Lebanon’s usually lucrative summer tourist season is about to start, and local businesses are hoping for better luck after a year of war and social turmoil. But a grinding political crisis, a war-shattered infrastructure and lingering fears of another conflict with Israel threaten to keep the tourists and investors away.

The restaurants and cafés lining the cobblestoned, pedestrianised streets of downtown Beirut should be filled with tourists sipping cappuccinos or tiny cups of Turkish coffee in the spring sunshine. But since December the district has been a front line in the battle between the Western-backed Government of the Prime Minister, Fouad Siniora, and the opposition led by the militant Shia Hezbollah. Hundreds of opposition supporters, surrounded by razor wire and troops, are camped in the city centre in an open-ended sit-in that has paralysed local commerce.

Many restaurants were forced out of business, defeated by high rents and empty tables. Scoozi, a popular Italian-style restaurant chain, reopened its doors at the end of April, encouraged by a period of relative calm and hoping for a revived tourist season to recoup its losses. Talal Gharib, the manager, said: “Siniora says he’s optimistic for the summer. God willing, we will have some business.”

The political tension peaked after last summer’s 34-day war between Israel and Hezbollah. Shia Cabinet ministers resigned and the Opposition launched a campaign to topple the Government. The country has been mired in political gridlock and economic stagnation ever since.

The optimism brought by the Cedar Revolution of spring 2005, when street protests led to the disengagement of neighbouring Syria, has long since evaporated amid rising sectarianism and a worsening security climate. A recent poll found that 30 per cent of Lebanese were considering emigrating, double the figure recorded days after the war ended in August. The month-long war killed more than 1,000 Lebanese and caused damage worth several billion dollars. The Israeli bombing campaign targeted bridges, roads, airports, electricity and water networks and oil storage facilities. In South Lebanon, several villages were left in ruins.

Lebanon had promises of $1.3 billion (£657 million) in reconstruction aid. Mr Siniora said this week that $318 million of the $707 million so far received had been spent on compensation, infrastructure and housing refugees from South Lebanon. The Government persuaded several Gulf states to sponsor the reconstruction of southern settlements: Saudi Arabia alone has adopted 42 villages.

Mr Siniora hopes that the patronage of Sunni Arab states will wean the mainly Shia southern Lebanese from the Iran-funded Hezbollah. It is not lost on Hezbollah that Qatar, which houses the largest American military base in the Middle East and enjoys economic ties with Israel, is sponsoring the reconstruction of four Lebanese villages where Shia militants waged their fiercest resistance last summer.

In January Mr Siniora’s Government won further pledges from donor states totalling $7.6 billion in grants and soft loans to help to service Lebanon’s massive public debt of more than $40 billion and to offset private sector losses caused by the war. But much of the promised funds were conditional on the Lebanese Government pushing through economic reforms such as the privatisation of cash-strapped state utilities, which Hezbollah opposes. “Planned reforms which have been prepared by the Government need ratification from parliament,” Mr Siniora said in Beirut last week.

But Nabih Berri, the Speaker of the Lebanon parliament and a Hezbollah ally, refuses to schedule a parliamentary session for the proposals, and the Opposition charges that the Government is allocating reconstruction funds selectively, punishing Shia areas for supporting Hezbollah. Shia MPs from South Lebanon plan public protests against alleged Government neglect.

The Haret Hreik district, in Beirut’s Shia-dominated southern suburbs, was almost flattened by multiple Israeli airstrikes. After the war, Hezbollah offered $12,000 as an initial compensation to everyone who lost their home. Referring to a construction organisation linked to Hezbollah, banners on half-demolished buildings read: “USA destroys and Jihad al-Bina rebuilds”.

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