The emirate of Dubai, probably the brashest creature of globalisation, has just been bailed out by its conservative and censorious older brother, the emirate of Abu Dhabi.
Coming just after Dubai had come to be perceived as a risk equivalent to Iceland – its five-year credit default swaps this month leapt beyond 1,000 basis points, closing on the spread of Icelandic bonds – that will restore some confidence.
The central bank of the United Arab Emirates has bought up half a $20bn five-year bond issued by Dubai, one of the seven emirates in its federation. After a mediocre response to the refinancing of Borse Dubai last week, that pretty much settles the question of Dubai’s ability to service its debts.
They write:
ReplyDelete"This is not the best climate for investors to ponder whether (assumed) sovereign debt is twice gross domestic product or, on the contrary, GDP was so understated it is twice what it was. Riddles and recessions do not mix."
I'm afraid I don't understand what they're implying here about GDP figures here.
Are they implying the possibility that GDP figures are UNDERstated?
Thanks.
By the way, yesterday, we could not post a comment the entire day because the word verification thing would not work.
ReplyDeleteThanks for your blog. It is great.