What happened?
On 15 July, Lebanon Prime Minister Saad al-Hariri stepped down after failing to form a government over the past eight months. Hariri resigned, following a brief meeting with President Aoun at Baabda Palace. Aoun accused Hariri of having already decided to step down prior to their meeting. According to Al Jazeera, the President's office said, "Hariri rejected any amendments related to changes in ministries, their sectarian distribution, and the names associated with them."

On the same day, during an interview with Lebanon's Al Jadeed TV, Hariri said he selected his candidates based on their expertise and their ability to reform the economy, but Aoun did not. Following Hariri's step down, his supporters took to the street and there were few clashes with Lebanese soldiers. The Lebanese pound hit a new all-time low exceeding USD 21,000. 
Reuters reported: French Foreign Minister Jean-Yves Le Drian said Lebanese leaders seemed unable to find a solution to the crisis that they had created, calling the failure to form a cabinet another terrible incident. US Secretary of State Antony Blinken said Hariri's decision was "disappointing" and urged Lebanese leaders to put aside their differences and form a government.

What is the background?
First, Lebanon's unique power-sharing system. Different sects share and allocate key political and security offices. The president is a Maronite Christian, the prime minister a Sunni Muslim, and the speaker of parliament a Shia Muslim. Hariri, a former prime minister, and Lebanon's leading Sunni Muslim politician, was designated in October to assemble a government following the resignation of Prime Minister Hassan Diab's cabinet in the wake of the Beirut port explosion. Hariri is the most influential Sunni politician in Lebanon and has the support of the Lebanese Sunni religious establishment. Although support from Sunni-led Saudi Arabia waned in recent years, he still has backing from other Sunni Arab-led states like Egypt. 

Second, the internal political deadlock. Hariri's decision to step down marks the culmination of months of conflict over cabinet posts between him and Aoun, the Maronite Christian head of state. The latter is allied with the Iran-backed Shi'ite Muslim group Hezbollah. According to the Al Jazeera report, on 14 July, Hariri proposed a 24-minister government, which according to local media, gave Aoun eight ministers, including the defense and foreign ministries. Hariri has been at odds with Aoun over the size and distribution of a new government. Aoun has accused Hariri's proposal of lacking Christian representation and dismissing the country's sectarian-based power-sharing system, while Hariri has accused Aoun of wanting too large of a share in the government.

Third, the economic crisis. The World Bank has described Lebanon's depression as one of the sharpest in modern history. The currency has lost more than 90 per cent of its value in two years; poverty has spread, and there have been crippling fuel shortages, prompting growing fears of social unrest. The economic freefall is Lebanon's worst crisis since the 1975-90 civil war. 

Fourth, the external pressure. There have been sanctions by European Union on Lebanese officials preventing a new government from taking power. The international community has urged Lebanese officials to settle political differences and put together a government that would enact economic reforms to unlock billions of dollars in aid and make the economy viable again. 

What does it mean?
Prime Minister Hassan Diab is staying in a caretaker capacity. A parliamentary election is due to be held next May; some believe the political vacuum will continue till then. With no candidate in place to replace Hariri, Lebanon's sectarian-based political system has been thrust into a period of further uncertainty. The continuation of a political vacuum will also impact Lebanon's ability to bring international aid to manage economy.