(Bloomberg) -- Hezbollah has shown flexibility with regards to a proposal for a cease-fire with Israel, according to Lebanon’s economy minister, as world powers rush to prevent a full-blown war between the two.
“We feel there is a lot of flexibility in the past 24 hours from Hezbollah’s side,” Economy and Trade Minister Amin Salam told Bloomberg TV on Thursday.
The US, European and Arab countries are calling for a three-week truce between Israel and Iran-backed Hezbollah in a deal that could prevent an Israeli ground offensive of southern Lebanon and potentially help end the Israel-Hamas war in Gaza.
A key element of the deal would be enabling tens of thousands of displaced Israelis and Lebanese to return to their homes in the Israel-Lebanon border area.
There have been “very positive messages from Hezbollah with an intention to avoid escalation,” Salam said. He’s been communicating to Hezbollah and others “very serious messages about the repercussions of such a full-scale war on Lebanon.”
There was no word from Hezbollah on whether the militant group would agree to a deal and stop firing rockets and missiles at Israel. Moreover, some far-right Israeli politicians say their government cannot agree to a cease-fire and allow Hezbollah to regroup.
Hezbollah began shelling Israel on Oct. 8, a day after Hamas fighters swarmed into southern Israel, killing 1,200 people and taking 250 hostage, triggering the conflict in Gaza. Hezbollah says it’s acting in solidarity with Hamas — both groups are considered terrorist organizations by the US and have received funding and training from Iran.
Israel has stepped up its attacks on Hezbollah in the past 10 days, saying it had no choice because diplomatic efforts to stop the group’s strikes and get it to move fighters back from the Israeli border were failing.
Moribund Economy
The escalation in hostilities is already exacerbating Lebanon’s economic situation. Before October, tourism was rebounding, bringing in much needed hard currency.
Now, the Lebanese economy is “in a very bad place,” Salam said. Hopes of Lebanon’s tourism and food industries flourishing are “gone,” he said.
The small Mediterranean country is in the grips of a crisis rooted in decades of corruption and mismanagement. Lebanon defaulted on around $30 billion in international bonds in March 2020 and saw its economy crater.
“Growth is non-existent at this point,” the minister said. Foreign investment is “far to reach” and a spread of the conflict in the Middle East may push Lebanon to a point where there is “no return for the economy,” Salam said.
Lebanon’s government has been functioning in emergency mode for over three years and has no president because political parties disagree on who to pick.
Moreover, policymakers are far from agreeing on how to restructure banks and carry out other reforms that will be needed to get a loan from the International Monetary Fund.
In 2022, Lebanon reached a preliminary agreement with the IMF on a $3 billion loan, a deal that is conditional on a series of deeply divisive reforms. Lebanon has not accomplished half of the commitments to unlock the IMF program, Salam said, as political tensions have thwarted attempts to enact changes.
(Updates throughout.)
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