Political events in Tunisia and in Egypt have sent reverberations around the Arab world. Libya has not proved immune to the contagion. In response to the ousting of the Tunisian president, Zine el-Abidine Ben Ali, the Libyan leader, Muammar Qadhafi, addressed Libyans in a speech broadcast on state radio and television. He said that he was "very pained by what is happening in Tunisia" and told the Tunisian people that they had allowed their country to become "prey to hooded gangs, to thefts and fire". He went on to say that Mr Ben Ali's ousting was "a great loss" and that "there is none better than Zine to govern Tunisia", adding that he still considered Mr Ben Ali to be the "legal president of Tunisia under the constitution" and hoped he would remain president "for life".

Colonel Qadhafi's strong condemnation of the uprising in Tunisia stands in stark contrast to the comments of other Arab leaders, who have avoided inflammatory remarks, instead mostly expressing their respect for the will of the Tunisian people. Although it is not unusual for Colonel Qadhafi to be outspoken, his speech clearly contained a coded message to Libyans that any such activity in Libya would not be tolerated.

But in spite of his public remarks, it was clear that he would not support Mr Ben Ali's return to Tunisia. Speaking to Asharq al-Awsat, a Saudi Arabian newspaper, an unnamed Libyan official said that the Libyan government considered the Ben Ali regime "a closed chapter". Indeed, media reports said that the Libyan authorities had played a part in facilitating Mr Ben Ali's escape from Tunisia. The official also vehemently denied reports that Libya was supplying the remnants of the Tunisian regime with arms.

Keen to prevent any spillover from Tunisia, Colonel Qadhafi quickly formed a crisis management team, run by the head of foreign intelligence, Abu Zeid Omar Durda, to monitor events in Tunisia and formulate a domestic strategy. Understanding that Libyans harbour similar grievances to Tunisians, the government immediately abolished all taxes and custom duties on wheat, rice, vegetable oil and sugar, as well as children's milk products. Libya already spends over US$6bn on subsidies and this politically motivated measure will push that bill even higher.

However, the government failed to forestall protests erupting over housing in the middle of January. Clearly inspired by events in Tunisia, hundreds of protesters broke into 1,400 houses under construction in Bani Walid and Benghazi, occupying them for almost a week. The protests turned violent, with gangs of looters ransacking the offices of the South Korean construction contractors, during which several South Korean employees were injured. The protests also spread to other towns, such as Bida'a, Dernah and Sebha.

The protesters were expressing their irritation over the government's failure to provide adequate housing. The government has promised to build some 250,000 housing units by 2014, but many projects are facing severe delays and many Libyans have waited years to move into housing, even after paying deposits.

Wary of events in Tunisia, the Libyan authorities ordered police to avoid clashes with the protesters and gave specific instructions not to fire any live ammunition. The General People's Committee (the cabinet) issued a statement saying that "all the problems will be solved soon through the legitimate authorities". The government also instructed clerics to use their sermons to call for calm. The state-sponsored National Committee of Young Journalists also launched a campaign on Facebook, a social networking website, under the banner "no to theft and looting", which condemned the housing occupations. Calm was eventually restored and some 214 people were reported to have been arrested. In response, the government announced the establishment of a US$24bn investment fund to support additional housing development.