For the first time, Lebanon defaults on its debts

A CURRENCY CRISIS has done what years of sectarian bloodletting could not. On March 9th Lebanon did not repay a $1.2bn Eurobond, the first sovereign default in the country’s history. Even during the darkest days of its civil war in the 1980s, the state met its obligations. But Lebanon must now choose between honouring its debts and providing the most basic services to its citizens. “How can we pay the creditors while there are people in the streets without the money to buy a loaf of bread?” said Hassan Diab, the prime minister.

Lebanon has spent months slipping towards an economic abyss. Its currency, the pound, is officially pegged to the dollar, but has lost more than 40% of its value on the black market. Banks are imposing ever-stricter capital controls because they lack the hard currency to repay depositors. Big protests in October, against the corruption and incompetence that led Lebanon to crisis, brought down the previous government. Mr Diab, an academic, inherited a mess when he took over in January. Many Lebanese support his decision to default. But it is only a first step—and it is not clear that his government has a plan.