The FINANCIAL — The fallout from Dubai's debt crisis rippled across the globe on November 27, raising concerns of another wave of financial turmoil and showing how vulnerable the world economy remains despite signs of recovery.
"A year after the global slump derailed Dubai's explosive growth, the city-state's main investment arm, Dubai World, revealed this week it was asking for at least a six-month delay on paying back its $60 billion debt. Major credit agencies responded by slashing debt ratings on Dubai's state companies, saying they might consider the plan a default," Today's Zaman informed.
As global stock, commodity and currency markets went into a tailspin, the possible spillover effects from Dubai surfaced from London to South Korea, with banks big and small drawing concern for any losses they could suffer as a result of their exposure to the massively debt-laden emirate.
In recent years, Dubai has expanded with ambitious, eye-catching projects like the Gulf's palm-shaped islands and the world's tallest skyscraper in hopes of becoming a tourist friendly and cosmopolitan Middle Eastern metropolis. In the process, however, the state-backed networks nicknamed Dubai Inc. have racked up $80 billion in red ink, and the emirate may now need another bailout from its oil-rich neighbor Abu Dhabi, the capital of the United Arab Emirates.
Following a rout in Europe, Asia's stock markets tumbled on Friday while the dollar hit a fresh 14-year low against the yen as investors piled into currencies perceived as safer. Crude oil at one point fell more than 6 percent. With Dubai World hard pressed to pay its bills, banks could take the biggest hit, analysts said.
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