FACTBOX-Political risks to watch in Jordan

By Suleiman al-Khalidi

Fri Mar 4, 2011 9:23am EST

AMMAN, March 4 (Reuters) -

King Abdullah faces a growing challenge from protests against economic hardship and political stagnation, but Jordan's defining faultline between its "East Bank" and Palestinian citizens could pose a graver threat.

Trying to prevent contagion from the uprisings sweeping the Arab world, Abdullah sacked his prime minister last month and promised political reform. Authorities also announced a $650 million package of state subsidies for Jordanians.

The moves took some of the steam out of protests which broke out across the resource-poor kingdom in January and February, but did not address underlying tensions between indigenous East Bankers and Jordanians of Palestinian origin.

East Bank Jordanian tribes, who form the bedrock of support for Abdullah's Hashemite monarchy, felt threatened by falling state benefits brought about by the global financial crisis and economic reforms of previous governments, as well as any prospect for political empowerment of Palestinian Jordanians.

Palestinians dominate Jordanian businesses but are sharply under-represented in politics. Electoral laws ensure that urban centres where most of them live return far fewer parliamentarians per voter than rural tribal areas.

The extra spending on social aid has pushed up the projected 2011 budget deficit half a percentage point to 5.5 percent of GDP and forced the government to cut capital spending.

PROTESTS

Protests have broken out in East Bank tribal strongholds as well as around Amman, where Palestinians -- and Islamists, who form the most popular political force -- are concentrated.

But although all demonstrators have been chanting for reform, East Bank protests are motivated largely by concerns over state jobs and benefits, while demonstrations in Amman are fuelled by a sense of injustice in Jordan's electoral laws.

Divisions between the two camps were highlighted in a February statement by 36 tribal figures, ostensibly calling for political reform in Jordan, which sharply criticised the monarch's Palestinian-born wife, Queen Rania.

Even before the wave of protests inspired by the uprisings in Tunisia and Egypt, Jordan witnessed an escalation of violence in provincial regions that are strongholds of East Bank tribes, fuelled partly by competition for the dwindling number of jobs provided by the state and perceptions of corruption.

What to watch:

-- Possible clashes between Islamist and pro-democracy supporters on one hand and conservative tribal elements, who fear that any significant political reforms would benefit Jordanians of Palestinian origin.

-- Widening scale of sit-ins and protests, by mostly public sector employees demanding higher wages.

-- Reaction of the mainstream Muslim Brotherhood Islamists, who have so far not thrown in their full weight behind street demonstrations, to any communal tensions.

Response of a government-appointed dialogue committee mandated to present proposals for a new election law and the reaction of Islamist and liberal groups if -- as expected -- they fall short of addressing political grievances.

ARAB-ISRAELI PEACE TALKS

Jordan hosts the largest number of Palestinian refugees and when the kingdom made peace with Israel in 1994 it got no guarantee of right of return for its Palestinian citizens.

Analysts say the issue would come to the fore if the breakdown in Middle East peace talks raises the prospect of a permanent settlement of Jordanians of Palestinian origin, who form a majority of the country's 7 million population but are marginalised in government posts, the army and security forces.

Bakhit's government is expected to stall some of the economic liberalisation policies that appear to have benefited the largely Palestinian business class, alienating many East Bank Jordanians whose power base has been in large state-run industries and the bureaucracy.

What to watch:

-- Aggressive or defiant comments by ultra-nationalist Jordanians that further polarise the two communities.

-- A tougher policy towards Israel if peace talks sour and prospects for a two-state Israel-Palestinian solution dim, leading to fears of an Israeli "transfer policy" that expels West Bank Palestinians to Jordan.

-- Retreat from privatisation and a bigger role for the state in the economy as policies seek to funnel more funds to cushion East Bank Jordanians dependent on subsidies and pensions.

RECORD DEFICIT/SLUGGISH ECONOMY

To head off the unrest that has swept the Arab world, the government introduced social aid in January ranging from salary hikes for civil servants to a freeze in gasoline price rises.

Although the finance minister has said the impact of the extra spending on already cash strapped public finances [nLDE71QOBU] will be minimised by cuts in capital spending, analysts believe lack of fiscal prudence could raise the deficit to higher than the projected 5.5 percent of GDP.

Expansion of spending on civil service salaries and pensions -- which form 80 percent of the budget -- will push debt levels beyond a legally permissible 60 percent of GDP, analysts say.

The appointment of a premier who favours a bigger state role in the economy has sent negative signals to the vibrant private sector, which the treasury relies on to generate jobs and taxes.

Foreign aid that has traditionally covered budget shortfalls to underpin the stability of the pro-U.S. country is expected to reach $620 million this year but with the extra social spending this will not be sufficient to ease the fiscal strain.

What to watch:

-- Whether policy makers resort to higher levels of domestic borrowing from banks and abroad to finance growing social needs and the budget deficit.

-- Signs of donor fatigue over pace of political and economic liberalisation and lower aid levels from the United States, the country's biggest donor.

-- Whether the government tackles corruption in state-owned enterprises that wastes tens of millions of dollars.

* For political risks to watch in other countries, please click on [ID:EMEARISK] (Editing by Jon Boyle)

Jordanian protesters ratchet up demands but stop short of urging king's ouster

By Joel Greenberg Friday, March 4, 2011; 6:13 PM

Washingto Post

AMMAN, JORDAN -

Enas Hamed went out Friday for the first time to join thousands of people marching through central Amman to demand an overhaul of Jordan's political system, a growing weekly demonstration that is posing a mounting challenge to King Abdullah II.

Hamed, a 27-year-old homemaker who was joined by her mother-in-law, said such political participation was new to her.

"I saw what happened in Tunis and Egypt, so it's possible in any country with any government," she said, referring to the uprisings that toppled two autocratic leaders. "It gave us the courage to go forward to this demonstration. I love my country, and I want it to change."

The protesters are not calling for the removal of the king or the monarchy, which many Jordanians still see as a vital unifying force in a country with a large Palestinian population and numerous rival tribes.

Yet organizers from the Muslim Brotherhood, Jordan's largest opposition group, and members of smaller leftist parties have ratcheted up their chants: "The people want to reform the regime!" they roared, echoing the battle cry of the Egyptian revolution: "The people want to topple the regime!"

The protesters called for the ouster of the king's latest appointee, Prime Minister Marouf al-Bakhit, whom they accused of corruption and presiding over rigged elections during a previous term as premier. They called for the dissolution of parliament, widely regarded as an unrepresentative assembly chosen in a fraud-marred vote, and demanded an elected cabinet, replacing the current system in which the prime minister is appointed by the king.

In a call addressed to King Abdullah, they shouted: "Change the policy, not the people."

Pictures of the monarch, seen everywhere in Jordan, were noticeably absent from the protest, though marchers carried Jordanian flags. Ranks of police separated the protesters from a small group of pro-monarchy demonstrators, who walked ahead, proclaiming their loyalty to the king. Last month, men armed with sticks and metal rods attacked anti-government demonstrators, injuring eight.

The protests appear to be attracting a wider circle of Jordanians, both religious and secular, who are finding them an outlet for discontent stoked by economic hardship, including rising prices and unemployment and a growing gap between rich and poor.

"We want to fix the system," said Yazid Arman, 27, a Web developer who said he was protesting for the first time. "We want the liberty to express ourselves, and we need justice in the distribution of resources."

Attacking the king and undermining the monarchy would only lead to internal strife, Arman said. "The change has to be step by step," he added.

Maneuvering to prevent the unrest from accelerating, Abdullah and top officials have sought to reassure Jordanians that real change is coming and that their voices are being heard.

"When I say reform, I want real and quick reform," Abdullah declared in a recent speech to cabinet ministers, legislators and judges.

After Bakhit's government narrowly won a vote of confidence in parliament on Thursday, the prime minister announced plans to create new jobs and prevent price hikes for basic goods and utilities. And the head of Jordan's Public Security Department, Lt. Gen. Hussein Majali, promised in a public letter to the king to protect citizens' right to free speech.

So far, both protesters and authorities have managed their confrontations so as to avert the deadly clashes seen in neighboring Arab countries. But debate is growing about the king's authority.

"The government is a sham, and it takes orders from the king and the security agencies," said Murad Adaileh, a leader of the Muslim Brotherhood's Islamic Action Front. "The people should have a role in governing the country."

Hamed, the homemaker and first-time demonstrator, said the monarchy was essential to hold the country together. "It's an umbrella for us," she said, "and it preserves the country's stability."

Said Diab, a member of a leftist party, noted that insulting the king is banned in Jordan. Asked why the protesters were not criticizing the monarch, who holds ultimate power, he replied: "We can't. We criticize the government - and ask him for things."

Greenberg is a special correspondent.