“After Israel’s onslaught on our country we are now on the edge of a deep recession,” Siniora told the conference, adding that his go-vernment would stand firm against the Hezbollah-led protests and try to enact a planned financial reform. “The cost of failure is too great to contemplate, certainly greater than the cost of implementing success,” he said.

Hezbollah is funded by Shi’ite Iran and has promised to provide its own financial aid to the war victims. Western countries and Arab Gulf states are anxious to show the Lebanese people they have deeper pockets and are the better allies.

“The process of reconstruction must be a priority for the Lebanese people, but they need help in order to do it,” British Foreign Secretary Margaret Beckett told reporters, saying London would offer some $48 million, primarily for refugees in Lebanon.

THE LEBANESE CRISIS EXPLAINED

<B>Politics and religion…</B>

■ Lebanon is the most politically complex and religiously divided country in the Middle East, which is what makes it such a potentially explosive factor in an unstable region.

Tiny Lebanon baffles outsiders. Even people in the Middle East find its politics confusing.

Set up by France after World War I as a predominantly Christian state, Lebanon is now about 60 % Muslim, 40 % Christian. It has 18 officially recognised religious sects and sharing power between them has always been a complicated game. Lebanese Muslims have tended to look east for support from the other Arab states and from Iran. The Christians have tended to look west to Europe and the United States. The country’s proximity to Israel - and the presence of a large number of Palestinian refugees on its soil - mean it is also intimately tied to the Arab-Israeli dispute. While Lebanon has plenty of problems of its own, it has also become the arena where many of the region’s conflicts and rivalries are played out. Syrian influence The long conflict which ravaged the country from 1975 until 1990 was both a civil war and a regional war. It left Lebanon firmly under Syria’s thumb, and with a southern strip of territory occupied by Israel as a buffer zone Israel has repeatedly intervened in Lebanon to protect its northern border. The civil war also drew in Iran to fight Israel and support the Lebanese Shia. In 1982, with Iranian help, the Shia created Hezbollah, the Party of God, which has evolved into a major player in Lebanese politics and an important ally of Iran and Syria. Israeli forces eventually withdrew in 2000 and Syrian forces in 2005. But while Syria no longer has a military presence, it has retained political influence through its relationship with Hezbollah.

Israeli onslaught. It is against this backdrop of conflict and polarisation that the war on the Lebanese-Israeli border unfolded during the summer. The capture of two Israeli soldiers by Hezbollah provoked a month-long Israeli onslaught. The areas where the Shia movement enjoys support – south Lebanon and the southern suburbs of Beirut – bore the brunt of the Israeli offensive. This caused large-scale death and destruction but failed to secure the soldiers’ release or Hezbollah’s defeat. Hezbollah claimed it had won a “divine victory”. In the aftermath of the war, the country began the task of physical reconstruction - but still plagued by its old divisions. The government is badly split between anti-Syrian and pro-Syrian factions. The first is a loose alliance of Sunnis, Christians and Druze (a heterodox offshoot of Islam) and enjoys the support of the United States. The second is an essentially Shia grouping dominated by Hezbollah, with the backing of Syria and Iran. Two things have served to raise the temperature to boiling point. One is Hezbollah’s threat to bring its supporters onto the streets unless there is a cabinet shake-up which would give it veto power over government decisions. The other is the string of assassinations of anti-Syrian politicians, the latest of whom is Pierre Gemayel. Seldom has Lebanon looked more fragile.