Dubai: mugged by reality

Dubai may contain the world's tallest building, but down on the ground it has the troubles and the debt to match. It's been "telling the world" since the financial crisis struck that it would extricate itself from an $80bn debt hole, said the FT's Simeon Kerr. The figure is more than 100% of Dubai's GDP.

But as the markets "jubilantly toasted" a $10bn loan from the Central Bank of the United Arab Emirates this week, it was clear that Dubai has "finally come to terms" with economic realities.

Following a huge real-estate boom which Dubai borrowed to finance because, unlike Abu Dhabi, it has scant oil property prices have fallen 25% from their September peak, said Morgan Stanley this month. Further, Dubai needs to refinance $15bn in maturing loans and bonds in 2009, said Moody's.

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And now the bail-out from neighbouring Abu Dhabi "threatens to cost Dubai its autonomy", said the International Herald Tribune's Henry Meyer, as well as "the free-wheeling economic system that helped establish it as the Middle East's main business hub". It's not clear that Abu Dhabi would be willing to lend Dubai more money, said The Wall Street Journal's Chip Cummins.

Even though it has vast foreign-exchange reserves and assets snapped up during the oil boom, Abu Dhabi's own property prices are sagging and "its sovereign wealth fund has been stung by some overseas investments". Still, there may be a silver lining for the region, said Lex in the FT. At least Emeratis won't be "overrun by footballers' wives, after all".