Emerging-market stocks around the world have slumped for two days on concern a debt restructuring by Dubai World, with $59 billion of liabilities, will add to the $1.72 trillion of losses and writedowns from the global credit freeze. The MSCI Emerging Markets Index fell 1.9 percent to 940.30 as of 1:55 p.m. in New York, extending this week’s decline to 2.6 percent. Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a tourism and financial hub, suffered the world’s steepest property slump in the recession. Home prices fell 50 percent from their 2008 peak, according to Frankfurt-based Deutsche Bank AG.
Note EU-Digest: So could Dubai actually go down? It's certainly possible. In the past, Abu Dhabi, Dubai's oil-rich neighbouring emirate, has regularly given Dubai loans to keep things ticking over. There's a strong feeling Abu Dhabi might come to the rescue again, but there are no guarantees. It should be pointed out that Dubai's $80 billion debt isn't massive by global standards. But the collapse of an entire nation like it was the case with Iceland, would again raise questions as to whether the Global Financial Crises is really is over.
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