Zohra Bensemra / Reuters Protesters from Tunisia's marginalized rural heartlands in Tunis, January 24, 2011.

Tunisia's Flawed Bank Bailout

Paid by the People, But Not for the People

At the beginning of August, several parliamentarians in Tunisia angrily called for the government to disclose the findings of secret audits for two state-owned banks. A bank bailout vote would be taking place only days later, on August 7, and most of the loan portfolios of the two banks in question—Société Tunisienne de Banque and Banque de l’Habitat—were abused or laid to waste by the regime of former president Zine el-Abidine Ben Ali. These banks hold a tsunami of still unresolved bad debt and are now publicly known to be illiquid and possibly insolvent.

The audits detail the lending activity of the two banks during more than two decades of mismanagement under state bankers installed by Ben Ali. During that time period, the bankers had been forced to finance most, if not all, loan applications presented by Ben Ali and his entourage. They did so by counting these loans as gifts, according to a local Tunisian banker who has seen one of the secret bank audits. Once granted, most of the loans were never repaid. Since the fall of the Ben Ali regime after the 2011 revolution, the banks have remained largely unreformed, although the government is promising a shakeup of executive-level management.

Some figures from within Ben Ali’s inner circle are indebted to these banks and have since transformed themselves into key allies of the new Nidaa Tounes majority party, led by Tunisia’s new 88-year-old president, Beji Caid Essebsi, in order to protect their political influence and financial transactions, an official who is knowledgeable about state bank transactions told me. As a result, the planned management shakeups have themselves become tangled in a power play, he said, in which Nidaa Tounes and its closest allies need to change key bank appointees selected after 2011 in order to create “a new distribution of the cake.”

Zoubeir Souissi / ReutersA man waits for tourists to visit his souvenir shop in Carthage, near Tunis February 10, 2013. Tunisia's tourism industry recorded a sharp

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