Dubai Debt Problems Resurface, QE II May Go on the Block
On November 25, Dubai said it needed to delay payments on $25 billion in debt from its property units Nakheel and Limitless World. The emirate's neighbor Abu Dhabi provided $4.1 billion in capital to tide the Dubai-controlled entities over for an unknown period of time.
The news from Dubai shows how far the sovereign debt issue has spread. Several countries in southern Europe face debt problems, exacerbated by high government spending, a slow global economy, and trouble collecting tax revenue. The issues among these E.U. members and Dubai have caused concern that eventual downgrades of the sovereign debt of Japan, the U.K., and the U.S. could lead to a rising cost of raising money in the capital markets to cover national deficits.
A sale of assets is not likely to bring in the kind of capital that any of these nations need to cover the sovereign debt problems. Who can afford the QE II anyway?