Tunisia Premier Jbeli Quits After Failing to Form New Government

Tunisian Prime Minister Hamadi Jbeli announced his resignation last night after failing to form a technocratic government to ease political tensions after the assassination of an opposition leader.

Jbeli announced his plan to step down at the presidential palace in Tunis in a speech carried live. He had promised to quit if his plan didn’t work, and said the decision was in “fulfillment of my oath before our citizens.”

The premier sought to form an above-party government after the Feb. 6 killing of Chukri Beleid in an effort to stabilize Tunisia, where the wave of Arab unrest began with the overthrow of Zine El Abidine Ben Ali in January 2011. Jbeli’s own party, the Islamist Ennahda movement, resisted the move. Thousands of its supporters rallied earlier this week against the proposal.

Standard & Poor’s pushed Tunisia’s sovereign credit rating deeper into junk status earlier in the day, citing increased political risks after the death of Beleid. It lowered long-term foreign and local-currency ratings by one level to BB-, three steps below investment grade, with a negative outlook signaling further reductions.

The murder of Democratic Patriots party leader Beleid, which his wife blamed on Ennahda, sparked clashes between thousands of protesters and the security forces. The unrest marked the most serious crisis in Tunisia since protests more than two years ago began the so-called Arab Spring uprisings.

Transition Risks

The cut was the third by the ratings company since Ben Ali’s ouster. The Tunisian economy, which relies on agriculture, exports, tourism and mining, is struggling to recover from its first contraction in at least two decades. The budget deficit widened to a 12-year high 6.4 percent of economic output last year, according to International Monetary Fund estimates.

“Risks to Tunisia’s transition to democracy have increased markedly in recent weeks,” S&P analyst Patrick Raleigh wrote in a report. Disputes over the technocrat government plan have highlighted deep divisions within the coalition that impaired its ability to “take corrective measures against a weakening economic and financial backdrop.”

The nation, which is set to hold elections in June, is seeking to sign a 1.78 billion Tunisian-dinar ($1.2 billion) financing arrangement, the International Monetary Fund said Feb. 5. That follows loans of $500 million each from the World Bank and the African Development Bank in 2012. Tunisia’s 46 percent ratio of debt to gross domestic product compares with 68.5 percent for Spain.

The country was the only Middle Eastern nation to witness an advance in credit risk last year. Five-year credit default swaps jumped 87 basis points to 355, in contrast with a regional average decline of 62 basis points to 267, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. Tunisia’s CDSs were at 350 on Jan. 4.

Still, Tunisia has no foreign currency liabilities maturing until 2017 other than the $330 million of euro-bonds due this year, for which the government has cash to pay, according to Moody’s Investors Service.

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