VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #0233 0281457
ZNR UUUUU ZZH
R 281457Z JAN 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 3362
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0250

UNCLAS CAIRO 000233 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA, EB/IDF/OMA 
USAID FOR ANE/MEA MCCLOUD AND DUNN 
USTR FOR SAUMS 
TREASURY FOR NUGENT AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/TALAAT 
 
E.O. 12958:  N/A 
TAGS: ECON PGOV EG
SUBJECT: KEFAYA DEMONSTRATES AGAINST RISING INFLATION 
 
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Protest Marks Anniversary of 1977 Uprising 
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¶1.  (U) Opposition movement "Kefaya" held a demonstration on January 
18, the 30th anniversary of the 1977 Bread Intifada, to protest 
increases in prices of basic commodities and express solidarity with 
workers from the Nile Delta towns of Helwan and Mahalla, who went on 
strike in December over promised but unpaid end-of-year bonuses. 
Press reports indicated approximately 100 people assembled for the 
protest in front of the El-Sayyeda Zeinab Mosque in downtown Cairo. 
State security services surrounded the protestors but took no action 
to stop the demonstration.  Carrying anti-government banners and 
holding up carrots and onions, the crowd demanded the government 
take action to lower commodity prices and called for greater 
government transparency.  The demonstration coordinator, Kefaya 
member Kareem Mohamed Rega, was quoted as saying "commodity prices 
have constantly been rising the past 25 years ever since Mubarak 
came to power.  People need lower food prices and we chose to hold 
the demonstration today to mark the 30th anniversary of the 1977 
Bread Intifada." 
 
¶2.  (U) The January 1977 Bread Intifada erupted when President Anwar 
Sadat decided to dramatically increase the price of basic 
commodities, such as bread and vegetables, overnight.  Riots and 
strikes broke out around the country, prompting Sadat to overturn 
his decision temporarily.  Egyptian contacts frequently cite the 
1977 "Bread Riots" as evidence that when pushed far enough, 
Egyptians will take to the streets in large numbers to demand 
change, particularly when it comes to economic concerns.  Some 
analysts also cite the incident as the cause of the GOE's extreme 
caution when making changes to the commodity subsidy program. 
Recent changes to this program, including the July fuel subsidy 
reduction, were modest in comparison to the cuts needed to reduce 
the program's burden on the state budget. 
 
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Despite Low Turnout, Inflationary Concerns Increasing 
--------------------------------------------- -------- 
 
¶3.  (U) Although the protest drew only a modest crowd, price 
increases are a subject of much concern in the media and among 
average Egyptians.  The Consumer Price Index rose 12.4% year-on-year 
in December 2006, the highest level in 2 years.  Warning of possible 
overheating in the economy, the Central Bank raised interest rates 
in October and again in November, with some, but not all, commercial 
banks following suit.  The GOE has been treading a thin line on 
inflation vs. growth, not wanting to dampen the impressive growth 
rate of 6.9% registered in fiscal year 2005-06.  Many economic 
analysts believe the real problem for the average Egyptian is not 
the rise in prices, but the lack of a concomitant rise in wages.  It 
was precisely this issue that prompted the strikes at state-owned 
textile factories in Helwan and Mahalla in December.  Prime Minister 
Nazif had promised workers a 2 month bonus, which the factories 
refused to pay.  Workers went on strike until management agreed to 
pay the bonus. 
 
---------------------- 
Kefaya' Future Unclear 
---------------------- 
 
¶4.  (SBU) COMMENT:  This was the first time Kefaya organized a 
demonstration solely to protest an economic issue.  Some observers 
see the voicing of economic concerns as an attempt to broaden 
Kefaya's appeal to the average Egyptian.  The relatively low 
turnout, however, was seen by some as an indication of Kefaya's 
waning unity and organizational capacity.  In the aftermath of the 
demonstration, Kefaya's leader, George Issac, stepped down on 
January 25, while denying rumors of a power struggle in the 
organization.  Isaac told the press that his resignation was a 
message to Arab leaders to step down and make room for new blood. 
Dr. Abdel Wahab Al-Misseiry took over as head of Kefaya upon Isaac's 
resignation.  Although Al-Misseiry has not announced his intentions 
as the new leader of Kefaya, the modest turnout for the January 18 
demonstration may dissuade the organization from future attempts to 
mix economic issues with the group's political agenda. 
RICCIARDONE