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Egyptians fret over economy after rancorous vote on constitution

Dec. 26, 2012 9:29 P.M. (Updated: Dec. 26, 2012 11:40 P.M.)
CAIRO (Reuters) -- Egypt prepared to announce on Tuesday the result of a vote on a new constitution that Islamist President Mohamed Mursi hails as a step toward stability in a country beset by political and economic crisis.

But critics say that by ramming through the basic law, Mursi has angered his liberal, leftist and Christian opponents, and may have squandered any chance of building a broad consensus on tax rises needed to rein in a crushing budget deficit.

Unofficial tallies from Mursi's Muslim Brotherhood showed the charter was approved by a 64 percent majority. The electoral commission will announce the official result at 1700 GMT, with the final numbers widely expected to confirm earlier estimates.

Mursi believes the constitution will end a protracted period of turmoil that has haunted the most populous Arab nation since the fall of military-backed strongman Hosni Mubarak in 2011.

But ordinary people and some commentators worry that Mursi's approach in pushing through the contentious text will only galvanise his rivals to capitalise on any public backlash against austerity rather than help sell reforms to the nation.

Hossam El-Din Ali, a 35-year-old newspaper vendor in central Cairo, said he agreed the new constitution would help bring some political stability but like many others he feared the possible austerity measures lying ahead.

"People don't want higher prices. People are upset about this," he said. "There is recession, things are not moving. But I am wishing for the best, God willing."

If the "yes" vote is confirmed, a parliamentary election will follow in about two months, setting the stage for Islamists to renew their struggle with more liberal-minded opponents.

On the political front, tensions remain high. The opposition says the constitution, crafted mostly by Mursi's Islamist allies, fails to guarantee personal freedoms and the rights of women and minorities. The government denies this.

Economic worries

Once a darling of emerging market investors, Egypt's economy has taken a hammering since Mubarak's fall.

The budget deficit surged to a crippling 11 percent of gross domestic product in the financial year that ended in June 2012 and is forecast to exceed 10 percent this year.

In a further worrying sign, Egypt has made it illegal for travellers to carry more than $10,000 in cash in or out of the country amid growing fears the government may not be able to get its fragile finances under control.

Reflecting investor concerns, Standard and Poor's cut Egypt's long-term credit rating this week and said another cut was possible if political turbulence worsened.

Adding fuel to people's worries, the central bank also said it was taking steps to safeguard bank deposits, in a statement which emerged after some Egyptians said they had taken out cash out of concern their accounts would be frozen by authorities.

Without broad support, Mursi will find it hard to implement reforms needed to secure a $4.8 billion loan from the International Monetary Fund.

Shortly before the referendum, Mursi enraged many by introducing hikes on the sales tax on goods and services that ranged from alcoholic beverages, cigarettes and mobile phone calls to automobile licences and quarrying permits.

In an embarrassing policy U-turn, he withdrew them within hours under criticism from his opponents and the media.

Facing public anger, the Muslim Brotherhood's party, which propelled Mursi to office in an election earlier this year, may now also face a tougher fight in the parliamentary election.
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