The current situation in Egypt has great potential for disaster. On the economic front, the government threatens to eliminate subsidies on food and other basic consumer commodities in order to reduce its current budget deficit of about $4 billion. The subsidies are currently costing $3.8 billion -- $1.5 billion for food and $2.3 billion for fuels -- and represent the largest single item in the $11.3 billion government budget.
 
 Subsidy cuts by the government would violate a popular symbol of Nasser’s “Arab socialism” and Egyptian national independence (the subsidies actually date from the British era during World War II). The cuts would seriously hurt millions of Egyptians, who would not be able to heat their homes or even get adequate nourishment if food and fuel were sold at world market prices. The government wants to avoid a repetition of the January 1977 riots, which followed announced food price increases. So far the government has made only token efforts to cope with the deficit. At the end of the summer it restricted imports of caviar, ostrich meat and other luxuries to conserve foreign exchange, and consumer prices of many staples, including sugar, have increased. Rice is now in very short supply. (Rice is grown in Egypt but exported; all rice legally sold in Egypt is imported.)
 
 The deficit is only a symptom of a broader economic crisis. The recent drop in world oil prices has reduced Egypt’s foreign currency earnings by as much as 50 percent this year. According to one report by Egyptian economists who visited the US last January, oil exports will diminish by at least 30 percent, Suez Canal tolls (heavily used by oil tankers) will drop by 50 percent, remittances from Egyptians working abroad (mainly in oil producing countries) may fall off by as much as 75 percent, and tourism will decrease by 55 percent in the aftermath of the October 1985 Achille Lauro incident and the Central Security Forces mutiny in February 1986.
 
 The US government and the IMF have been urging the Egyptians to move decisively to eliminate subsidies, despite the potential for social unrest. Such unrest might open the way for a military coup by Minister of Defense ‘Abd al-Halim Abu Ghazala, seen by many as “America’s man” in Cairo. Abu Ghazala returned from a visit to Washington in June with an impressive list of promised new military hardware. President Husni Mubarak, himself a military man, was far from enthusiastic. Referring to the need for national austerity, he hinted that spending on American arms should also be reduced.
 
 The differences between Mubarak and Abu Ghazala have been read into many recent developments, including the Central Security Forces riots in late February. Notions of an American conspiracy may or may not be exaggerated, but they certainly show people’s angry reaction to what they perceive as American domination of the country.
 
 Opposition to the government is increasingly expressed in the form of Islamic fundamentalism. In the last week of June, police arrested members of radical Islamic societies (gama‘at islamiyya) for arson attacks on video clubs in several Cairo neighborhoods. The video clubs, where foreign and uncensored Arabic movies can be rented, are a popular form of entertainment for the Westernized middle classes. They have largely replaced movie theaters, which in Cairo have deteriorated and become physically quite uncomfortable. The Islamic societies view the video clubs as centers of immorality and Western cultural influence. In another incident, student members of the Islamic societies attacked the dean of the Cairo University Medical School. His offense: He had insisted that a woman medical student remove her face veil at a dissection exam to confirm her identity.
 
 Nearly everyone here agrees that the Islamic societies are today the strongest political opposition to the regime. They have built a grassroots movement with effective health care, education and social services. They have infiltrated several political parties, in particular the secular liberal Wafd, as well as many professional associations and public institutions. Their influence extends to every arena of Egyptian society. Though they have no effective program for the broad economic and political challenges facing Egypt, their moralism and rejection of “Western” culture find widespread sympathy.
 
 In contrast to the confident and growing Islamic groups, the government is on the defensive and its base of support shaky. The legacy of the whole period since Nasser, and perhaps even since the Free Officers movement took power in 1952, is now called into question. Sadat’s “open door” is an obvious failure. Dependency on the US is more and more unpopular, but impossible to ignore. The Pentagon has reportedly been studying the possibility of “leasing” the Israeli-built airbases in Sinai, and Defense Secretary Weinberger may have raised this issue in his meetings with Abu Ghazala. Mubarak’s recent “summit” with Israel’s outgoing Prime Minister Shimon Peres is widely regarded as capitulation to US pressures and the price of continued aid. Democratic rights and freedoms remain limited, and profiteering and corruption are rampant. Not surprisingly, the government-controlled daily press fails to report much of what is going on, or its stories are so distorted that people cannot make sense of them without using other sources. Rumors abound of disputes and policy deadlock in top government circles.
 
 The left opposition has been unable to challenge the government effectively, even though the government is more vulnerable than ever and there have been strikes and worker protests in which the left has been able to intervene. The two largest strikes in Egypt during 1986 -- the ESCO textile workers in January and the railroad conductors in July -- were not led by the Tagammu‘, the major left opposition party, although it did set up support committees after the government moved against the strikers. The left has not been able to challenge the Islamic groups. Instead the Islamic groups keep the left off balance by charging it with atheism and hostility to Islamic principles. Progressive religious persons within the left have not been able to neutralize such attacks. Faced with the bitter hostility of the fundamentalists, the left has felt the need to limit tensions with the regime. Thus al-Ahali, the Tagammu‘ newspaper, did not report the arrest of Tagammu‘ members soliciting signatures on petitions against the subsidy cuts.
 
 At a deeper level, the left seems unsure of its analysis of the current crisis and how to solve it. Some critics argue that the alliance between the communists and the Nasserists within the Tagammu‘ hinders a thoroughgoing critique of the Nasser period, which may be necessary if a fresh new perspective is to develop. (Al-Yasar al-‘Arabi, based in Paris, has been an important forum for criticism of what it calls the “reformist” line of the Tagammu‘.)
 
 But those most active within the Tagammu‘ argue that a break in alliances would be a grave mistake at a time when the left opposition as a whole is weak. They see the need to build up the widest possible progressive movement and to push for more of a democratic opening. Whether such a broad alliance can be constructed when Islamic fundamentalists are infiltrating many political organizations remains to be seen.
 
 Virtually everyone acknowledges that the current crisis is extremely severe. As one journalist recently commented, “The likelihood of things remaining as they are is very thin.” The foreign debt now stands at around $36 billion. This summer the population reached 50 million, and is increasing by 1 million persons every eight months. The Egyptian people have tolerated much over the last 20 years, and outbursts of popular outrage have been only sporadic. No one really knows how much money is hidden away in villages and the poor neighborhoods of the big cities. There may still be enough cash in the black and gray sectors of the economy to carry people through the consequences of the budget deficit crisis and the oil price collapse. But this will only put off the time of reckoning.