One of the traders who was quoted over the weekend in the financial press helped put the Dubai debt crisis in perspective. He noted that Dubai World’s debt is $60 billion, but when Lehman Brothers Holdings went belly up over a year ago, it’s debt burden was $1 trillion.
Markets may be overreacting to Dubai World’s debt standstill. European and Asian stock and bond markets have fallen while safe-haven currencies are up. That is hardly surprising. The Dubai government sprang this news on the eve of a four-day holiday. For Dubai to now claim it had anticipated the market reaction to its “sensible business decision” is preposterous. Dubai stands accused of irresponsibility, incompetence and bad faith.
Few will trust it now.