Beware What You Push for! the Unintended Effects of EU-Promoted Financial Sector Reforms in Egypt

There is little doubt that the EU has played a key role within the wider constellation of forces pushing several Arab Mediterranean countries on the path of economic reform since the late 1980s. This is particularly clear in the case of Egypt, where the EU has been able to differentiate itself from international financial institutions and main donors in two crucial respects. On the one hand, it has proposed a gradual model of economic integration, opposed to the ‘big bang’ approach often favoured by the Bretton Woods twins. On the other hand, the EU has tried to entrench its own model of ‘neoliberalisation-by-reregulation’ in its periphery, effectively promoting EU standards in several key areas. The specificity of this approach is nowhere clearer than in the financial sector reforms, which are discussed in this paper in order to discuss two forms of polarisation that the EU appears to have maintained and strengthened, if not necessarily created. On the one hand, in socioeconomic terms, the benefits of financial sector reforms have been captured by large Egyptian companies and European multinational corporations, with the wider population bearing its costs. On the other hand, increased access to the Egyptian financial sector has increased the stability bias in Brussels, as thus the reliance on Mubarak’s ruling elite before the revolution. These outcomes have made the Egyptian public and its elites in the post-Mubarak era much less receptive to the incentives offered from Brussels, thus decreasing the EU’s leverage on the country.