El Erian on what Egypt needs to do now

As Egypt maintain control over one of the most important trade bottlenecks in the world, that being, the Suez Canal, its descent into chaos could have dramatic effects on the West.  Imagine for a minute, that the Muslim Brotherhood took control and governed like the mullahs in Iran.  Iran has congratulated Egypt for its boldness towards Mubarak and if Iran had a fast ally in Egypt, huge amounts of trade would be under its wing. 

Not only could they disrupt trade, but it could also be a major revenue source for funding of guys with explosive vests.

Mohamed El Arian, CEO of Pimco, has four things that we should be remembering as this dramatic sequence unfolds in the comfort of our living rooms.  Via Bloomberg:
First, the concept of so-called managed change, or what some people in Washington are calling orderly transition, is critical. Everyone, including the Egyptian government and opposition movements, agrees that the country cannot simply reset to where it was seven days ago; and all wish to avoid chaos. But they differ widely in the meaning of change, and the associated journey. As such, Egypt needs a mechanism to reconcile very different views of managed change.

Second, it matters how the opposition evolves from here. Their vocal protests must now be channeled into an actionable and detailed, forward looking agenda. This is critical not only for Egypt’s internal stability. It is also essential to counter concerns outside Egypt that what is unquestionably a secular movement could be hijacked by theocrats.

Third, Egypt is not helpless. It has solid economic foundations, large international reserves and minimal external debt. More importantly, the armed forces are respected and liked by most citizens. The military understands what is at stake. In contrast to many other developing countries, the armed forces, if asked, can help facilitate economic and political reforms, including free and fair elections.

Finally, while the instability in Egypt is being driven mainly by internal factors, it would be foolish to ignore external contributors. Egyptians are feeling the pain of surging commodity prices and food inflation. This problem will become more acute as some other governments around the world boost their stockpiling of foodstuff to guard against social unrest.

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