The United Arab Emirates, largely bankrolled by Abu Dhabi, was bound to step in to rescue debt-laden Dubai. Unfortunately, the march to bail-out at the end of last month was so painfully slow, and so lacking in clarity, that the impact of the $10bn federal loan, part of a $20bn five-year Dubai bond issue, could be less dramatic than intended.
Back in October, when the financial meltdown had only just begun, the UAE was the most pro-active among its Arab peers in moving to safeguard its economy by injecting funds into the banking system and guaranteeing deposits.
But the message that action carried – that the federal system would kick in with force when needed – was soon drowned out by the alarm over the high leverage of Dubai’s quasi-government entities and rumours over what form an eventual bail-out would take.
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