Egypt Army Under Fire After Appropriating More Powers

Egypt’s Muslim Brotherhood challenged the army’s appropriation of wider powers, after the ruling generals stripped the presidency claimed by the Islamist candidate of much of its authority.

The Brotherhood said it was joining youth activists in a mass rally in Cairo today to protest the military council’s decision to give itself executive and legislative powers and safeguard its budget from scrutiny. That followed a court ruling last week dissolving parliament, where the Brotherhood’s party formed the largest bloc.

The army’s constitutional decree was issued hours beforeMohamed Mursi claimed a presidential election victory yesterday. It fueled charges that the army is derailing Egypt’s transition to democracy, adding to tensions that have hurt the $240 billion economy and dimmed prospects of quickly luring back investors. Egyptian stocks and bonds extended declines today.

“There’s no way this is going to be a smooth transition,” Shadi Hamid, director of research at the Brookings Doha Center, said by phone. “That opportunity was lost” with the military’s declaration on June 17, he said.

Mursi today reiterated his claim of victory over Ahmed Shafik, who served as premier under ousted leader Hosni Mubarak, in the two-man runoff election. The Brotherhood candidate won 52 percent of the vote based on complete results from the country’s 13,000 polling stations, his campaign said at a televised press conference in Cairo. Shafik’s campaign has also claimed victory. Official results are due June 21.

‘Overthrow of Democracy’

The Brotherhood warned that Egyptians are ready to continue the struggle to prevent “the military council’s hegemony over the reins of power, and the overthrow of democracy,” in a statement on the Facebook page of its political arm, the Freedom and Justice Party.

Egypt’s EGX30 stock index slumped 4.5 percent at 1:30 p.m. in Cairo, extending its slide since the first-round election last month to 18 percent. Yields on dollar bonds maturing in 2020 rose 1 basis point to 6.95 percent.

Economic growth stalled after last year’s revolt as tourists and investors stayed away. The government’s borrowing costs for one year debt have surged by about 50 percent since the start of last year, and the central bank has spent more than half of the country’s currency reserves. Conflicts between parliament and the military-appointed interim government and parliament have thwarted efforts to negotiate a $3.2 billion International Monetary Fund loan.

‘Egypt Needs More’

The military’s declaration has created a government that has authority to run the country’s day-to-day affairs, yet “can’t introduce policy,” Said Hirsh, an economist at Capital Economics in London, said by phone. “Obviously, Egypt needs a lot more than this” to allay investor worries, he said.

Under the military decree, the president loses the title of the Supreme Commander of the Armed Forces, while the army would play a key role in the drafting of a new constitution.

The U.S., which backs Egypt’s military with more than $1 billion of aid a year, has urged the generals “to relinquish power to civilian-elected authorities and to respect the universal rights of the Egyptian people and the rule of law,” Pentagon press secretary George Little said yesterday.

‘State Above State

Amr Hamzawy, an independent member of the parliament annulled by the court last week, said on his Twitter account that the decree means the military has “become a state above the state” that is “immune to any challenges.”

As it battles the generals, the Brotherhood also faces a legal threat. An administrative court in Cairo today deferred until September a hearing in two lawsuits seeking to dissolve the group on the grounds that it was not properly registered.

The conflict between the Brotherhood and the military is likely to continue, said Hani Sabra, an analyst at the New York- based Eurasia Group, which monitors political risk for investors.

While the military “ultimately remains more powerful than the Brotherhood, it does not want to, nor is it able to totally dominate Egyptian politics,” Sabra said.

To contact the reporter on this story: Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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