THE EGYPTIAN army last night staged a military coup, deposing President Mohamed Morsi and pushing the oil price to a 14-month high amid fears that the regional economy could be destabilised.
Fireworks filled central Cairo as General Abdul Fattah al-Sisi, head of the country’s armed forces, announced that the military had installed an interim leadership after Morsi “failed to meet the demands of the Egyptian people”.
Meanwhile, the Portuguese government teetered on the edge of collapse, pushing up bond yields across the Eurozone as global stock markets fluctuated.
The Egyptian coup follows weeks of protests from liberals against the Islamist Morsi. This culminated in the military warning the President on Monday that he had 48 hours to either accept the demands of the protestors or leave.
Morsi, who was elected last June in Egypt’s first ever free election, ignored their request and last night insisted that the army had overruled the will of the people by removing him from office.
Last night foreign secretary William Hague said he opposed the use of military intervention to remove Morsi.
Traders responded to fears that Egypt could destabilise the wider region by pushing the price of US light crude oil through the $100 barrier. Although Egypt is not a major oil producer, it controls the Suez canal and Sumed pipeline which form crucial links for oil from the Gulf to the West.
But the Suez Canal Authority insisted that it would be able to secure the passage of ships along the key trade route.
Dr Alan Mendoza of the Henry Jackson Society, a British foreign policy thinktank, said Morsi failed because he rejected consensus decision making and “had no answers to the economic problems of Egypt”, especially youth unemployment.
Mendoza told City A.M. similar economic issues currently threaten the stability of other states across the Arab world, especially Jordan, Tunisia and Turkey.
Elsewhere, the Portuguese coalition came close to collapse last night in a row over austerity relating to the country’s €78bn (£66bn) bailout. The resignation of several ministers had convinced markets that the government would fall, pushing the yield on benchmark 10-year Portuguese bonds up 0.75 percentage points to 7.47 per cent and underlining the precarious nature of many Eurozone economies.
“The financial credibility recently built up by Portugal could be jeopardized by current political instability,” said European Commission President Jose Manuel Barroso.
But last night the two governing parties agreed to crisis talks and pledged to keep the coalition together for the good of the nation. This was too late for the domestic stock market, which fell by more than five per cent and dragged down other European indices. Yields on Spanish and Italian bonds jumped.