Discontent Surrounds Start Of Mubarak's Third Term

A WEEK after winning a showy presidential referendum in which he was the only candidate, Egypt's President Hosni Mubarak will be sworn in today for his third six-year term. But the pomp of ceremony will be overshadowed by circumstance.

At home, Mr. Mubarak faces mounting domestic political turmoil and continuing economic decline. Abroad, he is struggling to assert his democratic credentials in a rapidly changing region, in which Egypt's importance to Arab-Israeli relations may be diminishing in the wake of the peace accord between the Jewish state and the Palestinians.

Cairo is gratified that the talks between Israel and the Palestine Liberation Organization will open here tomorrow, keeping the focus on Egypt. But there is concern in government circles and the military that the resolution of the Middle East conflict will ultimately deny Egypt the huge annual aid package it has received from the United States since it made peace with Israel in 1978. US military aid is $1.3 billion a year.

The concerns seem justified, as worsening economic conditions threaten Mubarak's credibility at home. Public resentment is widespread, undercutting the credit Mubarak has earned even from his most scathing detractors for significant accomplishments during his 12 years in office, including a loosening of the political system and an easing of restrictions on the press.

But even if these gains are lost, most Egyptians, illiterate and totally detached from party politics, would hardly notice. Unemployment is unprecedented and food prices are skyrocketing, as Cairo has removed all food subsidies except that for bread, in order to comply with an economic program designed by the International Monetary Program.

``The social fund, which was supposed to lesson the blow of the new economic order, has been a disaster, and there is nothing to protect ordinary Egyptians,'' says one Western diplomat.

According to one of the country's leading economists, great strides have been made in liberalizing Egypt's heavily controlled economy - a process eased by the benefits from the massive debt write-off that Cairo won for joining the coalition in the Gulf war.

But more has to be done to create a climate of stability by tackling economic problems, which the economist sees as at the root of the surge in Islamist violence. The concern is that, in trying to counter terrorism, political openness will be lost and without it, the hard choices needed for reform will not be made.

``This second phase of economic reform will be much more difficult than the last; we need to have an atmosphere of creativity and confidence, and that is a contract. If we continue to have these concerns about corruption, and if the Cabinet remains largely as it is, the signal will be that nothing has changed,'' confides the economist. He, like most Egyptians, is wary of openly criticizing the president, but feels the need for change is paramount.

The inauguration ceremony follows the weekend arrest and interrogation of leading opposition politicians and journalists for opposing the extension of the president's tenure and alluding to government corruption in arms deals in an opposition newspaper.

It is most unusual, perhaps unprecedented, for even an opposition Egyptian newspaper to target Mubarak openly. The opposition press, while it frequently highlights corruption in high places, has generally been intimidated by the aura of power and abuse by many of the president's long-serving ministers, whose futures are now a subject of debate as Mubarak prepares to appoint a new Cabinet.

The Egyptian Human Rights Organization has condemned the arrests, reminding observers that the men can be convicted under Egypt's sweeping anti-terrorism laws, ammended in July 1992 to counter a wave of attacks by Islamic extremists.

But in Egypt's increasingly tense atmosphere, observers were not surprised that the authorities moved so swiftly against the critics of the president. There are indications that Mubarak is sensitive to rumors of corruption now touching his family. In a recent interview in a state-owned magazine, the president denied that his sons or those of other high-ranking officials were taking advantage of their influence to gain government contracts or concessions from foreign companies.

Yet the damage to the reputation of Mubarak and his ministers may already have been done. ``A few years ago the image of President Mubarak was of a man who was not particularly innovative but he was considered modest, clean, a man of high integrity,'' says an influential Egyptian.

``This has changed: Now people are talking about his sons and those of other high officials. It has become a hot issue. Some of these stories I find unbelievable, but the truth is that people are prepared to believe them and this is very bad,'' he says.

The referendum also heightened public disatisfaction. The official results claim that over 80 percent of eligible Egyptians cast their ballots and 96 percent voted for Mubarak. Polling station visits by independent observers revealed irregularities.

Meanwhile, the military courts instituted last December to try civilians charged with offenses under the broad sweep of the terrorism act have condemned 27 to death, and 15 were hanged in June and July.

In an apparent revenge attack on Saturday, men believed to be Islamic extremists wounded a high ranking Egyptian military prosecutor involved in a mass trial of alleged militants.