Experts differ on just how bad Egypt’s economy is. But they all agree it’s pretty bad. Let’s not confuse our priorities, though. The foundation for real, sustainable economic recovery is a stable political regime. Markets—and investors—have little patience for uncertainty, and since its revolution a year ago, Egypt has experienced one of the most mismanaged democratic transitions in recent memory. The country finds itself under sway of competing power centers: the ruling military council, a new Parliament dominated by Islamists and, of course, the street.
The international community will definitely need to commit considerable economic assistance to Egypt. But that requires knowing who’s in charge—and knowing whom to hold responsible for the billions of dollars that will be pouring in. Fortunately, the ruling military council is slowly being eased out of power. By July, if all goes as planned, Egypt will have an elected parliament and a new president, both enjoying popular legitimacy. Ensuring that the transition timetable is respected, then, is just as critical as any particular set of economic policies.
Egypt’s military—which has used many of the same tactics as the old regime, and worse—will not go down without a fight. With this in mind, the international community must be present to send an unmistakable message: Egypt cannot and will not receive an economic lifeline unless the democratic aspirations of its people are respected and unless the military goes back to where it belongs—the barracks.
Even then, economic aid cannot be a carte blanche for Egypt’s new (and untested) rulers. Any assistance should be made contingent on Egypt's meeting explicit benchmarks on democratization, including military noninterference in civilian affairs, judicial independence and a free, vibrant press. This can occur through establishing a “reform endowment” that would provide clear incentives to Egypt and other Arab countries to implement necessary reforms.
Such efforts should not be the sole province of the United States (which is, after all, struggling with its own economic problems). But President Obama can lead the way, coordinating the financing of the endowment—to the tune of at least $5 billion—by enlisting the support of European allies, as well as Turkey, Brazil and the Gulf states.