Since the emergence of the post-1943 state, national policy has been determined largely by a relatively restricted group of traditional regional and sectarian leaders. The 1943 national pact, an unwritten agreement that established the political foundations of modern Lebanon, allocated political power on an essentially confessional system based on the 1932 census. Until 1990, seats in parliament were divided on a 6-to-5 ratio of Christians to Muslims (with Druze counted as Muslims). With the Ta'if Agreement, the ratio changed to half and half. Positions in the government bureaucracy are allocated on a similar basis. Indeed, gaining political office is virtually impossible without the firm backing of a particular religious or confessional group. The pact also allocated public offices along religious lines, with the top three positions in the ruling "troika" distributed as follows:

• The presidency is reserved for a Maronite Christian;
• The prime minister, a Sunni Muslim, and
• The speaker of parliament, a Shi'a Muslim.

Efforts to alter or abolish the confessional system of allocating power have been at the center of Lebanese politics for decades. Those religious groups most favored by the 1943 formula sought to preserve it, while those who saw themselves at a disadvantage sought either to revise it after updating key demographic data or to abolish it entirely. Nonetheless, many of the provisions of the national pact were codified in the 1989 Ta'if Agreement, perpetuating sectarianism as a key element of Lebanese political life.

Although moderated somewhat under Ta'if, constitutionally, the president has a strong and influential position. The president has the authority to promulgate laws passed by the Chamber of Deputies, to issue supplementary regulations to ensure the execution of laws, and to negotiate and ratify treaties.

The Chamber of Deputies is elected by adult suffrage (majority age is 21) based on a system of proportional representation for the various confessional groups. Political blocs are usually based on confessional and local interests or on personal/family allegiance rather than on political affinities.

The parliament traditionally has played a significant role in financial affairs, since it has the responsibility for levying taxes and passing the budget. It also exercises political control over the cabinet through formal questioning of ministers on policy issues and by requesting a confidence debate.

Lebanon embarked on a massive reconstruction program in 1992 to rebuild the country’s physical and social infrastructure devastated by both the long civil war (1975-90) and the Israeli occupation of the south (1978-2000). In addition, the delicate social balance and the near-dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort. Monetary stabilization coupled with high interest rate policies aggravated the debt service burden, leading to a substantial rise in budget deficits. Thus, the government accumulated significant debt, which by 2005 had reached $36 billion, or 185% of GDP. Unemployment is estimated at 18% officially, but in the absence of reliable statistics, some estimate it could be as high as 20-25%.

The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. The government passed an Investment Development Law as well as laws for the privatization of the telecom and the electricity sector, signed the Euro-Med Partnership Agreement with the European Union (EU) in March 2003, and is working toward accession to the World Trade Organization (WTO). In order to increase revenues, the government introduced a 10% value added tax (VAT) that became applicable in February 2002 and a 5% tax that became applicable in February 2003.

In November 2002, Lebanon submitted a comprehensive program on its financing needs at the Paris II Donors Conference and succeeded in attracting pledges totaling $4.4 billion, including $3.1 billion to support fiscal adjustment and $1.2 billion to support economic development projects. To date, the government has received $2.5 billion, mostly used to retire or replace maturing debt, which carried an average cost of 13.5%. In return, the government issued donors 15-year dollar-denominated Eurobonds carrying a 5% coupon, with a 5-year grace period for repayment.

On the domestic front, the Central Bank of Lebanon (CBL) and commercial banks also contributed to the reduction of debt servicing costs. In December 2002, the CBL wrote off $1.8 billion in public debt it held and re-subscribed $1.8 billion in 15-year Eurobonds carrying a 4% coupon. Commercial banks subscribed 10% of their deposit base as of October 31, 2002 (about $4 billion) in 2-year treasury bills at zero percent interest rates. As a result of these combined efforts, about $10 billion was mobilized from local and international sources and used to replace high cost, short-term debt with lower cost and longer maturity debt. Paris II positively impacted financial markets and lowered interest rates.

As of the 2004 Article IV report, International Monetary Fund (IMF) directors welcomed recent positive macroeconomic developments but urged a more vigorous pursuit of macroeconomic stabilization and structural reforms, seizing the advantage of the positive momentum generated by the Paris II conference and the favorable international environment. Directors stressed that the attainment of debt sustainability over the medium term required further large increases in the primary surplus based on deep-seated revenue and expenditure reforms. Lebanese authorities acknowledged that much remained to be done to meet Paris II. IMF encouraged institutional reforms to solidify financial policies, starting with a phasing out of central bank financing of the government.

Lebanon's history from independence has been marked by periods of political turmoil interspersed with prosperity built on Beirut's position as a regional center for finance and trade. In 1958, during the last months of President Camille Chamoun's term, an insurrection broke out, and U.S. forces were briefly dispatched to Lebanon in response to an appeal by the government. During the 1960s, Lebanon enjoyed a period of relative calm and Beirut-focused tourism and banking sector-driven prosperity. Other areas of the country, however, notably the South, North, and Bekaa Valley, remained poor in comparison.

In the early 1970s, difficulties arose over the presence of Palestinian refugees, many of whom arrived after the 1967 Arab-Israeli war and "Black September" 1970 hostilities in Jordan. Among the latter were Yasser Arafat and the Palestinian Liberation Organization (PLO). Coupled with the Palestinian problem, Muslim and Christian differences grew more intense.

Beginning of the Civil War--1975-81
Full-scale civil war broke out in April 1975. After shots were fired at a church, gunmen in Christian East Beirut ambushed a busload of Palestinians. Palestinian forces joined predominantly leftist-Muslim factions as the fighting persisted, eventually spreading to most parts of the country and precipitating the President's call for support from Syrian troops in June 1976. In fall of 1976, Arab summits in Riyadh and Cairo set out a plan to end the war. The resulting Arab Deterrent Force, which included Syrian troops already present, moved in to help separate the combatants. As an uneasy quiet settled over Beirut, security conditions in the south began to deteriorate.

After a PLO attack on a bus in northern Israel and Israeli retaliation that caused heavy casualties, Israel invaded Lebanon in March 1978, occupying most of the area south of the Litani River. In response, the UN Security Council passed Resolution 425 calling for the immediate withdrawal of Israeli forces and creating the UN Interim Force in Lebanon (UNIFIL), charged with maintaining peace. Israeli forces withdrew later in 1978, turning over positions inside Lebanon along the border to their Lebanese ally, the South Lebanon Army (SLA) under the leadership of Maj. Saad Haddad, thus informally setting up a 12-mile wide "security zone" to protect Israeli territory from cross border attack.

U.S. Intervention--1982-84
An interim cease-fire brokered by the U.S. in 1981 among Syria, the PLO, and Israel was respected for almost a year. Several incidents, including PLO rocket attacks on northern Israel, as well as an assassination attempt on the Israeli Ambassador to the United Kingdom, led to the June 6, 1982 Israeli ground attack into Lebanon to remove PLO forces. Operation "Peace for Galilee" aimed at establishing a deeper security zone and pushing Syrian troops out of Lebanon, with a view toward paving the way for an Israeli-Lebanese peace agreement. With these aims in mind, Israeli forces drove 25 miles into Lebanon, moving into East Beirut with the support of Maronite Christian leaders and militia.

In August 1982, U.S. mediation resulted in the evacuation of Syrian troops and PLO fighters from Beirut. The agreement also provided for the deployment of a multinational force composed of U.S. Marines along with French and Italian units. A new President, Bashir Gemayel, was elected with acknowledged Israeli backing. On September 14, however, he was assassinated. The next day, Israeli troops crossed into West Beirut to secure Muslim militia strongholds and stood aside as Lebanese Christian militias massacred almost 800 Palestinian civilians in the Sabra and Shatila refugee camps. Then-Israeli Minister of Defense Ariel Sharon was held indirectly responsible for the massacre by the Kahane Commission and later resigned. With U.S. backing, Amin Gemayel, chosen by the Lebanese parliament to succeed his brother as President, focused anew on securing the withdrawal of Israeli and Syrian forces. The multinational force returned.

On May 17, 1983, Lebanon, Israel, and the United States signed an agreement on Israeli withdrawal that was conditioned on the departure of Syrian troops. Syria opposed the agreement and declined to discuss the withdrawal of its troops, effectively stalemating further progress. In August 1983, Israel withdrew from the Shuf (southeast of Beirut), thus removing the buffer between the Druze and the Christian militias and triggering another round of brutal fighting. By September, the Druze had gained control over most of the Shuf, and Israeli forces had pulled out from all but the southern security zone, where they remained until May 2000. The virtual collapse of the Lebanese Army in February 1984, following the defection of many Muslim and Druze units to militias, was a major blow to the government. With the U.S. Marines looking ready to withdraw, Syria and Muslim groups stepped up pressure on Gemayal. On March 5, 1984 the Lebanese Government canceled the May 17 agreement; the Marines departed a few weeks later.

This period of chaos witnessed the beginning of terrorist attacks launched against U.S. and Western interests. These included the April 18, 1983 suicide attack at the U.S. Embassy in West Beirut (63 dead), the bombing of the headquarters of U.S. and French forces on October 23, 1983 (298 dead), the assassination of American University of Beirut President Malcolm Kerr on January 18, 1984, and the bombing of the U.S. Embassy annex in East Beirut on September 20, 1984 (9 dead).

It also saw the rise of radicalism among a small number of Lebanese Muslim factions who believed that the successive Israeli and U.S. interventions in Lebanon were serving primarily Christian interests. It was from these factions that Hizballah emerged from a loose coalition of Shi'a groups. Hizballah employed terrorist tactics and was supported by Syria and Iran.

Worsening Conflict and Political Crisis--1985-89
Between 1985 and 1989, factional conflict worsened as various efforts at national reconciliation failed. Heavy fighting took place in the "War of the Camps" in 1985 and 1986 as the Shi'a Muslim Amal militia sought to rout the Palestinians from Lebanese strongholds. The Amal movement had been organized in mid-1975, at the beginning of the civil war, to confront what were seen as Israeli plans to displace the Lebanese population with Palestinians. (Its charismatic founder Imam Musa Sadr disappeared in Libya 3 years later. Its current leader, Nabih Berri, is the Speaker of the Chamber of Deputies.) The combat returned to Beirut in 1987, with Palestinians, leftists, and Druze fighters allied against Amal, eventually drawing further Syrian intervention. Violent confrontation flared up again in Beirut in 1988 between Amal and Hizballah.

Meanwhile, on the political front, Prime Minister Rashid Karami, head of a government of national unity set up after the failed peace efforts of 1984, was assassinated on June 1, 1987. President Gemayel's term of office expired in September 1988. Before stepping down, he appointed another Maronite Christian, Lebanese Armed Forces Commanding General Michel Aoun, as acting Prime Minister, contravening Lebanon's unwritten "National Pact," which required the prime minister to be Sunni Muslim. Muslim groups rejected the move and pledged support to Salim al-Hoss, a Sunni who had succeeded Karami. Lebanon was thus divided between a Christian government in East Beirut and a Muslim government in West Beirut, with no president.

In February 1989 Aoun attacked the rival Lebanese Forces militia. By March he turned his attention to other militias, launching what he termed a "War of Liberation" against the Syrians and their Lebanese militia allies. In the months that followed, Aoun rejected both the agreement that ultimately ended the civil war and the election of another Christian leader as president. A Lebanese-Syrian military operation in October 1990 forced him to take cover in the French Embassy in Beirut and later into a 15-year exile in Paris. After Syrian troop withdrawal, Aoun returned to Lebanon on May 7, 2005 and won a seat in the 2005 parliamentary elections. He is now the leader of the largest opposition bloc in parliament.

End of the Civil War--1989-91
The Ta'if Agreement of 1989 marked the beginning of the end of the war. In January of that year, a committee appointed by the Arab League, chaired by Kuwait and including Saudi Arabia, Algeria, and Morocco, had begun to formulate solutions to the conflict, leading to a meeting of Lebanese parliamentarians in Ta'if, Saudi Arabia, where they agreed to the national reconciliation accord in October. Returning to Lebanon, they ratified the agreement on November 4 and elected Rene Moawad as President the following day. Moawad was assassinated in a car bombing in Beirut on November 22 as his motorcade returned from Lebanese Independence Day ceremonies. Elias Hrawi, who remained in office until 1998, succeeded him.

In August 1990, parliament and the new President agreed on constitutional amendments embodying some of the political reforms envisioned at Ta'if. The Chamber of Deputies expanded to 128 seats and was divided equally between Christians and Muslims (with Druze counted as Muslims). In March 1991, parliament passed an amnesty law that pardoned all political crimes prior to its enactment. The amnesty was not extended to crimes perpetrated against foreign diplomats or certain crimes referred by the cabinet to the Higher Judicial Council. In May 1991, the militias (with the important exception of Hizballah) were dissolved, and the Lebanese Armed Forces began to slowly rebuild itself as Lebanon's only major nonsectarian institution.

In all, it is estimated that more than 100,000 were killed, and another 100,000 left handicapped, during Lebanon's 16-year civil war. Up to one-fifth of the pre-war resident population, or about 900,000 people, were displaced from their homes, of whom perhaps a quarter of a million emigrated permanently. The last of the Western hostages taken during the mid-1980s were released in May 1992.

Postwar Reconstruction--1992 to 2005
Postwar social and political instability, fueled by economic uncertainty and the collapse of the Lebanese currency, led to the resignation of Prime Minister Omar Karami in May 1992, after less than 2 years in office. Former Prime Minister Rashid al Sulh, who was widely viewed as a caretaker to oversee Lebanon's first parliamentary elections in 20 years, replaced him.

By early November 1992, a new parliament had been elected, and Prime Minister Rafiq Hariri had formed a cabinet, retaining for himself the finance portfolio. The formation of a government headed by a successful billionaire businessman was widely seen as a sign that Lebanon would make a priority of rebuilding the country and reviving the economy. Solidere, a private real estate company set up to rebuild downtown Beirut, was a symbol of Hariri's strategy to link economic recovery to private sector investment. After the election of then-commander of the Lebanese Armed Forces Emile Lahoud in 1998, following Hrawi's extended term as President, Salim al-Hoss again served as Prime Minister. Hariri returned to office as Prime Minister in November 2000. Although problems with basic infrastructure and government services persist, and Lebanon is now highly indebted, much of the civil war damage has been repaired throughout the country, and many foreign investors and tourists have returned.

In January 2000 the government took action against Sunni Muslim extremists in the north who had attacked its soldiers, and it continues to act against groups such as Asbat al-Ansar, which has been linked to Usama bin Laden's al-Qaida network, and other extremists. On January 24, 2002, Elie Hobeika, a former Lebanese Forces figure associated with the Sabra and Shatila massacres who later served in three cabinets and the parliament, was assassinated in a car bombing in Beirut. Israel withdrew its troops from south Lebanon in May 2000, in accordance with UN Security Council Resolution 425, which had been adopted in 1978. Armed elements of Hizballah are still present in southern Lebanon.

A September 2004 vote by the Chamber of Deputies to amend the constitution to extend President Lahoud's term in office by 3 years amplified the question of Lebanese sovereignty and the continuing Syrian presence. The vote was clearly taken under Syrian pressure, exercised in part through Syria's military intelligence service, whose chief in Lebanon had acted as a virtual proconsul for many years. The UN Security Council expressed its concern over the situation by passing Resolution 1559, also in September 2004, which called for withdrawal of all remaining foreign forces from Lebanon, disbanding and disarmament of all Lebanese and non-Lebanese militias, the deployment of the Lebanese Armed Forces throughout the country, and a free and fair electoral process in the presidential election.

Post-Syrian Withdrawal--2005
Former Prime Minister Rafiq Hariri and 19 others were assassinated in Beirut by a car bomb on February 14, 2005. The assassination spurred massive protests in Beirut and international pressure that led to the withdrawal of the remaining Syrian military troops from Lebanon on April 26. In the months that followed Hariri’s assassination, journalist Samir Qassir and Lebanese politician George Hawi were both murdered by car bombs, and most recently, Defense Minister Elias Murr narrowly avoided a similar fate when a car bomb exploded near his convoy. The UN International Independent Investigative Commission (UNIIIC) headed by Detlev Mehlis is investigating Hariri’s assassination and is expected to report its findings to the Security Council in fall 2005.