Welcome to "The Hangover," Cairo edition. The widespread grass-roots protests that broke out in Egypt this spring succeeded in accomplishing what many skeptics doubted they could: ousting long-serving strongman Hosni Mubarak and ending his 30-year authoritarian rule. But now, some four months on, Egypt's revolution is obviously on the skids.
The problems start with Egypt's economy. Under Mr. Mubarak, Egypt's economic fortunes were comparatively rosy, with the national gross domestic product growing an average of nearly 6 percent annually over the past three years. Today, by contrast, they are anything but rosy. Since Mr. Mubarak's ouster in February, the Egyptian stock exchange has lost nearly a quarter of its value, prompting its chairman, Mohamed Abdel Salam, to embark upon a frantic tour of Gulf monarchies in an effort to drum up Arab investment. Tourism, the lifeblood of the Egyptian economy, likewise has plummeted, falling an estimated 60 percent over 2010 levels and costing the country more than a half-billion dollars in revenue to date in the process. Nor is a reprieve in sight. According to observers, it could take a decade for Egypt's tourism industry to rebound fully - if, indeed, it rebounds at all. The prognosis is grim: As a recent analysis in the Asia Times put it, "Egypt's economy is in free-fall."
The international community has responded to this malaise in predictable fashion - by throwing money at the problem. President Obama's May 19 Middle East speech contained two major economic carrots - debt forgiveness to the tune of $1 billion and loan guarantees for the same amount - intended as a good-faith gesture to Cairo. Subsequently, at their summit in Deauville, France, the Group of Eight nations pledged a whopping $20 billion to strengthen Egypt's and Tunisia's pro-democracy direction. (Precisely how still remains to be seen.) The International Monetary Fund has gotten in on the act as well, proffering $3 billion to prop up Egypt's rickety financial institutions.
But whether these near-term infusions of capital will make a lasting difference depends largely on Cairo's new order being viewed as a good investment by the rest of the world. At the moment, the evidence overwhelmingly suggests it isn't.
Religious frictions, for example, are on the rise. Recent months have seen a sharpening of divisions between Egypt's hard-line Muslims and its Christian population - and an uptick in the persecution of the latter. Also, Salafis in Egypt have taken to targeting the country's small Shiite community. All of this led the U.S. Commission on International Religious Freedom in its 2011 annual report to recommend for the first time that Secretary of State Hillary Rodham Clinton designate Egypt as a "country of particular concern," putting it among the world's worst religious violators.
Then there is Egypt's troubling new foreign-policy tilt. Historically, Egypt and Iran have seen themselves as geopolitical rivals, jockeying for power and influence in the volatile Middle East. But post-Mubarak, Cairo has drifted increasingly into Tehran's orbit. It has - after a decades-long moratorium - granted Iran's navy access to the Suez Canal and agreed to resume long-frozen diplomatic ties with Tehran. Some in Egypt even have begun flirting with the idea of accepting Iran's long-standing offer of nuclear cooperation. These changes are increasingly transforming Egypt from a hedge against Iran's regional ambitions to an enabler of them.
Cairo likewise has softened its stance toward Hamas, the Palestinian Authority's main Islamist movement. Egypt's transitional government was the major broker of the hasty merger between Hamas and the authority's ruling Fatah faction this spring, and its "upgraded" diplomatic relationship with Hamas since has fanned Israeli fears that Cairo will no longer work as diligently to prevent the terror group's rearmament.
But perhaps the most pressing concern lies in the Sinai, the desert region that separates Egypt from Israel. The area has long been largely demilitarized as part of the "cold peace" that has prevailed between Cairo and Jerusalem since the signing of the Camp David Accords in 1979. During the country's revolutionary ferment this spring, however, the Egyptian military redeployed there, spurred by fears that the Sinai Peninsula's indigenous Bedouin tribes might become a source of instability. Since then, though, the Sinai has been left largely to its own devices.
A recent report by the BBC suggests that the region has become increasingly lawless and dangerous since the Mubarak regime was swept from power. Radical elements have wasted no time exploiting the resulting vacuum; Egyptian military officials warn that more than 400 members of al Qaeda are believed to have made their way to the peninsula in recent weeks, where they pose a serious threat to Egypt and Israel alike.
Of course, this state of affairs is not yet set in stone. This September, Egyptians will go to the polls in a parliamentary election that will go a long way toward determining the country's political direction. With the proper political will, a responsible coalition still could stabilize the Egyptian ship of state and steer it back into the Western fold. But with limited electoral choices and the specter of rising domestic Islamism, the economic malaise and geopolitical realignment now visible in Cairo could easily become permanent. If they do, the hangover from Egypt's revolution is likely to linger for quite some time to come.