Financial markets in Dubai and other Arab emirates plunged about seven percent early Monday, with investors worried about Dubai's ability to pay back $60 billion in debt
Financial markets in Dubai and other Arab emirates dropped about seven percent early Monday, with investors worried about Dubai's ability to pay back $60 billion in debt.
Both Dubai's and neighboring Abu Dhabi's stock exchanges slid quickly after markets opened.
It was the first day of trading since state-owned Dubai World asked for a six-month delay in repaying its debts. The announcement Wednesday came just before the Muslim Eid al-Adha holiday.
The repercussions were felt last week in other markets around the world.
But Asian markets Monday were up, following word Sunday that the United Arab Emirates' Central Bank in Abu Dhabi would step in to help Dubai World.
The property company has been hard hit by the global financial and real estate crises, putting on hold many of the grandiose projects for which Dubai has gained fame.
Louis Hobeika, an economist at Lebanon's Notre Dame University, says one lesson of the crisis should be Dubai's reassessment of its financial limits.
"Dubai had lots of potential, lots of ambition," Hobeika said. "However it has very little, or limited resources to implement those ambitions or realize them."
Hobeika says that Dubai will have to downsize its ambitions, and with Abu Dhabi's, and possibly Saudi Arabia's, eventual help with debt rescheduling, the crisis should soon pass.
The Emirate's Central Bank has said it will not give an unconditional bail-out to Dubai World, but look at components of the company to see if they are worth saving.