonghi Baek (State University of New York, USA); Canada, Canada);
★John Opute (London South Bank University, UK); ★Timothy J. White (Xavier University, Ireland);
★Léonie Maes (Vrije Universiteit Brussel, Belgium); ★Tumanyan David (Yerevan State University, Armenia);
★Lomarsh Roopnarine (Jackson State University, USA); ★Zahid Latif (University of Peshawar, Pakistan);
★Marius-Costel ESI (Stefan Cel Mare University of ★Valentina Vardabasso (Pantheon-Sorbonne University,
Suceava, Romania); France);
★Marek Rewizorski (Koszalin University of Technology, ★Xhaho Armela (Vitrina University, Albania);
Poland); ★Yi-wei WANG (Renmin University of China, China);
The Editors wish to express their warm thanks to the people who have generously contributed to the
process of the peer review of articles submitted to International Relations and Diplomacy.
International Relations
and Diplomacy
Volume 7, Number 7, July 2019 (Serial Number 70)
Contents
Conflict and Cooperation
Egypt, Possible Conflict and Cooperation Areas in the Foreign Policy of the
Islamic Republic of Iran 295
M. Serkan Taflıoğlu
Currency Devaluation
Egypt’s Currency Devaluation & Impact on the Most Vulnerable 303

Laila El Baradei
Principle of Subsidiarity
The Principle of Subsidiarity 317

Athinodoros D. Doussis, Vassiliki Delitheou, Constantinos GE. Athanassopoulos
Russian Foreign Policy
The Tsar Legacy: Russian Foreign Policy in the Mediterranean Area from the
Romanovs to Putin 325
Maria Teresa Giusti
Economic Strength
The Myth of the Economic Strength of the United States 331

Eduardo Alfonso Rosales Herrera
International Relations and Diplomacy, July 2019, Vol. 7, No. 07, 295-302
doi: 10.17265/2328-2134/2019.07.001
D
DAVID PUBLISHING
Egypt, Possible Conflict and Cooperation Areas in the Foreign

Policy of the Islamic Republic of Iran
M. Serkan Taflıoğlu
Niğde Ömer Halisdemir University, Niğde, Turkey

A country’s foreign policy process is also a decision-making process. Foreign policy is a rational, multifaceted, and
balanced area that needs to be thought and executed. States operate within the framework of the decisions of
governments. The decision-making process can change its direction with reflections and influences from national,
regional, and international politics. While some theories think that governments/decision-makers are rational actors,
there are other theories. Decision-makers/governments are able to make decisions in accordance with national
interests. Who or which institution will determine what a country’s national interest is and whether its foreign
policy is in the national interest. Claiming that a foreign policy carried out by political will is in line with national
interest and gives it a certain degree of legitimacy and authority. The main problem here is the identification of
national interest with the discourse/policies of those officially responsible for the conduct of foreign policy.
National interest can best be determined if it has become a verifiable expression of the priorities of a nation. Heads
of state trust their advisors in their immediate surroundings when making foreign policy decisions, so it is important
to recognize the composition of the immediate environment. In authoritarian and totalitarian regimes, such as Iran,
ideology and leader are vital in foreign policy. The Iranian geopolitics, the ideological structure of the political
regime, and the constitutional structure, which is constitutionally effective and superior, should be analyzed in
order to examine Iran’s foreign policy. This comprehensive assay will naturally exceed the purpose and scope of
this study.
Keywords: Islamic Republic of Iran, Egypt, foreign policy
Introduction
Strategies/calculations in the Middle East are not read/implemented as planned on
maps/tables/numbers/words. For National Security, power (not just military force) requires rational acquisition
and manipulation. One of the main goals in the protection of National Security is to prevent the formation of
blocks against yourself in your region by using foreign policy tools. As Iran confronted the post-revolutionary
realpolitik realities, it shifted from idealistic discourses to more realist practices. As a result, after Khomeini,
Iran tried to normalize its relations with Arab states, especially Saudi Arabia. The geopolitical realities and the
goals of Iran’s political regime have in recent years changed from an implicit struggle with Arab states to an
open conflict. The increasing influence of Iran on Iraq, Syria, Yemen, and Lebanon brought Arab states against
Iran. Remove the Gulf Arab states and Turkey, they saw America as a counterbalance to Iran, but in recent
M. Serkan Taflıoğlu, Dr., associate professor, Department of Political Science and International Relations, Niğde Ömer
Halisdemir University, Niğde, Turkey.
296 EGYPT, POSSIBLE CONFLICT AND COOPERATION AREAS IN THE FOREIGN POLICY
years, the geopolitical fracture Egypt to the forefront as a balancing factor. The aim of our study will be to
understand the present situation after considering Iranian-Egyptian relations from a historical perspective. It
will be aimed at understanding whether there is a possibility of serious rapprochement and cooperation between
Iran and Egypt.
Foreign Policy Objectives of the Islamic Republic of Iran

When examining the political regimes, if any, the highest norm and the political text start with the
constitutions. As the state describes itself, it is also the rules governed by the state itself. One of the main
objectives of the Constitution is to bring balance, predictability, and functioning order to the actions of the state.
Leaving aside the philosophical and hypothetical debates on the constitution, constitutions can be
anti-democratic and authoritarian/totalitarian. The constitution of the Islamic Republic of Iran is one of the best
examples of the question of how to establish an authoritarian and totalitarian regime (Taflıoğlu, 2010). The
constitution of the Iranian constitution states that the revolution will continue inside and outside until the final
victory of the oppressed against the oppressors is won. It is emphasized that international cooperation with
other Islamic and popular movements will be improved in order to gather the Ummah under one roof in the
world. It is clearly stated that the struggle will continue until all the oppressed/persecuted peoples are saved.
Article 11 of the Constitution obliges the Islamic peoples of the Islamic Republic of Iran to provide political,
economic, and cultural unity. The issue of protection of the oppressed is stated in Article 154 of the
Constitution that except for the claims of the oppressed, the internal affairs of other nations will not be
interfered. In the first idealist/romantic discourse of the revolution, Khomeini stated in a statement that he
hoped to establish a party under the name of the Party of the Oppressed in the world (Humeyni, 1379, p. 185).
Article 9 of the Constitution gives protection to the territorial integrity of Iran as the duty of the Islamic
Republic of Iran as well as to each member of the nation. Article 153 of the Constitution includes the
preservation of “independence and territorial integrity” among the foreign policy objectives of the Islamic
Republic. The slogan “Neither the East nor the West, the Islamic Republic”, which is the summary of
Khomeini’s foreign policy philosophy in the early years of the revolution, has been broken against geopolitical
elements and realpolitik. The discussions on the meaning of this sloganized expression are excluded from our
study (Muhammedi, 1377, p. 38).
Understanding the Decision-Making Process in the Foreign Policy of the Islamic Republic
of Iran
Foreign policy decision-making approaches include system-level, global order/actor, individuals, groups,
or non-state actors, such as the public. Here, we will briefly try to put forward the decision-making process in
the Islamic Republic of Iran by trying to understand how the constitutional process works rather than the
outcomes of the events. The highest political authority in the Islamic Republic of Iran is the Guidance
Authority. Since Khomeini’s vilayeti mutlakı fakih is based on the concept of Fakih, there is no limit to his
legal powers (Taflıoğlu, 2013). Article 110 of the Iranian Constitution gives some direct and indirect powers in
the foreign policy decision-making process to leader (Rehber). First of all, it is the authority of the country to
determine the general policy in consultation with the Assembly for the Determination of the Benefit of the
Order and to check that it is implemented well. To give an example, when Egypt signed the Camp David
Agreement with Israel, Khomeini cut diplomatic relations between Egypt and Iran with a fatwa. As the
EGYPT, POSSIBLE CONFLICT AND COOPERATION AREAS IN THE FOREIGN POLICY 297
commander-in-chief of the Islamic Republic of Iran, the guide is entitled to declare war, peace, and
mobilization. The decisions of the Supreme Council of National Security of the Islamic Republic of Iran cannot
enter into force without the approval of the guide. The presidency is officially the second highest authority in
Iran. According to Article 113 of the Constitution, the president is responsible for regulating the relations
between the execution of the Constitution and the three powers (legislative, executive, and judicial). We will
not enter into a controversial constitutional position of the president within the regime, but the issue that we
must emphasize here is that in totalitarian regimes, the laws will not be read as written. Pursuant to Articles 113
and 133 of the Constitution, it authorizes the president to appoint his minister in charge of foreign policy. It has
the authority to sign all agreements, covenants, and alliances on behalf of Iran (Article 125). It is up to the
president to appoint Iranian ambassadors in other countries and to accept the ambassadors of other countries
(Article 128). The Islamic Shura Assembly is an element of legislation (Article 171) (Taflıoğlu, 2010). The
Assembly of the Islamic Shura is an authority that has the power to ratify the signed international treaties,
which are among the principal powers of all parliaments (Article 77). The border change agreement signed with
any country shall be permitted if the interests of the country are respected and are not unilateral, without
prejudice to independence and with the approval of 4/5 of the Assembly of the Islamic Council (Article 78). In
order to receive any foreign aid and lend to other countries, the approval of the Assembly of the Islamic Shura
is required (Article 80). The approval of the Islamic Council is required to appoint foreign experts provided that
it is non-military. As an important constitutional institution and a part of the legislative process, the Guardian
Council has the authority to approve the decisions of the Assembly of the Islamic Shura and has an effective
position in foreign policy decision-making (Article 94).
A Brief Look at the Political History of Iranian-Egyptian Relations

In narrow terms, Iran and Egypt are the two axis countries of the Middle East. Historically, the first
contact of Iranians with Egypt was the Persian Empire that can be taken until B.C. 550. During the Fatimid
period, Iran had one of the most powerful periods of cultural relations between Iran and Egypt (Yusufzade,
2019, p. 106). Naturally, this period coincided with the period when Azhar was established and Ismaili/Shiism
became effective in Egypt. In 1869, the French government invited the Iranian Shah Nasreddin to the opening
and sent a delegation to the Shah. In the same period, the presence of Cemalettin Esadabadi Afghani in Cairo
and his scientific activities strengthened the cultural interaction between the two countries. In the 19th century,
Egypt was bound to the Ottomans, albeit in shape, but in an effort to be autonomous and independent. Iran, on
the other hand, was the most important country in the region for Egypt to receive political support against the
Ottomans. The invasion of Egypt by the British Empire in 1881, the British Russian hegemony struggle over
Iran, the constitutional movements of Iran were the most important problems of the two countries. Muhammad
Reza Pahlavi’s marriage to the sister of the Egyptian King Farouk made the two monarchies closer. The
agreement between the British and Egyptian administrations in 1936 did not actually end the occupation, but it
ended legally.
Turkey, Iran, Iraq, and Afghanistan signed Sadabad Pact. Although the Egyptian government had intention
to join the agreement but the British and the German competition of that era did not permit. With the divorce of
the Shah of Iran in 1948 from the sister of the Egyptian King, some coldness occurred between the two
countries. The relations with the reign of the Mossadegh government in Iran and the reign of Abdul-Nasser in
Egypt re-enacted. This process did not last long after the overthrow of Prime Minister Mossadegh with the Ajax
operation organized by the US and British Intelligence in 1953, the two countries became distant from each
other. Iran’s entry into the Baghdad Pact and its close relationship with Israel brought tensions in Iranian
relations with Egypt in 1960. Iranian Shah became the representative of Persian/Iranian nationalism. The 1967
Arab Israeli war dealt a major blow to Nasser’s reputation, and Iran’s support for the Arabs paved the way for
the two countries to re-establish diplomatic relations. After the death of Nasser in 1970, Anwar Sadat came to
power and the relations between Iran and Egypt were strengthened. Enver Sedat wanted to improve his
relations with the US administration instead of the Union of Soviet Socialist Republics (USSR). The peace
agreement he signed with Israel was the mainstay of this. The Shah of Iran supported the Sadat administration
despite the opposition of other Arab states. Sedat, on the other hand, was in favor of keeping strong relations
with Iran in the Persian Gulf against the Iraqi Baath administration.
After the revolution, Egypt lost its biggest supporter in the region against the other Arab states of its
agreement with Israel. Khomeini cut diplomatic ties with Egypt with a fatwa and became the biggest enemy in
the region. Naturally, the Egyptian government accused the Islamic Republic of intervening in the internal
affairs of the Arab states and regarded it as a danger to their national security. Khomeini’s rhetoric supported
Egypt’s discourse that Iran posed a danger to regime exports to Arab states, and that it was a major threat to
Gulf Arab states in particular. With the start of the Iran-Iraq war, the Egyptian administration had the
opportunity to re-develop its relations with the Arab states by providing military and economic support to Iraq.
With the establishment of a ceasefire between Iran and Iraq, the Iranian administration delivered Egyptian
prisoners as demonstrations of goodwill. Iran began to normalize its relations with Arab states, especially Saudi
Arabia, in the period that it called the post-war economic structure. The disintegration of the USSR, the
invasion of Iraq by Kuwait, the peace agreements between the PLO-Israel and Jordan were the factors that
paved the way for the softening of Iran’s relations with the countries of the region. Muhammad Khatami’s
election as president and moderate rhetoric helped to improve relations with the Gulf countries and the
European Union. While Iran wanted to improve its relations with other Islamic countries through the
Organization of Islamic Conference, it established cultural and economic relations with Egypt. The activities on
the subject of Persian language education in Cairo are the leading ones. Egypt established a factory in Iran and
Iran started to sell tractors to Egypt. However, the global and regional developments, the ideological structure
and activities of the Islamic Republic of Iran, and the complexity of foreign policy decision-making prevented
the full development of relations with Egypt.
Post-2011 Iran-Egypt Relations

With the blessing of the Mubarak regime, Iran expected a new chapter in relations with Egypt. Most
Iranian thinkers and experts argued that this was a revolution. Guide Khamenei advised the Egyptian army to
stand by the people in his Friday sermon in Arabic in February (Muhammed & Mahmud, 2016). Iran’s Foreign
Minister, on the other hand, supported the cheering of the Egyptian people and heralded the birth of an Islamic
Middle East. Former President Rafsanjani told a newspaper he called on the people to continue their actions
and told Egypt that a leader like Khomeini is now a must. At that time, Iranian President Ahmedi Nejat
declared in his statements that the Middle East would soon be dried from America and Israel. In one statement,
he even claimed that Imam Mahdi had the hand in these popular movements. Former President Khatami spoke
of the great contribution Iran and Egypt made to Islamic civilization, and that Egypt had been the center of the
anti-exploitation struggle for the last 150 years.
Naturally, the expectation was a serious break in the foreign policy of Iran after the revolution. Unless the
geography of a country changes, its existential foreign policy based on geopolitical realities is unlikely to
change. The real issue was how much Egyptian foreign policy could change after January 2011. Accordingly,
would this change be reflected in relations with Iran? While the process was ongoing, an Iranian diplomat was
declared unwelcome on 30 May, 2011 for espionage and was asked to leave Egypt. During the presidency of
Morsi, in August 2012, a commission including Iran, Egypt, and Saudi Arabia was proposed to solve the Syrian
problem. Mursi was the first and only president to visit Iran after the revolution. The policy of the Morsi
administration against the Syrian government was not the same as that of the Iranian government. The common
ground of both countries was that North Atlantic Treaty Organization (NATO) and all foreign armed elements
must leave Syria. In October of the same year, the Iranian Egyptian Businessmen forum was held in Tehran and
the Egyptian delegation discussed military cooperation with the Iranian deputy defense minister. In 2013,
Iranian President Ahmedi Nejad visited Cairo with his foreign minister and expressed his wish to improve
relations with Egypt to an unlimited extent. But in order to welcome him, the Sheikh of Azhar, who was very
far from Iran, also joined. The Morsi administration did not agree in every issue implicitly with Iran, especially
on the Syrian issue. The Gulf Arab countries, especially Saudi Arabia, which had a great importance for the
Egyptian economy, did not want Egypt to get closer to Iran.
Post-Mursi Relations
The first statement made by the Iranian foreign spokesman was that everything was not over, that the
movement continued and that the army should not enter politics. A spokesman for the Egyptian foreign affairs
declared that they saw this as an intervention in their internal affairs and that they could not accept it. The new
administration was inviting the Iranian president to attend the sworn-in ceremony of Sisi, the Egyptian
president, in fact making a gesture to Iran and looking for a leverage to strengthen his legitimacy. Although he
did not respond to the spiritual invitation, the Iranian deputy foreign minister, responsible for Arab and African
affairs, participated. The deputy foreign minister said Egypt’s security is Iran’s security, and Egypt is stronger
in Iran (Osman, 2014). The visit of the Emir of Kuwait to Iran and the meeting with the guide and President
Rouhani was an important indicator for Egypt. Egyptian President Sisi stated in a statement that relations with
Iran have passed through the Persian Gulf (Basra) and that Egypt’s security cannot be separated from Gulf
security (Ebu’l-az, 2014). Iran has made it clear that it wants to develop relations with the new administration
by declaring that we respect the preferences of the Egyptian people. After 30 June 2013, the Egyptian Minister
of Foreign Affairs declared in a statement about Egypt’s priorities in foreign policy that they did not see Iran as
an enemy, but the Muslim Brotherhood representing political Islam as the biggest enemy (Muhammed &
Mahmud, 2016). On the other hand, in July 2015, Iran declared Egypt among the nationals who will travel to
Iran without a visa. The Egyptian administration has declared that Iran has the right to benefit from nuclear
energy for peaceful purposes (Bahi, 2015). In 2016, the attacks on the embassies and consulates of Saudi
Arabia in Iran were strongly condemned by Egypt due to the harsh intervention of the Saudi Arabian
administration against the Iranian pilgrims. The Sisi administration has clearly demonstrated its support for
Saudi Arabia and its weak relations with Iran.
Although Iran has declared that they want to sell oil to Egypt many times, Iran has been excluded from
this issue with the stimulation of Saudi Arabia. Egyptian Foreign Minister Samih Şükri explained that the basic
condition for establishing a dialogue with Iran should not interfere in the internal affairs of the Arab states and
try to dominate them (Alwasatnews, 2017). Upon reports of Iranian weapons capture in Yemen, the Egyptian
administration described Iran as an open continuation of its involvement in the internal affairs of neighboring
Arab states (Aljazeera, 2016).
Geopolitical Parameters and Political Activities that Prevent Cooperation

Throughout history, relations between Iran and Arab states have developed at the center of the shadow of
the concepts of Arab-Persian/Shi’ism. Regardless of the discourse of Iranian foreign policy, Iran could not
elude the Safavid/Sassanid/Zoroastrian title in the eyes of the Arab states. In global politics, states perceive and
act as a whole with their geography. History is an inseparable part of geography and of course states. It will
always carry this past on its back in its relations with Egypt. Shiite geopolitics is one of the most fundamental
and decisive geopolitical parameter of Iranian foreign policy. For Iran, the nature of the regime does not change
this situation, which is also a realpolitik reality. Egypt is one of the countries that have the strongest military
and economic relations with the American administration in the region. Egypt is one of the countries that get
the highest financial and military aid directly from the United States each year. Egypt’s strong relationship with
the United States is an obstacle to establish a real political and economic relationship between Iran and Egypt.
Iran seeks to besiege Israel in the Red Sea and the Nile Basin, seeking an exit base from the Persian Gulf.
Iran’s African expansion goes back to the 1960s during the Shah period. The newly independent African
countries and the Shah administration carried out their diplomatic activities in the 1970s with the increase in oil
revenues and the support of the American administration to prevent the spread of the Soviets and Communism
on the African continent. After the revolution, Khomeini described the peoples on the African continent as
oppressed and US and Soviets as evil forces and oppressors. Due to the chaos and the Iraq war in the early
years of the revolution, Iran could not show enough attention to the African continent in its foreign policy.
During the end of the war and the economic restructure of the Rafsanjani period after Khomeini, Iran’s foreign
policy entered into more constructive discourses against Arab states. In this context, Rafsanjani made his first
visit to Sudan in 1991. Military and economic agreements with mutual obligations were signed between the two
countries (EPC, 2016). In 1996, Rafsancani took a comprehensive trip to Africa, including African states, such
as South Africa, Kenya, and Tanzania, with senior bureaucrats and businessmen. During the Khatami period,
political and diplomatic attention was paid to the African continent as an observer member of the African
Union Organization. There were allegations that the Iranian Revolutionary Guards used some of Sudan’s
coastal ports to send arms to some armed movements in Gaza and Africa (The Times of Israel, 2014).
One of the most disturbing issues of the Egyptian government is the military and intelligence activities of
the Iranian Revolutionary Guards in the Red Sea. In 2014, the Israeli army claimed to have found Iranian
weapons on a Panama-banded ship on the Red Sea (Ynetnews, 2014). A large number of explosives were
seized on a ship caught off the coast of Yemen, and the possibility of these weapons going to Somalia by the
intelligence circles came to the region (Charbonneau & Nichols, 2013). The Egyptian administration considers
being Sudan and Somalia as Iran’s backyard unacceptable for its own national security. Iran sees Sudan and
Somalia as the gateway to Africa and a siege to Israel and a ramp to support Palestinian armed resistance
organizations, such as Hamas and Islamic Jihad. Egypt, on the other hand, takes an attitude against Iran in all
international settings on issues such as the three islands of the United Arab Emirates with Iran. Egypt wants the
Iranian administration to hand over the members of the organization, such as the Islamic and Jihad of the
Jamaat, which it has captured in its country or region. Iran, on the other hand, appeals and condemns the
captured armed resisters.
Possible Areas of Cooperation

The best places to develop cooperation for Iran and Egypt seem to be the activities and meetings of
international organizations such as the UN, G8, G15, and the Organization for Islamic Cooperation. In
particular, Iran is in deep need of diplomatic support from global and regional organization states in the nuclear
energy issue. Such global and regional diplomatic organizations provide a good basis for influencing the world
and regional public opinion. Israel’s possession of a large number of nuclear weapons could create another
ground for diplomatic cooperation with Iran. For many years, Egypt has been carrying out diplomatic activities
in diplomatic environments in order to demilitarize the Middle East and to sign Israel’s NPT treaty. In this
policy context, a natural alliance with Iran, which has the same policy in all international environments, arises.
Although Egypt withdrew from the Sinai Peninsula, the Taba region is still a serious problem between Israel
and Egypt. Israel must pay a substantial amount for the natural gas and resources it uses during the years it
occupied. The issue of the Israeli administration and the problem of Egyptian prisoners and citizens in Israeli
prisons are the issues that Iran will support.
Like Iran, Israel is building military, political, and economic relations with many African countries, such
as Kenya and Ethiopia. It is a complex and controversial issue which poses more threats as it threatens if Egypt
chooses between Israel and Iran. It is a well-known fact that Israel has used African Jews for intelligence since
its inception. Especially in the water problem between Egypt and Ethiopia, Israel is technologically and
economically related to Ethiopia. Iran could be a balance for Egypt against the power and siege of Israel in
Africa. In the same way, Iran may be a serious partner in the field against the Egyptian and regional leaders
who are seen as the biggest threat to the Egyptian administration. The issue of the establishment of the
Palestinian state meets the same point of Egypt and Iran. Cooperation in terms of intelligence against Israel is a
possible area of cooperation between other Egypt and Iran.
Conclusion
Although the relations between Iran and Egypt seem to have converged for a short period after 2011, it is
not possible to say that there is a serious relationship between the two countries. Iran wants to pursue a more
balanced policy instead of a conflictual policy with Egypt and Saudi Arabia in the face of increasing US
presence and pressure in the region. Saudi Arabia and the Gulf Arab states see America and Egypt as a
counterbalance to Iran’s growing military and ideological power in the region. Iran’s geopolitical superiority in
the region makes it essential for Arab states to cooperate with countries, such as America and Egypt. The main
discourse of Iran’s regional politics is based on the removal of the region from the foreign military presence,
which is shown as the source of the problems. According to this argument, the relations between Iran and Arab
countries will settle on a mutually healthier basis. It is unlikely that states, such as Saudi Arabia and the Gulf
States, especially the US, who are weak against Iran without external support, will be able to accept this offer.
Saudi Arabia,s direct oil and financial aid as soon as the Sisi administration arrived in Egypt stems from the
need for Egypt versus Iran. Iran, as far as possible, wants to try to keep its discourses against America and
relations with the states in the region separate. Given the American political relations with Egypt and Saudi
Arabia and its military presence in the Middle East, this is hardly possible in practice.
Iran thinks it can be more effective on Arab states if it can improve political and cultural relations with
Egypt. Egypt, on the other hand, sees Iran as a threat not only to the Gulf states. Egypt closely follows the
political, military, economic, and ideological activities of Iran in Africa and the Nile Basin. Egypt sees Iran’s
settlement as a vital threat in and around the Red Sea, which it regards as vital to its national security. Iran sees
military and political expansion into the Red Sea and its watershed as a strategic move for its foreign policy.
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11, 2019, from https://elbadil.com
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SBF Dergisi, 68(3), 95-112.
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https://www.timesofisrael.com/iranian-warships-dock-at-port-sudan/
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https://www.ynetnews.com/articles/0.7340.L-4535391.00.html
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from http://ensani.ir/file/download/article/20120325202005 1149-182.pdf
doi: 10.17265/2328-2134/2019.07.002
D
DAVID PUBLISHING
Egypt’s Currency Devaluation & Impact on the Most Vulnerable
Laila El Baradei
The American University in Cairo, Cairo, Egypt

The aim of the current research paper is to review what the Government of Egypt (GOE) has done to alleviate
hardship conditions facing vulnerable low-income citizens, including its civil servants, during the implementation
of the recent International Monetary Fund Economic Reform program. The main research questions are: What
policies and initiatives has the GOE pursued post its currency devaluation in order to alleviate hardships on the
most vulnerable? And to what extent are we now a more “socially equitable” nation? The paper provides a
background about the 2016 currency devaluation decision, presents a conceptual framework explaining the relation
between different economic ideologies and the impact on the vulnerable groups in society, elaborates on why we
should seek social justice in Egypt, and then finally examines and assesses some of the government’s efforts in
trying to alleviate hardships, including the Takaful and Karama Program, the Amman certificate, and the impact on
the pay scale of government employees. Some of the recommendations made by the paper include: the need to
apply true conditionality in the claimed “Conditional Cash Transfer Programs”, to re-consider government
employees’ compensation, and to re-allocate national resources to what matters in a more transparent manner.
Keywords: Egypt, currency devaluation, government employees, social equity, vulnerable groups, Takafol and
Karama Program, Aman Certificate
As part of the economic reform program implemented by the Government of Egypt (GOE) in 2016 in
coordination with the International Monetary Fund, a decision was taken to devaluate the Egyptian pound.
Overnight the exchange value of the Egyptian pound to the U.S. dollar changed from 8 EGP to $1
to being 18 EGP to $1. This resulted in an unprecedented increase in prices of all goods and services, and
automatically more difficult living conditions especially for the vulnerable low income groups.
The aim of this research paper is to review what the GOE has done to alleviate hardship conditions facing
vulnerable low-income citizens, including its civil servants, during the implementation of the recent
International Monetary Fund economic reform program. Already the compensation received by civil servants in
the lower echelons of the pay scale before devaluation, was relatively very low compared to real cost of living.
Now after devaluation and the increase in prices, covering the basic costs of living must have become more
challenging.
The aim is not to assess the effectiveness, or the potential, of the economic reform program, but rather to
investigate its impact on the vulnerable groups in society. The main research question is: What policies and
initiatives has the GOE pursued post its 2016 currency devaluation in order to alleviate hardships on the most
vulnerable? The question as such touches as well on the issue of “social equity”, a main demand of the 2011
Laila El Baradei, Ph.D., professor of Public Administration, School of Global Affairs and Public Policy, The American
University in Cairo, Cairo, Egypt.
304 EGYPT’S CURRENCY DEVALUATION & IMPACT ON THE MOST VULNERABLE
Revolution in Egypt when people went out into the streets and they were calling for “Bread, Freedom and
Social Equity”. Are we now a more socially equitable nation? Are we taking care of the vulnerable groups in
society? Things are becoming more challenging and more complicated with the Egyptian government
embarking on the Economic Reform Program as advocated by the International Monetary Fund (IMF).
The proposed methodology for the research paper is a desk research examining the variation that took
place in some main economic indicators after the devaluation decision, such as purchasing power, inflation, and
poverty rates; plus an exploration of the government’s intervention measures to alleviate the resulting hardships.
Special concentration will be directed to the civil servants, especially the lower echelon groups, to figure out
how the devaluation has affected them and how they may be coping.
A number of government initiatives targeting the most vulnerable have been heralded in the media, most
important being the Takaful and Karama Program initiated in 2015 and implemented by the Ministry of Social
Solidarity employing a variation of conditional cash transfers and direct pension schemes to the more than 1.5
million families in Egypt, and the new “Aman” certificate for informal labor.
Preliminary findings of the research point to the fact that poverty rates have been increasing and
vulnerable groups find it more and more difficult to make ends meet, despite all the governmental initiatives to
buffer the shock of the currency devaluation and the other aspects of the economic reform program advised by
the IMF. The question remains about what else can be done.
Background: The Decision to Devaluate the Egyptian Pound

On November 3rd, 2016 and based on the recommendation of the IMF, the Central Bank of Egypt
announced the floatation and hence the devaluation of the Egyptian pound. Floatation was a key prerequisite
for Egypt obtaining the promised IMF $12 billion loan over three years. The aim was to encourage foreign
direct investors to come back to Egypt, boost the market’s external competitiveness, and make available the
much needed foreign currency. In addition to the floatation decision, the Government committed to cutting
down subsidies, especially energy subsidies over three years, and introducing value added tax over a wide
variety of goods (Financial Times, 2018). Disbursement of the IMF loan installments depended on the GOE
implementing the agreed to reforms to be measured against key performance indicators. Obtaining the IMF
loan also enabled Egypt to prove its credit worthiness and be a potential recipient of other loans and assistance
from multiple sources, including Saudi Arabia and China (Africa Research Bulletin, 2016). Besides floating the
currency, in August 2016, the parliament approved the introduction of a value-added tax, and there are clear
steps being taken to reduce subsidies, including increases in prices of fuel and electricity (The Economist, 2016)
and the recent spike in the prices of the Metro tickets by more than 350% in May 2018 (Egyptian Center for
Economic Studies [ECES], 2018a).
The reforms were especially important after Egypt went through a rough period of political turmoil
following the 2011 Revolution and the resulting decrease in foreign currency inflow, due to a decrease in
exports, external remittances, and the drop in the number of tourists (Khalil & El Ghandour, 2018). Exports
reportedly decreased from $31.5 billion in 2011 to $22.5 billion in 2016; total remittances from Egyptians
abroad decreased by nearly 15% in 2016, and total number of tourists dropped from 11 million in 2011/2012 to
6.6 million in 2016/2017. As a result of a slow-down in global trade, revenues from the Suez Canal also
dropped, despite the opening of a new channel in August 2015. Annual Suez Canal revenues dropped from $5.2
billion in 2015 to $5 billion in 2016 (Khalil & El Ghandour, 2018).
EGYPT’S CURRENCY DEVALUATION & IMPACT ON THE MOST VULNERABLE 305
Structural Economic Reform was inevitable and much called for. There was a dire need to reduce the
fiscal deficit and the rising debt levels (Financial Times, 2018). Now, one year after implementation of its
diverse elements, it is already being heralded as a courageous program that is much needed. PWC Middle East
describes the Egyptian economy after the start of the implementation of the new economic reform program as
showing “a quick and strong sign of renewed confidence” and that Egypt has become “a more affordable
destination than before, and be it as a travel or an investment destination”1. The IMF mission chief for Egypt,
Chris Javris is quoted saying, one year after, the devaluation decision, that: “Egypt is in a better place than last
year. I think they have already taken the most difficult steps on the macro-economic level” (Financial Times,
2017).
Government officials are expressing the view that the implemented economic reform measures are
necessary, yet painful and tough. Egypt’s finance minister, Amr El Garhy, was quoted as saying:
If we leave things the way they were progressing, it would have taken us to a much more difficult situation [..] If we
leave it like this, the debt will increase, the deficit will increase and things will be much, much tougher. (Financial Times,
2018)
However, with the floatation decision, many Egyptians have been hit hard. For middle class citizens,
savings in Egyptian currency have been slashed in value (Reuters, 2016). The real pain of the reform is hitting
the poorest segments of the population. For those, the government is targeting a number of programs, but is that
enough?
Conceptual Background
Neoliberalism – Pro-poor Growth – Inclusive Growth- Social Protection – Social Justice – Social Equity-
Income Inequality - Vulnerable and Marginalized Groups
The research question for this paper seems to be linked to a number of conceptual issues and variables that
need to be dwelled upon and clarified further.
The set of economic policy reforms advocated by the international financial institutions, like the IMF are
part and parcel of the neoliberalism political ideology. Neoliberalism is based on the premise that the market
should rule, private sector should dominate, government interventions should be limited, and there should be a
strive to increase market deregulation and enhance competitiveness so as to have a balanced budget and price
stability. The application of neoliberalism policies over the past two decades or more in Egypt in particular has
been criticized as having the potential impact of marginalizing the needs of peasants, workers, and civil society
organizations (Joya, 2016). Although positive economic growth may be realized, poorer segments of the
population may find it difficult to meet their basic needs.
The discussion also touches on the continuing debate in the field of economics, political science, and
public policy about how to cater to the needs of the poor in general. Pro-poor growth (Shoukry, Jabeen, Zaman,
Gani, & Aamir, 2017) and inclusive growth (Organisation for Economic Co-operation and Development
[OECD], 2018b) are some of the terms used to refer to this concern. Pro-poor growth is defined as growth that
favors the poor and whereby mechanisms are in place to ensure that the incomes of the poor people grow faster
than the incomes of the rest of the population as a whole (World Bank, 2016). Meanwhile, OECD defines the
1
PWC, Middle East (2017-2018). The EGP devaluation: A new beginning. Retrieved from
https://www.pwc.com/m1/en/publications/the-egp-devaluation-a-new-beginning.html.
term inclusive growth to be: “economic growth that creates opportunity for all segments of the population and
distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across
society” (OECD, 2018b). When there was a focus on economic growth only, a large segment of the world’s
disadvantaged population was left behind. Perhaps that is the main reason behind choosing the slogan of “No
one left behind” to be the guiding principle behind the Global Sustainable Development Goals. Inclusiveness
has been mentioned in many sections of the Global 2030 Agenda and reflected in several of its goals. Goal 4
refers to inclusive and equitable quality education, while Goal 8 refers to sustained inclusive and sustainable
economic growth; Goal 11 refers to inclusive, safe human settlements; and Goal 16 refers to peaceful and
inclusive societies. The vision for the 2030 Agenda mentions: “a just, equitable, tolerant, open and socially
inclusive world in which the needs of the most vulnerable are met” and “a world in which every country enjoys
sustained, inclusive and sustainable economic growth and decent work for all” (United Nations Department of
Economic and Social Affairs [UN DESA], 2016).
Embedded in the discussion is also the concept of “social protection” which is used to refer to the role of
government in trying to combat poverty and implement various “mechanisms to help individuals manage social
risks, including illness, widowhood, unemployment and old age” (Loewe, 2004, p.3). Social protection
mechanisms may include social insurance, public health care, targeted food subsidies, and targeted direct
financial assistance (Loewe, 2004).
Another starting point for the discussion may be centered around the concept of “social justice” and why
we should pay attention to its realization in Egypt. Social justice is defined simply as providing equal
opportunities for all members of society, treating all members of society equitably and not discriminating
against them based on membership in a group, or any other form of identity (Robbins & Jamal, 2016). Social
justice thus covers all three dimensions of economic justice, political justice, and basic human rights for all
citizens (Clarke, 2013, as cited in Robbins & Jamal, 2016). The term “social equity” is used in many instances
as a synonym to “social justice” with particular focus on what governments should strive at in trying to reduce
the gap between the haves and the have-nots and how, in a development context, governments should focus on
the needs of the most marginalized groups in society (Guy & McCandless, 2012).
An important element of social justice is the measure of income inequality. Although the Gini coefficient,
a measure of the average distance between incomes, is used to measure income inequality, what is also
important is how people perceive their income inequality and to what extent there is perceived difference
between their current actual income and their expected income, or what they would like to receive, and this
may matter more (Verme, 2013).
Finally is the notion of vulnerable and marginalized groups in any society. Both terms are used
interchangeably in the current paper to refer to citizens in the lower income groups who do not have full access
to their rights, resources, and opportunities, and therefore are most likely to suffer and be in harm’s way
compared to others.
Figure 1. Conceptual framework.
Reasons Why We Should Seek Social Justice in Egypt

Many reasons are given for the need for social justice in Egypt, including: That it is stated in Egypt’s 2014
constitution. The Egyptian 2014 Constitution, Article 27, states that:
The Economic system aims at achieving prosperity through sustainable development and social justice so as to raise
the real growth rate of the national economy and the standard of living, increase job opportunities, reduce unemployment
rates and eliminate poverty. (Constitution of the Arab Republic of Egypt, 2014)
Social justice is one of the main popular demands by the masses during the 2011 revolution, is
consistently mentioned in the presidential speeches as a national priority, is in sync with Egypt’s 2030 national
sustainable development strategy; it is very much needed as a buffer to the currently implemented economic
reform programs, and finally because it is an international trend (Othman, 2018). There is international
consensus on the importance of social justice as stipulated in the Sustainable Development Goals.
Egypt’s Sustainable Development Strategy 2030 developed after the Revolution states that:
The New Egypt will possess a competitive, balanced and diversified economy, dependent on innovation and
knowledge based on justice, social integrity and participation, characterized by a balanced and diversified ecological
collaboration system, investing the ingenuity of place and humans to achieve sustainable development and to improve
Egyptians’ life quality2.
Amongst the key words in the stated vision are: “justice”, “social integrity” with the purpose of improving
“Egyptians’ quality of life”. The narrative of the SDS vision developed in 2015 is good, and so is the Egyptian
2014 Constitution, but to what extent are we moving towards true implementation.
Some Efforts by the GOE to Alleviate Hardships

The GOE has always exerted efforts to try to alleviate poverty and provide social protection for the poor
2
Sustainable Development Strategy: Egypt Vision 2030. Retrieved from http://sdsegypt2030.com/?lang=en.
and disadvantaged citizens. These attempts were emphasized during the Socialist Nasserist era following the
1952 revolution―aka coup d’Etat, the massive nationalization trends, the free public school and university
education and public healthcare services, and the controlled rent arrangements, in addition to the food and
energy subsidies. During Sadat’s era 1970-1981, an open door economic policy was adopted, paralleled with a
move towards privatization and a gradual decline in the quality of public healthcare and educational services,
and a shrinking in the umbrella of food subsidies and the real value of other social protection schemes,
including pensions and social assistance. President Mubarak 1981-2011 who continued to rule for over 30 years
did not introduce much change to the social protection policies, although throughout his reign the debates
continued about how to better target subsidies, how to introduce new pension schemes, etc. but the main focus
of his successive government cabinets was on improving economic growth with the assumption that a
trickle-down effect will happen out of its own accord. This did not happen, and the 25th of January Revolution
ousted Mubarak calling all the time, similar to Tunisia and other Arab countries who witnessed the wave of the
Arab Spring, for “Bread, Freedom and Human Dignity”. This was a clear lesson and warning to the following
rulers. Adopting neoliberal policies and focusing on economic growth is not sustainable.
Egypt continues to implement a complex social protection system that is based mainly on fuel and food
subsidies. These subsidies cost between 6 and 9 percent of GDP but are very poorly targeted and suffer from a
number of reported leakages, where 73% of non-poor Egyptian households have access to ration cards, and the
top 20% of Egyptian households by income receive 36% of energy subsidies (IFPRI Study, as cited in World
Bank, 2015b). Many changes and attempts have been made over the years to try to improve targeting,
especially of the food subsidy system.
The Takafol and Karama Programs by the Ministry of Social Solidarity

The two main contributions introduced to the bundle of social protection mechanisms by the current
regime, under President Abdel Fattah El Sisi, are what came to be known as the “Takafol and Karama” Project,
which mean “solidarity and dignity” when translated to English, and the “Aman” Project which means “safety”.
Both will be discussed in the following section.
In the latest speech made by President Abdel Fattah El Sisi on the occasion of Labor Day on the 1st of
May, he mentioned how he has: “great pleasure of applying an integrated social protection system…in order to
include all the beneficiaries, in a way that guarantees justice, and the whole feel that Egypt proceeds towards
the future and never forgets one of its sons” (State Information Service, 2018). He referred specifically in that
regard to the two initiatives being implemented.
“Takafol and Karama” (solidarity and dignity) are Egypt’s social safety net programs that are funded
mainly through the World Bank’s Project Strengthening Social Safety Nets project with a total estimated
budget of $400 million as a loan to the Government of Egypt. The target is to cover 1.7 million families out of
the country’s most vulnerable and poorest, especially families with young children plus the destitute elderly and
people with disabilities. Up till March 2017, nearly 1.5 million families, or if we assume an average of four
persons per family, then 6 million individuals were reached. The project is implemented through the Egyptian
Ministry of Social Solidarity. It is modeled after the successful conditional cash transfer programs implemented
in Latin America, such as the Bolsa Familia in Brazil and the Prospera in Mexico.
The “Takafol” Program is a conditional cash transfer program that provides a monthly income per family
calculated based on the number of school children that family has, and conditional on their keeping their
children in school and making use of maternal and child health care services. Families benefiting from the
program commit to better health and nutrition for their children aged 0-6 years, to school enrollment and to 80%
school attendance for children aged 6-18 years, and to seeking maternal care for the pregnant and nursing
mothers through two visits a year to health clinics by mothers and children below 6 years, maintaining child
growth monitoring records and attending health and nutrition awareness sessions. The cash received by families
benefiting from the program ranges from 325 EGP to 625 EGP or the equivalent of $40-$78 before devaluation
and $18-$35 after devaluation. The “Karama” Program, on the other hand, targets people with severe
disabilities (50% disability and above) and elderly people above the age of 65 with no other source of income
and who cannot work and provides them with a monthly pension. For Karama, the benefits are calculated per
person equal to 350 EGP, with a cap of three beneficiaries per household, or the sum of 1,050 EGP (World
Bank, 2017; World Bank, 2015b; OECD, 2018).
Technology is used in the disbursement of the cash transfers and pensions. Beneficiaries receive smart
cards and can obtain their dues either through ATM machines, through going to any post office or through the
Ministry of Social Solidarity units. Payments for Takaful are delivered every three months, while for Karama
on a monthly basis (World Bank, 2015b).
Clear key performance indicators were stated in the Takafol and Karama Project document as follows:
 Percentage of the program’s beneficiary households who are under the poverty line (to measure
efficiency)—target 60%;
 Percentage of poor households covered by the program (to measure coverage)—target 20% (World Bank,
2015b, p. 5).
The Aman Certificate

“Aman” Certificate was established based on a directive from the current President El Sisi. It is both a life
insurance and a saving certificate that aims at providing security, as the name means in Arabic, to the informal
labor sector, also referred to as temporary or seasonal workers, who are not covered by any other social
insurance umbrella.
The certificate attempts to contribute to “financial inclusion” where all individuals and businesses have
access to financial products and services that meet their needs. The idea is that when more people are covered
by financial services and products, they are more likely to start saving, planning for emergencies, sending and
receiving payments, and eventually, it will have a positive impact on poverty alleviation. The World Bank
group considers financial inclusion as an important enabler to reduce extreme poverty and has a global goal to
reach universal financial access by 2020 (World Bank, 2018a).
The Aman Certificate starts with the sum value of 500 EGP, has a maximum value of 2,500 L.E., has a
duration of three years, and can be refunded with 16% interest upon maturity. The certificate provides a life
insurance sum equal to 10K EGP in case of natural death, 50K EGP in case of death by accident and may reach
the sum of 250K EGP as a maximum, if the beneficiary decides to purchase up to five certificates with 2,500
EGP each. The certificate also may be used as a savings account providing a pension to the family of the
deceased if they do not have any other source of income. Options range from a five-year duration with a
monthly pension of 200-1,000 EGP, to a 10-year duration with a monthly pension of 600 EGP. The certificate
can be issued easily without the need for any medical certificates or check-ups for those requesting the service
within the age bracket of 19-59 (Youm7, 2018).
Within just three weeks from the date of issuance of the Aman Certificate, the four Egyptian public banks
responsible for its management, reported that they had collectively managed to issue nearly 443,000 certificates
with a value amounting to nearly 599 million EGP (Vetogate, 2018).
What Is the Impact of Initiatives so Far?

To what extent have the previously cited efforts and initiatives by the GOE achieved their goals and
contributed to buffering the impact of implementing the neoliberal IMF ideologies and alleviating the negative
impacts on the poor and marginalized groups in society? In trying to respond to that question, a multi-pronged
approach is followed that checks the results of an impact evaluation of Takaful Project, the results of an
Egyptian Social Justice Index, the trends in the reported poverty lines, and the real value of public servants’
compensation after the devaluation decision.
Impact Evaluation of Takaful and Karama

Several attempts were made to assess the effectiveness and efficiency, especially of the Takaful and
Karama Initiative, since it has been ongoing for a longer number of years compared to the Aman Certificate
which is still brand new. Effectiveness is measured by the extent of coverage of the poor, while efficiency is
measured by the good targeting of the poor (World Bank, 2015b). One study focusing on the relations between
cash transfer programs and state citizen relations in Egypt and focusing on the Takaful and Karama Project,
raises a concern that “cash transfers are being used as if they are the magic bullet for development [and]
macroeconomic stability is becoming the overriding goal to which all other goals, job creation and income
protection, are subordinated” (Zaki, 2017).
After three years of the implementation of the Takaful program, an impact evaluation was conducted by
the International Food Policy Research Institute in 2018. The evaluation referred to the program as a “cash
transfer program”, no longer referring to it as a “conditional cash transfer program”. The main reason for that
being the important finding that conditionality has not been implemented as yet and that only 2.5% of the
beneficiaries were aware of the conditions that will be added later for them to be able to continue in the
program (Breisinger et al., 2018). Additionally, a main shortcoming related to the program was its relatively
limited reach, and that only 20% of Egyptian households in the poorest quintile are receiving Takaful transfers
compared to the original target of 20% of all poor households in Egypt. On the other hand, a number of positive
impacts were cited in the IFPRI evaluation, including the fact that the program has managed to reach 2.25
million families across Egypt, that 67 percent of the program’s beneficiaries were below the poverty line before
having access to the transferred cash, compared with a target of 60% in the original project document.
Moreover, there was a high satisfaction rate amongst beneficiaries equal to 89% who were either very satisfied
or somewhat satisfied with the program, and that the consumption of benefiting families had increased by 8.4%,
which was perceived as a good indicator compared to other similar programs in South American nations
(Breisinger et al., 2018).
The Egyptian Social Justice Index

Recently, there was an attempt to come up with an Egyptian index to measure social justice in Egypt. The
index developed jointly by Baseera Polling and Research Center and the Egyptian Center for Economic Studies
(ECES) is considered the first of its kind in Egypt. The index focuses on five main gaps that afflict the Egyptian
society: wealth and income gap, social gap, geographical gap (urban versus rural), gender gap, and physical
disabilities gap. The index tries to assess the extent of those five gaps through focusing on a number of
indicators related to both human capital (access to education, health, culture, employment, and information) and
social capital (achieving justice, participation, satisfaction, and trust). According to the index, the degree of
social justice in Egypt when quantified, it is given a value of 2.28 on a scale of 10, where 1 is the best-case
scenario and 10 is the worst case scenario (ECES, 2018b). What matters more than the numerical figures are
the sectors identified as experiencing the greatest degree of social injustice, such as tertiary education and
health services and these are the areas that should merit more attention from the government.
Poverty Trends in Egypt Over the Past Few Years

As shown in Figure 1, the percentage of Egyptian citizens living below the national poverty line increased
over the past few years, going from 25.2 % in 2010 to 27.8% in 2015 (World Bank, 2018a). It should be noted
that the figure of 27.8% was calculated before the devaluation decision in 2016 and before the imposed
increases in the prices of fuel and electricity in the summer of 2018; those two latter increases have very high
expected impact on increasing the prices of all goods and services.
Figure 2. Percentage of Egyptians living below the national poverty line (Source: World Bank, 2018b).
With the rising inflation rates reaching 31.95% in June 2017, and in parallel to the currency devaluation,
as part of the economic reform program, Egypt’s poverty line was estimated to have jumped up from a value of
482 EGP in 2015, to reach 700-800 EGP in 2017, and people living under the poverty line to have increased to
35% in 2017, up from nearly 27.8% in 2015 (Egypt Today, 2017).
The Pay Scale for Egyptian Government Employees

Following is the pay scale for government employees in Egypt according to the new Civil Service Number
25 for 2015:
Table 1
Compensation of Government Employees in Egypt
Equivalent in USD before Equivalent in USD after
Job’s monthly devaluation devaluation
Job level Equivalent pay step
salary in EGP $1 = 8 EGP $1 = 18 EGP
(calculated by researcher) (calculated by researcher)
Specialized jobs:
Distinguished Distinguished 2,065 258.13 114.72
High High 1,415 176.88 78.61
General Manager General Manager 1,335 166.88 74.17
First seniority more than
First (A) 1,195 149.38 66.39
one year
First seniority up to one
First (B) 1,175 146.88 65.28
year
Second seniority more
Second (A) ,035 129.38 57.5
than three years
Second seniority up to
Second (B) 1,020 127.5 56.67
three years
Third seniority more
Third (A) 910 113.75 50.56
than six years
Third (B) than three years and up 895 111.88 49.72
to six years
Third seniority up to
Third (C) 880 110 48.89
three years
Clerical and technical jobs:
The first seniority one
First (A) Technician/Clerk 1,195 148 66
year or more
The first seniority up to
First (B) Technician/Clerk 1,175 146.88 65.23
one year
The second seniority
Second (A) Technician/Clerk 1,035 129.38 57.5
more than three years
The second seniority up
Second (B) Technician/Clerk 1,020 127.5 56.67
to three years
Third (A) The third seniority more
910 113.75 50.56
Technician/Clerk than six years
The third seniority more
Third (B)
than three years and up 895 111.88 49.72
Technician/Clerk
to six years
Third (C) The third seniority up to
880 110 48.89
Technician/Clerk three years
Fourth (A) The fourth seniority
850 106.25 47.22
Technician/Clerk more than two years
Fourth (B) The fourth seniority up
845 105.63 46.94
Technician/Clerk to two years
(table 1 continued)
Equivalent in USD before Equivalent in USD after
Job’s monthly devaluation devaluation
Job level Equivalent pay step
salary in EGP $1 = 8 EGP $1 = 18 EGP
(calculated by researcher) (calculated by researcher)
Craftsmen and support staff jobs:
Second seniority more 1,035
Second (A) Craftsman 129.38 57.5
than three years
Second seniority up to 1,020
Second (B) Craftsman 127.5 56.67
three years
Third (A) Service Support Third seniority more
910 113.75 50.56
Staff than six years
Third (B) Service Support
than three years and up 895 111.88 49.72
Staff/Craftsman
to six years
Third (C ) Service Support Third seniority up to
880 110 48.89
Staff/Craftsman three years
Fourth (A) Service Support Fourth seniority more
850 106.25 47.22
Staff/Craftsman than two years
Fourth (B) Service Support Fourth seniority up to
845 105.63 46.94
Staff/Craftsman two years
Fifth (A)Service Support Fifth seniority more
843 105.38 46.83
Staff/Craftsman than two years
Fifth(B) Service Support Fifth seniority up to two
840 105 46.67
Staff/Craftsman years
Sixth (A) Service Support Sixth seniority more
837 104.63 46.5
Staff than two years
Sixth (B) Service Support Sixth seniority up to two
835 104.38 46.39
Staff years
Notes. Source: Job titles and Salary figures derived from the Civil Service Law 18/2015 as published in the Egyptian Gazette,
Issue 11 Annex, 12 March, 2015, pp. 62-63; dollar Equivalence calculated by researcher.
Several Issues to Be Noted About the Egyptian Government Employees Pay Scale
1. The Egyptian government employees in most of the job levels listed above receive additional
allowances and incentives that are added to their monthly salaries and referred to as the “Complementary Pay”,
but the fixed “job’s monthly salary” represents the biggest chunk of their total pay (El Gibali, 2018).
2. According to Article 37 of the Civil Service law 81/2016, employees receive an annual raise equivalent
to 7% of their monthly salary, and according to article 38 of the same law, not more than 10% of employees on
the same salary scale in any one organization, may receive an incentive raise equivalent to 5% of their monthly
salary, with a maximum frequency of once every three years per employee. Additionally, employees may
receive lump sum monthly bonuses for “Scientific Excellence” if they manage to obtain an additional academic
degree, either a graduate diploma, master, or Ph.D., with the amount for the later estimated at 200 EGP (Central
Agency for Organization and Administration [CAOA], 2017, or $11.11 at the current exchange rate of 18 EGP
to the Dollar.
3. The amount listed under “job’s monthly salary” in EGP and especially when converted to USD is very
low. It decreased by nearly half its value overnight as a result of the Egyptian Pound devaluation in November
2016. This was paralleled by a rise in inflation and the cost of many basic food products and services.
4. According to the latest computations of the National poverty line for Egypt in 2017, and its
determination at 700-800 EGP, then from the above table, it seems that for many of the job levels in the GOE
pay scale, where the monthly salary is slightly above the 800 EGP level, the employees appointed thereon, are
bordering on the national poverty line! Fourteen out of the total 31 job levels in government obtain monthly
salaries less than 900 EGP! The picture may even become bleaker if we assume that each government
employee on the average is responsible for three other individuals, beside himself or herself, if it is a nuclear
family of four!
5. If we use the international poverty line of $1.9 a day (World Bank, 2015a), or $57 per month ($1.8 × 30
days) and use it to check the value of the mentioned monthly salaries of Government of Egypt employees after
the devaluation, the picture becomes bleaker. All the craftsmen and service support staff, the majority of the
clerical and technical staff, and even many of the specialized staff receive monthly salaries that place them
below the international poverty line!
6. In November 2018, President Sisi announced that this year there will be no annual raises allocated to
government employees and that the savings will be directed to building more schools (Afifi, 2018). This is at a
time when we find many of our government employees falling below the poverty line!
What Else Can Be Done

1. For the Takaful Program: There is a need to expand its outreach so that more of the poorest families are
covered and to make sure that the conditionality, which is a core building block in the design of the program,
gets to be really implemented over the coming years. We do not want to penalize the already poor families, but
rather motivate them to send their kids to school and take better care of their health.
2. For the public service employees, if we want to have a good caliber of public servants and improve the
quality of public services offered, we need to make sure that there is a decent compensation system employed.
We cannot build a nation while a good percentage of its public employees are falling below the poverty line.
3. Tax reform and progressive taxation: Several suggestions have been raised regarding a proposed tax
reform in order to increase the State’s tax revenues and enable it to cater to the needs of the underprivileged
groups in society. On top of the suggested reform is the implementation of a more progressive income and
residential property tax that will move the burden of the economic reforms a little bit more towards the higher
income groups in society (ECESR, 2013; OECD, 2017).
4. More encouragement for the private sector so that it creates job opportunities: Currently, there is
skepticism about the expanding role of the armed forces in Egypt into the civilian and business sectors to the
extent that it is scaring away many of the private sector companies. South Korea as an emerging economy
obliged the private sector to invest in research and development (R & D) in order to improve the quality of the
labor force and enable them to find better job opportunities. This may be a better option than just focusing on
subsidy cuts and tax increases (Joya, 2016).
5. Implementing policies that resolve educational inequalities and enable socio-economic mobility for the
disadvantaged groups in society, for example, through investing in early childhood education and also in
tertiary education and skills development (OECD, 2017).
6. Re-allocating resources to what matters in a more transparent mode: Rather than spending on mega
projects with no clear return on investment, like the new branch for the Suez Canal, or the new Administrative
Capital for Egypt, or organizing huge international youth conferences under the title of “We Need to Talk”,
perhaps more resources should be allocated to social protection, to the creation of real job opportunities and to
offering fair salaries for government employees, that places them above the poverty line.
Conclusion
The International Monetary Fund’s agreement with the Government of Egypt and the currency devaluation
decision have had a negative impact on the most vulnerable groups in society and are threatening their
well-being. This is in direct violation of the stated vision for the Government in its Sustainable Development
Strategy (SDS 2030). Through a conditional cash transfer program that is not conditional, and is relatively
limited in scope, through an insurance certificate for the informal workers, the Government of Egypt is trying
to alleviate hardships. However, the efforts are not enough and much more needs to be done.
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doi: 10.17265/2328-2134/2019.07.003
D
DAVID PUBLISHING
The Principle of Subsidiarity
Athinodoros D. Doussis
Panteion University, Athens, Greece
Vassiliki Delitheou
Panteion University, Athens, Greece
Constantinos GE. Athanassopoulos
Neapolis University Pafos, Paphos, Cyprus
The power of the Greek intellect has been evinced in the principle of subsidiarity “… for he ought to have a proper
power, and such a one is that which will be sufficient to make the king superior to any one person or even a large
part of the community, but inferior to the whole…”, Politics by Aristotle, Book 3, 1286 b. The principle of
subsidiarity inspires each building of federal type and it should be applied with spirit of collaboration of various
rungs of power. The principle of subsidiarity does not constitute a principle of distribution of competences but
regulates the exercise of powers and fixes in who sectors is permissible the action of Union establishing a type of
evidence in favor the more inferior rung with the thought that, when the decision is taken as much as possible more
near interested, in the citizen, it has increased prospects of effectiveness, after it creates to him a feeling of
proximity and attendance in this. In accordance with this principle, the Union may intervene in areas which do not
fall within its exclusive competence only insofar as the objectives of the intended action cannot be sufficiently
achieved by the Member States but can rather, by reason of the scale or effects of the proposed action, be better
achieved at Union level. The principle of subsidiarity constitutes driver as for the way at which it should be
practiced this powers in European level. It is intended to determine whether the Union can intervene or should let
the Member States take action. The subsidiarity constitutes dynamic significance and it must be applied in the light
of objectives that are mentioned in the Treaty.
Keywords: principle of subsidiarity, Aristotle, democratic deficit in European Union, Treaty of Lisbon
Introduction
The European Union is founded in Law (Hallstein, 1974). It was created by law, generates law, and is
controlled by law. The Union has only the powers that its members have granted and they have been assigned
to it. That is why it is not a “state” but a supranational institution with a pre-federal structure, an institution on
the road to federal integration based on the agreement of its members (Elazar & Greilsammer, 1986).
This “agreement” embodied in the Treaty of Rome defines the whole life of the legal order in the Union.
Thus, the Treaties are considered a Constitution in which the fundamental aims of integration and its means of
realization are proclaimed and stated.
Athinodoros D. Doussis, Ph.D. Student, Department of Public Administration, Panteion University, Athens, Greece.
Vassiliki Delitheou, Ph.D., Permanent Assistant Professor, Panteion University, Department of Economics and Regional
Development, Athens, Greece.
Constantinos GE. Athanassopoulos, Ph.D., President of the School of Law, Neapolis University Pafos, Cyprus.
318 THE PRINCIPLE OF SUBSIDIARITY
The stages of the process towards integration as well as the intensity continue to be determined by the
Member States which do not simply define the course of the Community (Dagtoglou, 1985). The intensity and
the extent of the loss of national sovereignty is a part of the consolidation stage. For the time being, Member
States remain the essential members of the Treaties (Papagiannis, 2011).
The touchstone of this structure is neither buildings in Brussels nor politicians. The touchstone is the
European Citizens. Many people wonder whether there is a principle that guarantees decision-making at the
lowest level and if it exists, it strengthens the effectiveness and democratic legitimacy of the Union.
Subsidiarity as a Principle of the Exercise of Union Responsibilities

Historical Review of the Principle of subsidiarity
The matter of subsidiarity has been a really controversial one among lawyers as the principle of
subsidiarity even since the signing of the Treaty of Maastricht from European Union in the Netherlands. The
Treaty was signed in Maastricht on 07/02/1992 and it was put into force on 17/11/1993. If the institutional
system of the founding Treaties “followed” the federal system of governance in consistency, they should have
included a clause similar to that of existing in many federal states, which regulates the distribution of
responsibilities between the federation and the Member States (Wheare, 1963).
It could be argued that the principle of subsidiarity is a creature of Greek intelligentsia. At least in an early
form, it is formulated in Aristotle’s Politics, where he tries to give the content of the science of political
phenomena and political practice. It is the center of political analysis, and the character of the third book is
more theoretical than the others.
In modern times, this principle was formulated by Pope Pius XI in 1931 in a circular. The circular Qua
dragesimo Anno was published on 15 May 1931.
This principle also applies to modern European federal states (Germany, Switzerland, Austria), although it
is not explicitly mentioned in their constitutional law. Even in Siberian anarchist communities, subsidiarity has
been and is a basic method of resolving issues that concern the community. We can therefore support that the
principle of subsidiarity is embraced by hundreds of approaches and theories, trying to identify relations
between the individual and society as well as between societies and institutions (Lilin, 2009).
The principle of subsidiarity was first established with the first revision of the founding Treaties of the
Community with the Single European Act, which was the precursor of generalizing the principle in Community
law. This principle is mainly found in federal states, with a view to resolving the problem of exercise of
responsibilities between the federation and the states. The principle of subsidiarity was presented in the first
Environmental Action Program 1973-1976 and in the Commission’s proposals for the Tindermans report. The
Single European Act was signed at the Intergovernmental Conference on 17 and 28/02/1986 and put into force
on 01/11/1987.
Article 130Π in conjunction with Article 130Σ established the principle of subsidiarity in environmental
law where when national law provided for better protection of the environment then it had priority and
Community law remained inactive.
Conditions of Application of the Principle of Subsidiarity
The principle of subsidiarity has been generalized and has been a general principle of Community law.
The etymology of the word comes from the Latin “subsidiarius” and means aid and military aid (the term
THE PRINCIPLE OF SUBSIDIARITY 319
subsidium was used as a military one by Romans). The Court of First Instance of the European Communities
decided that the principle of subsidiarity was not a general principle of law as far as the legality of Community
action is concerned. The principle of subsidiarity has established a kind of competition between the Community
and the Member States, which it immediately resolved in favor of the Community: It would exercise
competence, provided that its action was better than that of the Member States (Christodoulides & Stephanou,
1993).
 The application of the principle of subsidiarity is subject to three conditions, which must be cumulative.
 The planned action by the Community should not go beyond exclusive competence.
 The objectives of the proposed action cannot be sufficiently achieved by the Member States.
In view of the scale or effects of the proposed action, it should be achieved at a Community level.
Therefore, the first condition is of a formal nature. In other words, it will first be investigated if the nature
of the action envisaged falls within the exclusive competence of the Community. In order to be able to take
action at Community level, another condition is required. There must be a thorough investigation into the
necessity of the action envisaged, a prerequisite of a substantive nature. Although this estimation is positive,
then efficiency, which is a prerequisite of a substantive nature, should also be considered.
When all three conditions are met then only the Community can act.
It should be stressed that if EU competence is established then the action of the Community institutions
must not go beyond what is necessary and the content and form of the action must correspond to the objective
pursued and use of the milder instrument, principle of proportionality.
The principle of subsidiarity is subject to the jurisdiction of the ECJ, which means that if a Member State
doubts or disagrees, it can appeal to the ECJ. Judicial control of such a vague concept is very difficult. The only
thing that will be able to judge is whether it is a shared competence. Sufficiency and inadequacy are vague
concepts and are purely political judgments (Staggou & Saxpekidou, 2000). This in practice means that the
institution that has the initiative of adopting an act—the Commission with legislative initiative—will check
whether it is a shared competence and will then state a statement of reasons explicitly referring to the principle
of subsidiarity, without mentioning this principle, on the grounds that this objective can be better achieved by
Community action.
Specificity of the Conditions With the Revision of the Treaties
However, contradictory interpretations and approaches to content have remained (Ioakimmidis, 1998), and
in order to properly address the problem, a protocol on the application of the principles of subsidiarity and
proportionality annexed to the Treaty of Amsterdam was drawn up. Subsidiarity-related regulations remained
intact in the Treaty of Nice. The Article 3B §3 has just been numbered in a different way in the Treaty of
Amsterdam as Article 5 §3. The same numbering remained in the Treaty of Nice.
The following guidelines should be used:
 The issue under consideration has transnational aspects which cannot be satisfactorily regulated by action
by the Member States.
 Actions by Member States alone or lack of Community action conflict with the requirements of the Treaty
(such as the need to remedy distortions of competition or to avoid disguised restrictions on trade or to
strengthen economic and social cohesion) otherwise, the interests of the Member States.
 Action at Community level entails clear benefits due to the scale or results of the action compared to
action at Member State level.
In addition, the Protocol states that Community action should be as simple as possible, consistent with the
satisfactory implementation of the measure and the need for its effective implementation. The Community must
legislate when necessary.
In order to strengthen the above rules, the Protocol requires the following from the Commission:
 to consult extensively before proposing legislation and publish, where appropriate, consultation papers
(green papers) apart from cases of particularly urgent or confidential nature;
 to justify any proposal in relation to the principle of subsidiarity;
 to take account of the need for the financial or administrative burden on the Community, national
governments, local authorities, economic operators and citizens to be minimal and proportionate to the
objective pursued;
 to submit an annual report to the European Council, the European Parliament and the Council on its
implementation, which should also be forwarded to the Committee of the Regions and to the Economic and
Social Committee.
Subsidiarity could be seen as a “double-edged sword” (Dehouse, 1994). Its positive concept allows the
Community to act if Community action is necessary. On the contrary, its negative concept protects the
prerogatives of the Member States against unfair Community intervention, a concept maintained in the final
version of Article 3B, since it cannot be relied on to confer additional powers on the Community. The reason
why the definition of subsidiarity is so unclear in the Treaty of Maastricht is the fact that there has been little
political agreement on the substance of the concept in the European Community (Ioakimmidis, 1995).
If the Community institutional system consistently followed the federal system of government, then the
provision laying down the principle of delegated powers would have to be supplemented by another clause
similar to that existing in many constitutions of federal states and regulating, way, the division of
responsibilities between the federation and the federal states.
The above-mentioned problems were covered by the Treaty of Lisbon, which was ratified by the 27
Member States and has been in force since 1 December 2009. The decision of IGC in 2007 was concerned to
the enhancement of the effectiveness and democratic legitimacy of the Union and the coherence of its external
action. It follows broadly the provisions of the Treaty establishing a Constitution for Europe and is governed by
the principle of competence.
However, the principle of subsidiarity remains an indefinite concept, and the inconsistency persists, but it
makes a subdued wording and provides a step for the local and regional authorities of the Member States. So
the Union should retreat when sub-national levels are able to carry out the action.
The Democratic Deficit and the Principle of Subsidiarity

Definition of Democratic Deficit
The term “democratic deficit” in European institutions implies the exclusion of European citizens from the
EU decision-making process. This is a concept that seeks to demonstrate that the EU and its institutions are
deprived of democracy because of their complex functioning.
The Union as a supranational organization does not provide the “essential” notion of democracy as it
operates at an inter-state level.
Although since 1979 the direct election of the Members of the European Parliament and the recognition of
participation in decision-making were established, there is still an increasing volume of academic books and
articles on the democratic deficit. This is a concrete demonstration of the challenge of the Union’s democracy.
The democratic deficit consists of five elements:
 Firstly, European integration has contributed to increasing the executive power and reducing the role of
national parliaments.
 Second, many analysts conclude that the European Parliament needs further empowerment.
 Thirdly, the elections at European level are not being treated by citizens and politicians with equal
importance, so we cannot talk about “real” European elections.
 Fourth, citizens are unable, even in the case of strengthening the EC, to identify themselves with the EU
and its institutions, characterizing themselves as “European citizens”.
 Lastly, the policies pursued by the Union do not always—or almost always—enjoy the widespread
approval of citizens, since they are taken centrally away from direct control at national level.
Subsidiarity Principle Reduces the Democratic Deficit (?)
The need for more effective action, the need for transparency and simplification of the functioning of the
Union as well as the enlargement of the powers of the European Parliament and hence the reduction of the
“democratic deficit” had already become visible as the current Nice institutional framework could not respond
to the Europe of 28 (Papagiannis, 2011). Besides, the Nice arrangements have only been provisional, as is clear
from the Treaty itself. The Treaty of Nice incorporates a statement on the future of Europe where there is a
need to resolve the above problems where, following a report to be prepared for the Goteborg European
Council at its meeting in Laeken/Brussels in December 2001 will adopt a Declaration containing appropriative
initiative to continue this process. This process should cover the following issues: (a) how to achieve and
maintain a more precise delimitation of competences between the European Union and the Member States in
line with the principle of subsidiarity, (b) the Charter of Fundamental Rights of the European Union proclaimed
in Nice in accordance with the conclusions of the Cologne European Council, (c) the simplification of the
Treaties in order to make them clearer and more comprehensible, and (d) the role of national parliaments in the
European construction.
The need to ensure compliance with the principle of subsidiarity has led to the amendment of the Protocol
by the creation of new control mechanisms. An important novelty is the provision of Article 5 (3) of the EU
Treaty, which states that “National Parliaments shall ensure that the principle of subsidiarity is respected”.
Under the new Protocol on the application of the principles of subsidiarity and proportionality, each
institution is responsible for ensuring compliance with these principles (Article 1 of the Protocol). Before any
proposal for a legislative act, the Commission must conduct extensive consultations on the “regional and local”
dimension. Consequently, sub-national units receive for the first time a right of consultation vis-à-vis the
Commission, the non-observance of which constitutes essentially procedural relief, which leads to the
annulment of the legal act.
The relevant Protocol establishes the effective participation of national parliaments and provides the
possibility of bringing them before the Court of Justice which has jurisdiction to hear appeals for infringement
of a principle of subsidiarity by a legislative act in accordance with the procedures laid down in Article 263
TFEU, by a Member State or transmitted by a Member State in accordance with its domestic legal order on
behalf of its national parliament or a body of that parliament. Such appeals may also be exercised by the
Committee of the Regions in respect of legislative acts for the adoption of which the Treaty on the Functioning
of the European Union provides consultation with the Committee of the Regions.
Finally, the combined reading of the provisions of the Treaty and the Protocol implies the following
(Papagiannis, 2011; Chrysomallis, 2010):
 The Union, compared to any other organization, certainly has a surplus of democracy. If a state is chosen
as a benchmark, then a deficit is actually found, but it is also found in each state.
 The provisions are essentially based on the provisions of the Treaty of Maastricht, while the Subsidiarity
Protocol takes on more tangible and specific content on the procedure to be followed. Its main innovation is, of
course, the compulsory interference of national parliaments before adopting the promised legislative act, which
are called upon to decide if the principle of subsidiarity is respected.
 There is an explicit reference to the regional and local dimension of the principle of subsidiarity.
 All European Institutions have to send them the draft legislative act and any amended drafts, thereby
limiting the involvement of national parliaments only in the ordinary legislative procedure by excluding them
from the procedure for implementing the legislative measures by the Commission or the autonomous regulatory
power of the Council.
 The involvement of national parliaments remains advisory because it cannot block the legislative process
because the European legislator may after the review decide to maintain, amend, or withdraw the proposal. A
genuine veto right is not recognized, but a kind of brake to be re-examined.
 The national parliaments first make use of the political bodies of the Union, which means the Commission
and the legislative authority (the Parliament, the Council) and then the Court of Justice, with the result that the
principle of subsidiarity is first judged politically by placing it in its natural environment.
The possibility of legal appeal is also a matter of importance. Any Member State or any national
parliament may bring an action for annulment of the legislative act for breach of the principle of subsidiarity to
be transposed by a Member State in accordance with its domestic legal system (Article 8 (a) of the Protocol).
The Committee of the Regions may also bring appeals (Article 8 (b) of the Protocol), a major institutional
development.
Conclusions
The principle of subsidiarity is a guide to the way in which competences should be exercised at Union
level. This principle solves the problem of the exercise of competences if the Union or the Member States are to
legislate rather than the problem of the allocation of responsibilities. Subsidiarity is a dynamic concept and
should be applied in the light of the objectives set out in the Treaty.
It is not a principle of allocation of competences but defines the areas in which Union action is permissible
and establishes a kind of presumption in favor of the inferior level on the grounds that, when the decision is
taken as closely as possible to the citizen, it has increased efficiency prospects, since it creates a sense of
proximity and participation in it. Its contribution is also reflected in the obligation for a full and detailed
statement of reasons for action at Union level.
Reducing the democratic deficit without overburdening EU activity requires comprehensive information to
the national parliaments and at the same time showing particular interest in European affairs.
In the Treaty of Lisbon we can observe the change of legal framework and political architecture.
The scrutiny of the possibility of legislative action envisaged within the Union is placed within its natural
environment, that of political control. Considering the inevitable amalgamation of national and European competences, the
involvement of national parliaments at this level in the European legislative process is a positive development, even if it is
true to date that they do not show a lot of interest in European affairs. (2010)
The mechanisms devised in the new Treaty essentially create a three-party system but without creating a
real third legislature. National parliaments will be integrated into the European legislative process without
being an EU institution. Consequently, they will bypass the Council of Ministers.
In summary, we conclude that the institutional balance is changing and there are institutional
consequences, primarily for the Commission, which assumes a crucial role—in particular on the basis of the
protocol—but the great institutional consequence is the involvement of national parliaments, whose
involvement creates critical questions. Their engagement is good on the one hand because obviously
democracy is boosted, but on the other hand there is another procedural lingering that will put an end to
efficiency. However, there are doubts as to whether parliaments are capable of enhancing the principle of
subsidiarity (Bermann, 2008).
The European Union has no shortage of rights and values. From a closer reading of the Treaties we will
observe that everything is covered either in the form of values or in the form of objectives.
In other words, we have the goals and values but we do not have the political actions and the financial
means to promote our goals and values. Their absence is due to the correlation of political forces in the drafting
of the treaties.
Is it time for us to lead a federal-logic and not federal-character political union where independent
institutions dominate?
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doi: 10.17265/2328-2134/2019.07.004
D
DAVID PUBLISHING

The Tsar Legacy: Russian Foreign Policy in the Mediterranean
Area from the Romanovs to Putin1
Maria Teresa Giusti

University “G. d’Annunzio” of Chieti-Pescara, Italy
This paper aims at offering an analysis of the attempts of Russian empire before, and the Soviet empire later, until
to now, to exert its influence in the Mediterranean area. Drawing also from Russian archival sources, the relations
between the Soviet Union and Russia, on one side, and some countries in the Mediterranean or Adriatic areas, like
former Yugoslavia or Syria, will be examined. Part of the historiography, firstly Soviet and then Russian, continued
to maintain a theory, according to which Stalin’s foreign policy choices were made as a sheer reaction to English
and American challenges in the region which goes from the Adriatic to the Persian Gulf. According to others,
Stalin’s foreign policy was formed during and immediately after World War II and was dictated by Stalin’s
personal ambitions, reinforced by the victory over Nazi Germany. However, the documents consulted until now
allow for a new approach and a new evaluation of the events. The picture that emerges from an analysis of the new
documentation is more complex than what could have been imagined. The clarification of the objectives and
actions to be undertaken in various European countries, where communist regimes were intended to be established,
was dictated by pragmatic considerations and by the development of the situation in the various countries under the
Soviet influence. In addition, the USSR indirectly aimed at influencing foreign as well as internal policy in
countries, such as Italy, which did not belong to the Soviet sphere.
Keywords: Russian Empire, Soviet foreign Policy, Stalin, Adriatic Sea, Yugoslavia, Persian Gulf, Cold War, the
Soviet-Yugoslav Split
The present paper aims at analysing the attempts of Russian and Soviet Empire to exert its influence in the
Mediterranean area from Stalin’s era to Putin. In recent years historical research has been enriched by
numerous sources coming from archives of the former Soviet Union. Although Russian collections of
manuscripts are not always available for political reasons, they are nevertheless a major source of information
regarding certain aspects of modern history, which are little or only partially known. The present article, based
both on Russian and British documents as well as on published literature on the subject, concentrates on Soviet
foreign policy and on the relations between the USSR and Yugoslavia during the Second World War and on the
eve of the Cold War. The information obtained from Russian archives has resulted in our substantially
reinterpreting the events behind the creation of the Eastern Bloc and the institution of communist regimes in
Maria Teresa Giusti, Ph.D. in “Political History of Europe XIX and XX Centuries” at University of Bologna, Associate
Professor of Contemporary History, Social History and History of Russia at the Department of Humanities, Arts and Social
Sciences, University “G. d’Annunzio” of Chieti-Pescara, Italy.
1
Paper presented at the Conference “The Endurance of Empire”, organized by the Telos Paul Piccone Institute, Ragusa, Italy,
August 31-September 2, 2018. This paper was published with the financial support of the University “G. d’Annunzio” of
Chieti-Pescara, Italy.
326 THE TSAR LEGACY: RUSSIAN FOREIGN POLICY IN THE MEDITERRANEAN AREA
Eastern European countries and is a remarkable contribution to the analysis of political instruments and
alliances of which the USSR made use to extend its influence in the Mediterranean, in particular, in the Adriatic
Sea.
The picture that emerges from an analysis of the new documentation is more complex than what could
have been imagined, particularly as concerns the Soviet era and the Stalinist period. Until the early 1990s
Yugoslavian, Russian, and Western scholars based their research on relations between the USSR and
Yugoslavia and on the extension of Soviet interest towards the Adriatic, drawing from selected data, aimed at
propaganda or at endorsing a convenient version for the USSR and the international communist movement. In
other cases, they founded their studies on testimonies or memoirs of famous Yugoslavian government
representatives who more or less had the same aims (Kardelj, 1980; Vukmanović-Tempo, 1971; Djilas, 1962;
1985). On the other hand, after the Second World War, following publications on Serbian emigration to the
West, a contrasting version became prominent which discredited the USSR and the communist movement
(Nikolić, 1999).
Part of the historiography, firstly Soviet and then Russian, continued to maintain a theory, according to
which Stalin’s foreign policy choices were made as a sheer reaction to challenges in the region which goes
from the Adriatic to the Persian Gulf—first coming from Germany and later from the USA and Great Britain
(Hasanli, 2003; 2005; Hasanli & Zubok, 2007)2. According to others, Stalin’s foreign policy was formed during
and immediately after the Second World War and was dictated by Stalin’s personal ambitions, which were
reinforced by the victory over Nazi Germany (Volkov, 2000; Zubok & Pleshakov, 1996; Pechatnov, 2006). A
fundamental contribution regarding this topic was presented in the publication of collections of documents
which finally shed light on aspects which had not been studied properly (Bukharkin, 1998; Vuioshević, 1992;
Petranović & Zechević, 1988). In addition to these documents, interesting contributions by historians such as
Mikhail Narinsky, Leonid Gibiansky, and Vladimir Volkov have helped to clear up the complex picture of
relations between the USSR and the countries of South-Eastern and Central Europe, in particular Yugoslavia
(Naimark & Gibianskii, 1997; Gibianskii, 1987; 1997; 1998a; 1998b; 2002).
During the Cold War, the clarification of the objectives and the actions to be undertaken in various
European countries, where communist regimes were intended to be established, was dictated by pragmatic
considerations and by the development of the political situation in the various countries under the Soviet
influence. In addition, USSR indirectly aimed at influencing foreign as well as internal policy in countries, such
as Italy, which did not belong to the Soviet sphere.
In some respects, some objectives of the Soviet foreign policy have been borrowed from the tsarist Empire,
in particular the aim at reaching the control of the Mediterranean area. The Tsarist Empire was a typical
“continental Empire”, which at the same time was the largest state in the world and a European power, although
if compared to European countries it was very backward from a socio-political and economic point of view.
The Tsarist regime had survived the 1905 Revolution and the defeat against Japan, with whom the Tsar
managed to sign a peace treaty, losing relatively few territories. Anyway, the defeat with Japan that shocked the
Western powers, had clearly demonstrated the weakness of the Russian Empire.
2
About the Soviet attempt to extend its control over Iran and Turkey, see Jamil Hasanli, Juzhnyi Azerbaigian: Nachalo
Kholodnoi voiny (Baku: Adilogly, 2003); Hasanli, SSSR-Turtsiia: Poligon kholodnoi voiny (Baku: Adilogly, 2005); Jamil Hasanli
and Vladislav Zubok, “La prima crisi della guerra fredda: Mosca e il petrolio iraniano (1943-1946)”, Ventunesimo Secolo, 6(13)
(2007), 11-44.
THE TSAR LEGACY: RUSSIAN FOREIGN POLICY IN THE MEDITERRANEAN AREA 327
As regards the beginning of the 20th century, Russian foreign policy was conditioned by the accession of
Russia to the Entente with France and Great Britain; by its aggressive attitude towards the Ottoman and
Austro-Hungarian Empires; and by the traditional expansionist policy of Russian autocracy, aimed at obtaining
an outlet to the Mediterranean Sea (Zaslavsky, 1995, p. 51). These were also the reasons why the Russian
Empire entered the war in 1914. The Russian participation at war was useful both for attacking the two Empires
and eventually defeating them, and for reaching the Mediterranean, becoming a trusted ally of Serbia. All these
plans were not realized since, according to Victor Zaslavsky, “the history of the last years of Russian Empire is
the history of a regime in decomposition, unable to govern, that did not want to either reform or voluntarily
leave the power, dragging to the edge the entire country” (Zaslavsky, 1995, pp. 51-52). So the history of the
Russian Empire and its end is strictly connected with the First World War, which encouraged and facilitated the
outbreak of the Revolution. On the other end, in terms of domestic policy, through the entrance at war the
Russian leadership aimed at cracking down once and for all the revolutionary movement and the strikes. So a
huge number of young people were mobilized; a state of emergency was declared in industry; strikes were
prohibited, and demonstrations of enthusiastic patriotism were organized.
Anyway, all these efforts did not help in avoiding the epilogue of the Empire. The Brest Litovsk Treaty on
3 March 1918 signed by the Revolutionary Russia and the Central Empires put an end to the war, but
represented also a real break with the Western powers. On the ideological level this break was marked by the
decree about the land to peasants and the abolition of the private property.
The First World War completely undermined the system of empires and it was clear to all governments
that Europe and the world would not go further in the manner before 1914. The birth of the new state which in
1922 was named USSR, and its novelty as a political phenomenon in the European tradition, forced the
Bolsheviks to deal with domestic politics and leave for the moment any attempts at territorial expansion for the
time being. From its beginning the Bolshevik leadership aimed at strengthening the power and at eliminating the
so called enemies of the Revolution, replacing the old Empire with a new one, which inherited from the tsarist
Empire, the system of concentration camps, and the repressive methods, transforming the regime from an
authoritarian into a totalitarian one. After Lenin’s death, the problem of succession aroused and it is significant
that among the three contenders Nikolai I. Bukharin, Lev Trotsky (Lev D. Bronshtein), and Iosif Stalin (Iosif V.
Dzhugashvili), the latter, the commissioner for nationalities, emerged. The first real problem for the new Socialist
State was to maintain control, with all means, over the hundreds nationalities of the former tsarist Empire.
Furthermore, “the dominant position of Russians, primus inter pares, in Soviet society scarcely needs to be
demonstrated”, anyway “Russian hegemony within the tsarist Empire was seriously compromised by the
revolution” (Zaslavsky, 2005, p. 99). According to Lenin, it was the task of socialism to promote the
internationalization of economic, political, and cultural life. He recognized the need to struggle against Great
Russian chauvinism and against the legacy of tsarist nationalism and militarism. But in the late thirties and
particularly during World War II this attitude changed decisively, and state policy on the national question
underwent a sudden shift towards Russification. “The reasons for the shift are evident. The Russians, who
constitute the biggest ethnic group in the country, populate compactly the largest part of the USSR and also form
a considerable part of population in almost all national republics” (Zaslavsky, 2005, p. 99). The Russians gave
the major contribution to the industrialization and to the war. So, at the end of the thirties, along with the
Russification the militarist and imperialist politics of the tsarism was taken up again.
Even Stalin, interested in consolidating the Soviet State, gave a little importance to foreign policy and to
plans of expansion of the Socialist State. Many scholars agree on the defensive character of Stalin’s geo-political
doctrine: only after consolidating the Revolutionary State, Stalin aimed at enlarging the Soviet borders and at
expanding the communist model in other states. The defensive approach of foreign Stalinist policy changed
gradually through a series of bilateral agreements, among which the Molotov-Ribbentrop Pact of August 1939 (or
“Pact of non aggression”) which definitely broke the balance reached in Europe with the Treaty Peace of
Versailles, and which allowed Nazi Germany to start the war in Poland, and the Soviet Union to get some
territories, included the Baltic States, and half Poland, thanks to a war never declared. The alliance between
Germany and USSR broke when Stalin asked Hitler to get the control of some Turkish ports on the Black Sea and
the Straits of the Bosphorus and the Dardanelles, which were both an area of interest for Nazi Germany (Volkov,
2000, pp. 11, 35ff). This request clearly demonstrated the intensions of the Soviet leadership to reach the
Mediterranean Sea. The German attack to the Soviet Union, in June 1941, changed the position of the USSR
which had to face the invasion without any defensive plan. As a matter of fact, thanks to Russian documents we
know that Stalin had ordered the General Staff of the Red Army to prepare a plan of attack against Germany.
During WWII the Soviet Union sustained the partisan movement in Yugoslavia. In numerous meetings
held in Moscow with representatives from Belgrade, details of the line of tactics that would be followed by
Soviet diplomacy were clarified. The evolution of the Balkan framework was one of the issues touched upon, in
particular in Greece and Bulgaria, and above all the situation in Italy. At the beginning of the Cold War, and till
to 1948, the year of rupture with Moscow, Yugoslavia became a trusted ally of the Soviet Union. Stalin called
Tito the “bastion of USSR in the Mediterranean”, and Tito offered Stalin the port of Trieste in Italy.
Secondarily, Russian documents show that the Yugoslav Communist Party became an important ally to
influence the Italian communist party, at least till to 1948.
The rupture between Stalin and Tito in 1948 depended on the different ways of conceiving foreign policy:
“Adventurism” and the “unscrupulous” politics of the Yugoslavs towards Italy and Austria, aimed at pushing
the communist forces to revolt against local governments, were not supported by Stalin. Another example of
the different attitude towards Allies and the politics in the Mediterranean Sea was represented by the civil war
in Greece, erupted soon after the end of the Second World War, which risked destabilizing the relations
between the USSR and the Allies and leading to a war which the Soviet Union was not prepared for (Zaslavsky,
2002, p. 33). So the Cremlin was very cautious about the situation in Greece. During the war it was through the
Yugoslav Communist Party that Georgi Dimitrov—secretary of the Comintern until May 1943 and leader of
the Bulgarian Communist Party—got information about the situation in occupied Greece; in particular he asked
about the Greek partisan movement: the EAM (the national Liberation Front) and its military branch, the ELAS
(the Greek People’s Liberation Army), which was controlled by the KKE (the Greek Communist Party).
Dimitrov and Stalin were also interested in the relations between the communists and the other forces of
resistance, like the EDES (the National Republican Greek League) which at the beginning of the resistance was
the major group. In some cases, as in Yugoslavia happened, these forces (the communist and the nationalist
ones) were mostly interested in fighting each other, than against the occupiers, for the further control of the
country. Anyway in June 1944 the Central Committee of the KKE, by means Tito asked Stalin to help the
Greek resistance with equipment and weapons, specifying that the shortage of weapons and ammunition would
THE TSAR LEGACY: RUSSIAN FOREIGN POLICY IN THE MEDITERRANEAN AREA 329
have affected all Greek future politics (Ulunian, 1994, p. 101f)3. In October Dimitrov proposed to Viacheslav
Molotov (the Soviet minister of Foreign Affairs) to help “even morally” the EAM and the ELAS4, because he
perfectly knew that a direct help should have not been possible since the position of Greece has been already
decided by Stalin and Churchill in Moscow, and this position was in the Western bloc (Resis, 1978). In
December 1944 the British intervened in Greece in support of the government of Georgios Papandreu against
the ELAS resistance forces which, after the end of the Nazi occupation, had refused to surrender their weapons
and had started a real civil war to overthrow the government.
In this fight the Greek partisans had Tito’s support but not Stalin’s one. Yugoslavia asked Stalin to help
the communists fighting against the right-wing government, but Stalin denied any support to Greek communists,
because it risked destabilizing the relations between USSR and the Allies and leading to a war which the Soviet
Union was not prepared for yet. Furthermore, a possible support by the Kremlin to the Greek communists
should have led to a review of the position of the European countries in the opposing blocs, including Poland.
The Kremlin had all interests in maintaining control of its sphere of influence. For the same reason, Stalin was
irritated by the Yugoslav rebellion which revealed aspirations for independence.
Commenting on the situation in Greece, on 10 January 1945, in a telephone conversation with Dimitrov,
Stalin declared:
I had advised that a similar struggle should not be undertaken in Greece. The ELAS men were not to leave the
Papandreu government. They have undertaken an action for which we lack the strength. Apparently, they were counting on
the fact that the Red Army would descend to the Aegean Sea. We cannot do that. We cannot send our troops to Greece. The
Greeks have done a foolishness. (Anderson & Chubarian, 1998, p. 78)
As we can see, Soviet foreign policy was aimed at maintaining the status quo established at the
Conferences of Teheran and Yalta, but at the same time it was directed to find allies in order to influence
internal politics of European states. Defending Soviet interests, under Stalin and the communist leadership, was
a priority.
The same can be said about the new Russian Empire under Putin’s guide. It would be interesting to talk
about the charisma of some leaders, such as Putin. As regards foreign policy, the decisions taken, such as the
war in Syria, and all the proposals made by the Kremlin, show how Putin is interested in becoming a mediator
between the West and the East, between USA and rouge states, such as Iran and Syria, with whom Russia is
allied. The war in Syria represents the will of Moscow to defend Russian interests in the Mediterranean area.
As concerns Putin’s internal policy, many scholars have called it “soft authoritarianism”, which, in line with
tsarist and Soviet policy, is aimed both at maintaining the borders of the new Russian Empire and the control
over nationalities (inside the Empire) and at preserving its interests in the Mediterranean Sea and in the Pacific
Ocean.
3
See the telegram sent by G. Siandos to A. Dzimas on 12 June 1944, in Artiom Ulunian, Kommunisticheskaia partiia Gretsii.
Aktualnye voprosy ideologii, politiki i vnutrennei istorii. 1941-1956 [The Greek Communist Party. Current issues of politics and
internal history] (Moskva: Fond grech. Issled, 1994), p. 101f.
4
Pis’mo G. Dimitrova i L. Baranova V. Molotovu o natsionalno-osvoboditelnom dvizhenii v Gretsii, 21 oktjabrja 1944g [Letter
by Dimitrov and Baranov to Molotov about the National Liberation Movement in Greece, 21 October 1944], RGASPI (the
Russian State archive of Socio-political History), fond 495, case 74, file 178, p. 6.
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doi: 10.17265/2328-2134/2019.07.005
D
DAVID PUBLISHING
The Myth of the Economic Strength of the United States
Eduardo Alfonso Rosales Herrera

National Autonomous University of Mexico, Mexico City, Mexico
The US government constantly repeats that the country’s economy has solid foundations and that it is growing,
even the current president announces that his country’s economy is the strongest in history, but the truth is that
there are macroeconomic indicators that contradict it. The United States is experiencing a structural crisis of long
evolution that is reflected in colossal indebtedness, in the concentration of wealth, the increase in poverty, and in
the trade and budget deficits. During the second administration of President Obama, the ratio of debt to Gross
Domestic Product (GDP) reached 100% and since then, the amount of debt has continued to increase. With the
arrival of Donald Trump, the US economy registers historical deficits and the debt figure has already exceeded 21
trillion dollars, which augurs in the medium term a decline in GDP growth and a potential recession, but in the long
term and not reversing this trend could present a financial catastrophe. This situation will negatively impact other
indicators which could generate a climate of uncertainty, nervousness, and instability that will make the crises of
1929 and 2008-2009 pale.
Keywords: Structural crisis, public indebtedness, concentration of wealth, increase in poverty, trade and budget
deficits
Public Debt
First of all, it should be said that every State prepares a general budget year after year that is an estimate of
the income and expenditures that it will have and, based on these data, what is known as public expenditure. Of
course to make this forecast has to take into account various parameters such as inflation, unemployment, and
the growth or decrease of the Gross Domestic Product (GDP) and others.
Of course, it is very difficult for governments to calculate exactly the money they will receive and the
monetary resources that they will spend because there are innumerable factors that alter this estimate.
If the State receives more and spends less than the government accounts register surpluses, but if the
opposite happens, it incurs a deficit. In this second case, governments resort to both external and internal loans,
which is what is called public debt. In order to obtain monetary resources, governments issue instruments such
as treasury bond, which in terms of international finance is known as sovereign debt.
In periods of low collection and especially in times of economic crisis, internal and external financial
assistance is necessary; however there are many countries in the world that have long used debt as a mechanism
to cover their expenses and have entered into a vicious circle from which they have not been able to leave. Such
is the case of the United States, which has incurred a deficit since the monitoring of its public expenditure.
Eduardo Alfonso Rosales Herrera, Ph.D. in International Relations, full-time definitive professor at the Postgraduate School of
Higher Studies Acatlán, National Autonomous University of Mexico, Mexico City, Mexico.
332 THE MYTH OF THE ECONOMIC STRENGTH OF THE UNITED STATES
Second Half of the 20th Century

In the following figure we can observe the indebtedness observed in the United States in the period
1940-2012, that is, from the beginning of the Second World War until the end of the first administration of
President Barack Obama.
Figure 1. United States public debt 1940-2013 (in billions of dollars). Moreno (2013).
As you can see the debt remained stable and under control for 40 years, from 1940 to 1980. It is important
to point out that in these four decades the cold war was lived, which represented a very important expense for
the United States due to the arms race and the space race he waged against the Soviet Union (USSR) but also
there were other huge expenditures caused by the Vietnam War, one of the longest armed conflicts in its history,
as well as other problems such as the impact of the oil embargo that substantially increased the price of
hydrocarbons; however, the high agricultural and industrial productivity, the constant innovation, the growing
exports, the economic weakness of Europe and Japan due to the aftermath of the war and the inexistence of an
economic pole that generated a rivalry and competition such as current China allowed it to achieve half of
world GDP and consequently take the Western capitalism’s leadership.
The Last Two Decades of the 20th Century

The rising curve of indebtedness began with the arrival of Ronald Reagan to the presidency when the
public debt first reached the trillion dollars (Die Presse, 2006) which coincided with the implementation of its
economic policy called “reganomics” inspired by the neoliberal model proposed by Milton Friedman and the
School of the Chicago Boys, which meant financial deregulation, a significant decrease in taxes, an increase in
the deficit that went from 2.7% to 6% of the GDP (Budget of the United States Government, 2006) support for
anti-communist movements throughout the world, military actions in Libya and Granada, among others, the
THE MYTH OF THE ECONOMIC STRENGTH OF THE UNITED STATES 333
increase in military spending that rose by almost a third, the strategic defense initiative, better known as “Star
Wars” which meant an expenditure of around 25 dollar billions (Sputnik, 2019). All of the above caused the
increase in the budget deficit and the consequent increase in public debt.
The assertion that the Ronald Reagan government was unbalanced finances and began the rapid rise of
debt is shared by Joseph E. Stiglitz in the preface to his book Freefall America, Free Markets, and Sinking of
the World.
First Decade of the 21st Century

During the government of George W. Bush, two major military operations were carried out, the first in
Afghanistan to dismantle the Taliban Movement, liquidate the Al-Qaeda group, and eliminate Osama Bin
Laden and the second in Iraq with two objectives, the first to overthrow the regime of Saddam Hussein and the
second to locate and destroy weapons of mass destruction, something that certainly never happened because
such weapons were never found.
Notwithstanding the above, the costs of both operations were very high because of the war in Afghanistan,
according to very conservative estimates by Anthony Cordesman, a consultant in the State and Defense
departments during the wars in Afghanistan and Iraq and strategist Arleigh A. Burke of the Center for
International and Strategic Studies (CNNMoney, 2017); they were 841 billion and those of Iraq, according to
Joseph E. Stiglitz and Linda J. Bilmes, rose to three trillion dollars (Stiglitz & Bilmes, 2008, p. 12).
Other studies, such as those of Neta Crawford, co-director of the Cost of Wars Project at Brown
University (CNNMoney, 2017), consider that the total spending of wars in Iraq, Afghanistan, and Pakistan
since 2001 reaches five trillion dollars.
Regardless of the figures indicated, the truth is that the costs of both wars, those of Afghanistan and Iraq,
were enormous.
In 2007, the crisis of subprime mortgages also appeared, which caused a crisis in the financial system of
the United States and later in the world, which caused the bankruptcy of several banks, starting with Lehman
Brothers. This evidently sharpened the economic problems of the United States for the monumental cost
represented by the bank rescue and several companies such as the automotive industry.
Derived also from the economic crisis caused by the housing bubble, the Federal Reserve carried out
exceptional measures such as the quantitative easing that injected a total of 4.5 trillion dollars into the US
economic circuit, which obviously also had an impact on that country’s public debt.
On the other hand, the following figure allows us to observe the indebtedness of the United States in the
period 2001-2011, that is to say a decade in which this country faced the worst attacks in its history (S-11) and
the consequent crusade against terrorism started by George W. Bush and continued by Barack Obama.
Figure 2. The historical tradition of indebtedness. ABC.es Internacional (w/d).
Second Decade of the 21st Century

On the other hand, it is important to point out that for the year of 2011 China consolidated itself as the first
lender in the United States, which definitively broke with the idea that the first economic power in the world
should be the creditor country, not the debtor; besides Japan and the United Kingdom already appear as the
second and third lenders.
According to the previous figure, the fact that China has allocated more than 1.15 trillion dollars to loans
to the United States evidently reflects that the Asian giant had monetary surpluses in those years coming from
the double-digit growth of its Gross Domestic Product, the trade surplus which recorded its trade balance and
the consequent accumulation of foreign exchange reserves.
Other studies tell us that the debt of the United States with China is 1.8 trillion dollars and that for the
payment of interest the Chinese government receives almost 50 billion dollars a year (Ferrero, 2015) which
reveals the financial power of Beijing.
So far this century, the economic strength of countries like China contrasts with the weakening of the
United States, especially after the events of S-11. The waning period of the economy has been so long that it
makes us think that this country has gone from a conjunctural crisis to a structural one and that the last
governments have not been able to stop and less reverse. About the Asian giant it is necessary to emphasize that
it is the first commercial power in the world, the largest consumer of energy on the planet, the first producer of
steel, coal, and cement, the largest shipbuilder; it also has the largest merchant marine and the largest number
of troops military and is, in addition, the great world lender.
Returning to the United States, the administration of President Barack Obama was not different from the
previous ones because when he assumed the presidency the debt was 10.6 trillion dollars, but when his
government ended he reached 19.5 trillion, which means that in eight years the debt doubled. Obama faced the
challenge of taking his country out of the worst crisis in history after that of 1929; however, this achievement
had a colossal impact on the issue of indebtedness.
In the 21st century there have been three different administrations, first that of the Republican George W.
Bush, the second that of the Democrat Barack Obama, and the third that of Donald Trump but the final results
of the indebtedness have been disappointing.
To illustrate the seriousness of the problem, let’s see the following table.
Table 1
Historical Debt of the United States
Year Amount of debt Accumulation period
1981 1 trillion dollars 200 years
2019 22 trillion dollars 1 year
Source: OroyFinanzas.com (2016). Statistical chart of own elaboration.
The data show that the rate of accumulation of the public debt of the United States is vertiginous,
practically one trillion per year and very difficult to stop. The administration of President Trump has taken
measures similar to those of former President Reagan to boost GDP growth, such as lowering taxes, increasing
infrastructure spending, and expanding military spending. However, all of the above have weakened revenues
and expanded the debt.
A first consideration is that the US government cannot function without the monetary resources coming
from loans, in other words, the US economy is not healthy or sustainable because it is unable to generate
surpluses that reverse the trend of indebtedness regardless of who the president is and the party to which it
belongs.
Currently the United States ranks sixth worldwide among the most indebted countries in the world taking
into consideration the debt/Gross Domestic Product ratio, but in the next decade it is absolutely foreseeable that
it will reach the third place which could cause a global financial catastrophe.
Debt per Capita

Another problem that derives from this situation is the increase in per capita debt. Graphs on this issue are
just as alarming as those on public debt.
In February 2012, The Weekly Standard published the following figure prepared by the office of Senator
Jeef Sesions.
Figure 3. America’s per capita government debt worse than Greece. Freedman (2012).
In this same source it is mentioned that the United States has the highest debt per person than any of the
member countries of the European Union, including countries that at the beginning of the second decade of the
21st century were disparagingly called “PIGS”: Portugal, Ireland, Greece, and Spain, because all of them were
in a severe economic crisis that to date they have not managed to overcome in its entirety. The alarming thing
about this matter is that six years later, in 2019, this item continues to grow proportionally with the US public
debt, which means that every child born in this country today owes approximately $61,900 (Sputniknews, 2018)
that is 17,685 thousand dollars more than in 2013. This is a very high amount and therefore very worrying.
It is important to note that the previous figure “America’s per Capita Government Debt Worse Than
Greece” was drawn up in January 2013, just when the amount of the United States debt exceeded 100% of the
Gross Domestic Product. The following table exemplifies the above.
Table 2
Comparative Gross Domestic Product/Total Debt
Year Gross Domestic Product Total debt
2013 $15,294,300,000,000 $15,419,800,222,325
Source: Conn (2013). Statistical chart of own elaboration.
In order to have an additional comparative figure that shows us the problem of the per capita debt of the
American society, we mention that Mexico, a country considered to be emerging and with an economy 20
times smaller than that of the United States, has a debt/Gross Domestic Product ratio of around of 45% while
the United States has it at approximately 120%. The above means that the per capita debt of Mexicans is, at an
exchange rate of $19.00 pesos per dollar, of $4,475 dollars, while each American owes more than $60,000
dollars, that is, 13 times greater and continues to rise.
Table 3
Percentage Evolution of the Ratio of Public Debt to Debt per Capita
Year Public debt (% GDP) Debt per capita
1981 40.33% $5,041
2008 73.79% $24,250
2016 107.17% $55,810
2018 120% (aprox) $63,065 (aprox)
Source: Expansión/Datosmacro.com (2018). Statistical chart of own elaboration.
All of the above leads us to think that the US economy is addicted to indebtedness and regardless of the
official discourse this parameter is perhaps the most evident symptom of the incurable, progressive, and deadly
disease that it suffers and that no democratic or republican government has been able to resolve. Currently the
debt is unpayable and this explains why the Standard & Poors Company reduced the US debt rating in the year
of 2011 by one step, a fact unprecedented in the history of that country.
There is another negative fact that adds to the above and is that any debt generates interest payments. The
data published by the New York Times states that Washington will pay in 2019 almost 400 billion dollars for
debt service, but to continue this uncontrolled process of indebtedness, the interest to be paid within 10 years
will rise to 900 billion of dollars (Meschoulam, 2018).
Table 4
Interest Generated by US Debt
Year Payment of interest in billions of dollars
2017 260
2019 390
2029 900 (estimate)
Source: Statistical chart of own elaboration.
In a short time, the expenditures for this concept will be more than those of any other item of the public
budget.
At this moment it is pertinent to point out that one of the items of public spending that represent a real
drain on the US Treasury is the military budget. In 2018 it stood at 649 billion which represents more than a
third of the world’s spending and “is greater than the total of the expenses of the other eight countries that
allocate more resources to this same item”, according to data published by the International Institute of Studies
for the Peace of Stockholm (IISPS) (EC/AFP, 2019). To give an example of the costly and perhaps unnecessary
military expenditures, we note that in 2017 Trump presided over the inauguration ceremony of the 11th aircraft
carrier of the US navy, Gerald R. Ford, which cost 13 billion dollars, also on that occasion he promised to start
the construction of another one that could cost 15 billion dollars. Of course, these expenses do not include the
maintenance or operation of aircraft carriers, but in addition these types of warships may be vulnerable targets
when we know the existence and development of 21st century weapons such as hypersonic missiles with
multiaxial maneuverability, high submarine drones speed equipped with nuclear weapons, fifth-generation
fighter aircraft, and high precision laser cannons to name a few examples.
The problem of the current administration is that it is opening many battle fronts around the world from
the economic-commercial as with China to the military with Iran and all this generates huge costs.
In this context and in the frame of the verbal confrontation between the US president and Iranian President
Hassan Rouhani, at Washington’s insistence that the Tehran regime renounces its alleged nuclear weapons
program, Trump said that the United States “is by far the most powerful military force in the world, with 1.5
trillion dollars invested during the last two years” (Agencies, 2019) (referring to the military budget). It is more
than exemplary data provided by the tenant of the White House.
In addition, the combination of lower revenues, higher military spending, and a larger infrastructure
budget of up to two trillion will at some point impact not only fiscal revenues but also the Gross Domestic
Product, which could cause not only a slowdown but a recession. The United States suffers from a compulsion
for debt, which implies that at some point its structural power will be diminished and, of course, its ability to
influence the world.
Do not forget that apart from the public debt there is also a domestic debt that includes social benefits such
as Medicare and Medicaid, the care and pensions of retired citizens, and other items. Many other debts are also
worrying too much, such as that of companies that amounts to nine trillion, that of consumers that reaches 13.5
trillion, and that of students that reaches 1.5 trillion. If we add only the last three debts referred to plus the
public, the figure exceeds 45 trillion dollars so the problem is monumental to the extent that in the not too
distant future, there could be a scenario of financial bankruptcy for the United States government and its
citizens which would cause an expansive wave that in minutes would affect the entire planet.
Concentration of Wealth
Now, with regard to the concentration of wealth, the data are alarming when we know that the richest 1%
of families control almost 40% of the country’s wealth (Egan, 2019) which figure that the Federal Reserve
published in September of the year 2017 (Federal Reserve, 2019).
Another data related to the above indicate that 90% of families with less income now only have 23% of
wealth, 33% less than the figure in 1989, year in which the Federal Reserve began monitoring of this
parameter.
Regarding income, the data are even more discouraging because in 2016, the richest 1% of families
obtained 25% but 90% of the poorest ones won only 49.7%, that is, less than half. This last data in particular is
very alarming because in 1989, the year in which the FED began the measurement of this indicator, the income
of the poorest families was 60%, which means that in little more than a quarter of a century the poor are poorer
because they lost more than 10% of total income (Egan, 2017).
The previous figures are terrible and explain several things to each other, the steady increase in the
fortunes of the richest men published every year by Forbes magazine, but in contrast the emergence of
movements like the “Occupy Wall Street” and the rise of politicians like Bernie Sanders and Elizabeth Warren
who severely criticize the concentration of wealth and the spread of poverty. Whether or not one of the two gets
the democratic nomination for the 2020 elections, both are the visible face of the discontent of millions of
Americans who still do not understand why it continues to decrease their income, their purchasing power, their
savings, and their standard of living.
To exemplify the above, we can use the metric developed by the Italian statistician and demographer
Conrado Gini, which is colloquially known as Index or Gini Coefficient and which aims to measure the
inequality of income in a country, but also reflects adequately the gap between rich and poor or what is the
same is the inequality of the distribution of wealth.
Before showing the map and the figure, it is necessary to point out that the limits of this coefficient
oscillate between zero and one in which the zero would mean that there is an equitable distribution of wealth; it
would be a perfectly egalitarian society in which all its members perceive the same income while the one would
be the opposite, that is, a perfectly unequal society in which a single person would have all the income.
According to the United Nations (UN), when the Gini coefficient exceeds 0.40, it means that there is a
considerable gap between rich and poor, which makes a potentially risky scenario due to that the differences in
income of the different social classes cause an environment of polarization that would cause popular discontent
or insurrection.
Figure 4. Gini index world map. Wikimedia.commons.org (2017).
The previous map has several readings, such as the fact that the United States already exceeds 0.40 of
inequality, which places it on the threshold of a possible scenario of social upheaval. It also puts it on an equal
footing with countries such as Argentina in the Americas, or Morocco in Africa, or like Thailand in South Asia
and very far from other nations such as France, and even more distant from societies such as those Nordic
countries.
It should be added that derived from the crisis of 2008-2009, and as a point of comparison, the United
States came to have in 2011 a Gini index of 0.469 very similar to that of Mexico at that time that had a 0.472
which placed both in the 123th place of inequality among all the countries of the world. Now that according to
Donald Trump, the United States has the strongest economy in its history (Yahoo Finanzas, 2018). Because his
country has full employment, a substantial increase in exports, high indexes in its stock exchanges, and a high
GDP per capita, the United States cannot leave the risk zone as expressed by the United Nations Organization.
Thus, the official discourse is very optimistic and at the same time biased because it is based only on positive
indicators without taking into account the negative ones. In the near future there are also other reasons for
alarm, such as the potential decrease in the income of broad layers of society due to the technification of
production, the distribution and marketing of goods and services, and the consequent displacement of the hand
of work in addition to the unemployment of workers whose role in the productive apparatus will be affected by
globalization and by activities related to the knowledge economy.
Part of this problem has been widely exposed in the book Capital in the 21st Century published by
Thomas Piketty who, in summary, states that the market economy generates imbalances and asymmetries and
that the best indicator to measure the impoverishment of a society is precisely that of inequality. In this sense,
the system itself accumulates wealth on one side and poverty on the other. This explains the growing gap
between rich and poor, not only in the United States but throughout the world.
A fact that can be useful to demonstrate the previous hypothesis is when we know that, according to
Mauro Guillén, Professor of International Management at Wharton School and director of the Lauder Institute
of the University of Pennsylvania, 1% of the world population concentrates 50% of planetary wealth. In the
United States, an example of the above can be seen in the fact that 540 families have assets of more than one
billion dollars, but the middle class remains stagnant and the poor continue to increase (Guillén cited in
Montenegro, 2019). This also explains the acceptance of the leftist discourse between young people and the
lower classes such as Bernie Sanders and Elizabeth Warren and Donald Trump’s right-wing populist discourse
between Anglo-Saxon and Protestant whites who are less affected by the globalization phenomenon.
The foregoing also explains why in several countries there is talk of economic growth, but not
development. On the other hand, the increasing financialization of the economy has caused the richest to
increase the holding of shares of publicly traded companies, something that the poor and marginalized cannot
do, because if they do not have the money to cover their basic needs, the less acquire shares. In the United
States, “1% owns half of the country’s shares, bonds and mutual funds; 50% of Americans in the lower part
barely own 0.5% of these investments” (Jiménez, 2013).
Poverty
As regards this item, the American union is not in a better situation. We say the above because at the
beginning of 2018 there were around 41 million poor people, that is 13% of the total population, a very high
figure for the first economic power in the world.
In this country the poverty threshold is considered when a family of four has a gross income of less than
24,300 dollars per year, that is, 6,075 dollars per person.
The problem is compounded when we know that there are many counties in the United States that have up
to twice the poverty level and that African American and Hispanic families are the ones that suffer most from
this condition. In the case of African-Americans, the poverty rate is 22%, double the average for white families
(Shambaugh, 2017).
Figure 5. Where are the poor in the United States? Which counties have the highest and lowest poverty rates?
Shambaugh (2017).
Figure 6. Poverty in the United States. El Orden Mundial (2018).
A brief study published on the website “The World Order (EOM)” in November 2018 indicated the
following:
The United States is the third country with the greatest poverty gap in the OECD [Organization for Economic
Cooperation and Development] after South Africa and Italy, the fourth with the highest proportion of the population living
below the poverty line and the seventh with the highest income inequality. All of it from almost a quarantine of countries.
(El Orden Mundial, 2018)
In context, it is important to note that despite the low level of unemployment in the United States, there is
still a lack of more jobs and better remuneration because the economic growth in that country is not enough to
lift a growing number of people out of poverty.
Budgetary and Commercial Deficit

Since 1975, that is to say for more than four decades, the trade deficit has become a real headache for the
different governments, but the year 2019 is already a migraine for the Trump administration because the
annualized figure reached 891 billion dollars (Sputniknews, 2019).
At current rates, the short-term deficit could reach one trillion dollars, which means that the United States
imports much more than exports them. Of the countries with which this country has trade, five stand out, with
the highest deficit.
Table 5
Trade Deficit with Its Main Partners
Country Trade Deficit
China 636 billion 375 billion
Canada 582 billion 18 billion
Mexico 557 billion 71 billion
Japan 204 billion 69 billion
Germany 171 billion 65 billion
Source: Amadeo (2019).
The above explains the trade war that the United States has initiated against China; however, it is not the
Asian giant that directly blames this deficit, but other factors such as the global slowdown and the
strengthening of the dollar that make products more expensive abroad. However, tariffs imposed on China have
slowed the economy of that country, but US exports have also declined. In an interconnected world with
multiple communicating vessels, you cannot take a step against the main trading partner without affecting your
own economy.
The contrasts between the United States and China are very evident; the first imports the second export;
the first has low savings rates while the second has high; the first has a strong currency while the second the
downward adjustment; the first has a growth of the average GDP of 2% in the last six years while the second
one grows at rates above 6%; the first is consumerist while the second is the world’s factory. In this context, the
imposition of tariffs is a limited, partial, and incomplete way to balance the trade balance. Paul Krugman has
indicated that “trade deficits have almost nothing to do with tariffs or other trade restrictions” (Sputniknews,
2019), so the trade war against China is lost in advance. Since the presidential campaign, Donald Trump
promised to reduce the trade deficit, but by the end of 2018, US imports reached the highest point in a decade,
registering an imbalance of more than 55 billion dollars per month. All of its main trading partners expanded
their surplus balance as China, the European Union, and even Mexico. The truth is that the US economy
produces less than it consumes and that makes it resort to imports that advance at breakneck speed.
In this scenario, a low unemployment rate could be counterproductive because it would push up wages;
this would generate inflation and, ultimately, there would be increases in interest rates.
Table 6
Budget Deficit of the United States
Year Deficit in billions
2016 585
2017 665
2018 800
2019 900
2020 1 trillion
Source: Yahoo Finanzas (2018).
Regarding the budget issue, the picture is not more encouraging because fiscal year 2018 closed with a
deficit of 779 billion dollars, the highest since 2012 (Reuters, 2018) as a result of the tax cuts and the payment
of interest on the debt that has been growing due to the increase in interest rates. In fiscal year 2018, the budget
deficit represented 3.9% compared to 3.5% the previous year. Beyond the conjunctural aspect, the big problem
is that the graphs show that in the last 44 years the United States has only registered a surplus in four years,
from 1998 to 2001, which reveals that the deficit is a long-term structural problem.
Figure 7. United States Public Deficit as Percentage of GDP since 1975. Perpe (2013).
In this regard there are two important points, the first of Bernard Baumohl, global economist in chief of
Economic Outlook Group who mentioned “A healthy economy does not generate historical deficits” (Yahoo
Finanzas, 2018). Another statement in the same vein was the Nobel Prize for economics Paul Krugman says
“How the man of tariffs has become the man of deficits” and adds “Trump’s twin deficits denote his dishonesty
and ignorance” (Sputniknews, 2019).
A final reflection leads us to consider that all of the above has been caused by the neoliberal economic
model established by the government of Ronald Reagan and resumed with new vigor by the Trump
administration. The indicators that we have mentioned show the symptom of a great illness. Public
indebtedness, the concentration of wealth, the increase in poverty, the budget and trade deficit are just some
expressions of a greater problem. If the Trump government and the subsequent administrations do not reverse
the trend, the US economy will reach a point of no return and inevitably fall into a chasm from which it can no
longer exit
Conclusion
By the data indicated above, the indebtedness of the United States is colossal and unpayable and trying to
reverse it or even stop it which will have enormous political and social economic costs that we do not believe
that any government is willing to pay.
The country is addicted to credit and its budget cannot be financed without debt. The government,
businesses, and citizens are on an unsustainable path in the long term.
The dynamics of public debt has caused the citizens of that country to have one of the highest per capita
debts in the world.
While exports are lower than imports, consumption is higher than savings and the government spends
more than what the United States enters; it will continue in a vicious circle that in the long term will lead to
financial bankruptcy with global repercussions.
For its part, the government must reduce its military budget mainly and understand that an arms race will
take it to a scenario of unprecedented economic crisis. The model of permanent war economy is obsolete.
If the United States does not follow the logic that the first economic power in the world should be the
creditor country and not the debtor, it will become a vulnerable nation in the face of its creditors and will
weaken and lose influence among the various international actors.
The economy of inequality in which the United States lives has caused the gap between rich and poor to
widen dangerously causing the emergence of leaders and social movements of the left, but also of the extreme
right that confront and polarize large sectors of society that can generate social tensions with unprecedented
repercussions.
The American Union has gone from a conjunctural crisis to a structural crisis and the different
governments have not been able to recognize or stop this situation.
The neoliberal economic model adopted 40 years ago already gave everything it had to give; persisting in
this modus operandi will only produce periods of ephemeral boom and increasingly deep and recurrent crises.
The United States is on an unsustainable trajectory that, if not corrected, will accentuate its phase of
decline as a power.
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340894.html

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International Relations

David Publishing Company

Aims and Scope:

David Publishing Company

David Publishing Company

Editorial Board Members of International Relations and Diplomacy:

Egypt’s Currency Devaluation & Impact on the Most Vulnerable 303

The Principle of Subsidiarity 317

Russian Foreign Policy

The Myth of the Economic Strength of the United States 331

Egypt, Possible Conflict and Cooperation Areas in the Foreign

Keywords: Islamic Republic of Iran, Egypt, foreign policy

Foreign Policy Objectives of the Islamic Republic of Iran

A Brief Look at the Political History of Iranian-Egyptian Relations

Post-2011 Iran-Egypt Relations

Geopolitical Parameters and Political Activities that Prevent Cooperation

captured armed resisters.

Possible Areas of Cooperation

Egypt’s Currency Devaluation & Impact on the Most Vulnerable

Background: The Decision to Devaluate the Egyptian Pound

Figure 1. Conceptual framework.

Reasons Why We Should Seek Social Justice in Egypt

Some Efforts by the GOE to Alleviate Hardships

The Takafol and Karama Programs by the Ministry of Social Solidarity

The Aman Certificate

What Is the Impact of Initiatives so Far?

Impact Evaluation of Takaful and Karama

The Egyptian Social Justice Index

Poverty Trends in Egypt Over the Past Few Years

The Pay Scale for Egyptian Government Employees

What Else Can Be Done

The Principle of Subsidiarity

Subsidiarity as a Principle of the Exercise of Union Responsibilities

The Democratic Deficit and the Principle of Subsidiarity

Maria Teresa Giusti

The Myth of the Economic Strength of the United States

Eduardo Alfonso Rosales Herrera

Second Half of the 20th Century

The Last Two Decades of the 20th Century

First Decade of the 21st Century

Figure 2. The historical tradition of indebtedness. ABC.es Internacional (w/d).

Second Decade of the 21st Century

Debt per Capita

Figure 4. Gini index world map. Wikimedia.commons.org (2017).

Figure 6. Poverty in the United States. El Orden Mundial (2018).

Budgetary and Commercial Deficit

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