The Arab Spring : echoes of 1989

By Jean Pisani-Ferry
8 March 2011

(A version of this article was originally published in Le Monde)

In 1989 the wall separating the two halves of Europe suddenly collapsed. Within the space of a few
months, a hitherto seemingly immutable order gave way to commotion and impatience. One
moment the old countries of Europe were paralysed with fear of the unknown and anxiety about
immigration, the next they had seized the opportunity which history was offering them. They
implemented aid programmes, opened trade talks and promised enlargement. Two decades later,
success has proved spectacular. The economic and political transition of former eastern Europe has
been swift and deep, it has – with the dramatic exception of Yugoslavia – been peaceful, and it has
yielded development.
Could a similar – obviously not identical – story unfold for the southern rim of the Mediterranean?
This is the key economic question posed by the Arab Spring. The 500 million EU citizens have 170
million neighbours between Agadir and Port Said sitting on their doorstep and eyeing for prosperity
and democracy. In three of the five countries of the region, they have demonstrated their resolve by
overturning regimes which we had taken to be guarantors of stability. They ask nothing more than
to invest their energies in the recovery of their countries. But if they do not very rapidly have
reason to believe that their situation will get better, this transforming dynamism will become the
dynamism of despair – with all the risks that this implies.
The first priority is jobs. The young people driving the Tunisian and Egyptian revolutions are
massively underemployed. We do not know if the official data is correct (around 30 percent youth
unemployment) but it is clear that these economies were incapable of confronting the
demographic wave of the last decades. Recent growth rates – five to six percent annually in Egypt,
Libya, Tunisia and Morocco – appear high, but they are less impressive in light of the growth in the
working-age population of the order of two-and-a-half percent per year over the last ten years. Even
more growth is needed.
The obstacles are not chiefly macroeconomic. It is true that Egypt is fragile, that public finances
and current-account balances will slump, and that inflation will take off if governments try to
respond to the problems by spending money they have not got. They will need to invest more and
educate better, which will inevitably be costly. And international assistance will certainly need to
be mobilised. But these are not the immediate issues.
The main brake on development lies in their economic institutions. According to the World Bank, a
building permit in Egypt costs three times the average annual income, there are eleven different
steps needed to register a property transaction in Algeria, and Morocco is ranked 154th out of 183
for protection of shareholders against abuse of power by management. These are just a handful of
examples. They all point to economies where development is impeded by burocracy, monopoly
rents – very often as a result of political or family nepotism – and credit market sclerosis.
It is unthinkable to copy and paste the eastern European solution of importing EU legislation with a

© Bruegel 2011 www.bruegel.org 1

view to enlargement. But the current political revolutions also present the chance for economic
emancipation which the EU can support both by giving incentives to economic reform and by
mobilising its development banks.
Europe can exert a more direct impact in trade and mobility policy given its dominant role here.
Today migration is extremely circumscribed. Professional mobility must be allowed without delay.
Free circulation of goods is also limited. As a proportion of GDP, Tunisia trades two times less with
the EU than the Czech Republic, and Morocco four times less than Poland. Not only for goods but for
services too, Europe needs to promote much more than it has so far the adoption of an outsourcing
model in the most labour-intensive segments of the value chain, as Germany has done with great
success – and which in part explains its bounce-back in global markets. While this model entails
job losses in the North, it also preserves jobs by keeping production sites competitive and creates
jobs by paving the way for development of the South.
As French prime minister famously said Mendès-France said, governing is choosing. Europe must
choose either to mobilise help for its neighbours and open up to them, or start recruiting
coastguards and manning the patrol boats.

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