- Associated Press - Tuesday, August 14, 2012

TUNIS, Tunisia — After a disastrous year in which revolution, social upheaval and strikes scared away tourists and crippled industrial production, Tunisia’s economy is slowly climbing out of a deep recession that saw it shrink by 2 percent in 2011.

Tunisian economic recovery is vital to the success of the democratic transition of this North African country of 10 million people that touched off the Arab Spring in 2011.

The country, however, needs political stability to allow the economy to recover, while at the same time it needs the economy to calm social tensions.

When fruit seller Mohammed Bouazizi set himself on fire in December 2010 and galvanized a nation, it wasn’t just a dictatorship he was protesting but a dead-end life with no prospect of real jobs — something that is still a problem in Tunisia.

“This fragile political climate and subsequent political noise, which are already embedded in our baseline scenarios, underpin Moody’s negative outlook for Tunisia,” said the prominent ratings agency in a report in June that applauded the nascent signs of recovery while expressing concern over social tensions, including riots.

Although squabbles at the top of Tunisia's government worry international donors, the European crisis devastating the economies of Tunisia’s largest trading partner also threaten economic recovery.

After last year’s contraction, the $46 billion economy, which cannot rely on the vast oil resources of its wealthy neighbors, Libya and Algeria, is predicted to grow by a modest 3.5 percent in 2012.

‘A bad signal’

“There is an economic recovery, it is not as strong as we would want, largely because of Europe and also because of the political uncertainty that continues,” Mustapha Kamel Nabli, governor of the central bank, said in an interview shortly before he was fired by the president.

On June 27, President Moncef Marzouki abruptly announced Mr. Nabli’s dismissal, apparently without the necessary agreement of the powerful office of Prime Minister Hamadi Jebali.

In an interview with AP a few days later, Ridha Saidi, the deputy prime minister for economic affairs, said Mr. Nabli had not been dismissed and that they were seeking a compromise.

Mr. Saidi acknowledged the issue was part of a broader disagreement between Mr. Marzouki and Mr. Jebali over how their respective offices shared power.

Yet it was the same Mr. Saidi who, two weeks later, was tasked with presenting the case for Mr. Nabli’s dismissal in front of the assembly that finally voted him out last week.

“It gives a bad signal to domestic economic players as well as foreign ones, and that’s not good for the recovery of the economy,” warned Mr. Nabli afterward in an interview with French network France 24, saying he was dismissed for political reasons. “There is a clear will to take control of all the institutions of the state.”

A comeback in tourism

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