Hallo zusammen. Mal wieder will ich den Feed, welchen ich per elektronische Post erhalte, unserer Leserschaft nicht vorenthalten. Heute kam gerade die jüngste Goldman Sachs Mail bei mir an. In dieser äußert sich Erik F. Nielsen, Chief European Economist bei der US-Bank, sehr deutlich zum Thema Dubai

1. Dubai, Dubai!  Who would have thought? Well, who would not have thought?  After all, when you build ski slopes in the middle of the desert, then you know that you are appealing to the absolute marginal dollar spent by businesses and tourists, so with the global slowdown, it didn’t even take the ultimately inevitable rise in interest rates to cause trouble for the highly indebted entities in Dubai.  Reportedly, Dubai has debts of about $80bn (of which Dubai World is on the hook for $59bn), about half of which is owed to European banks.  BIS’ official data for bank exposures only provide numbers for their exposure to the UAE as a whole ($123bn), of which $51bn is owed to UK banks and $11bn to each of French and German banks (all end-June; latest available.) 

I have no idea how this will all be worked out because the links between the emirates seem so opaque, but do look out for updates from Ahmet Akarli, as more information becomes availbale.  Earlier today, Reuters reported Abu Dhabi officials to have said that they’ll continue to support Dubai, but that they’ll “pick and chose” which entities to support.   It also seems possible that Dubai will end up selling some of their good assets. 

My bottom line is this: While unpleasant for the creditors involved (and maybe further government support will be needed for individual creditors), the numbers are not big enough to cause systemic issues in Europe.  That said, there are two possible shorter term issues:  First, because of the holidays last week, it seems perfectly plausible that we’ll get some nasty market reactions on Monday that will ripple through the week.  Second, a number of people have raised the issue that once one quasi-sovereign has thrown in the towel, others – and maybe even sovereigns! – might get inspired to do the same.  My short answer for Europe: I don’t think so!  (Incidentally, as you know, I am not in the business of forecasting short term price movements, but last weekend I wondered why Greek 2-year spreads were barely above 100 at a time when we are coming to the ECB’s last 12-months operation, when they were 165 going into the first 12-month deal in June. 

Well, last night Greece 2-year traded at 155 after having been outside 165 earlier in the day.  I never dreamt it was going to happen this fast; after all, this year is mostly pre-financed in Greece.  For 2010, I remain very nervous, but let’s see what comes out of next week’s Ecofin meeting and then thereafter in terms of policy measures, as discussed below.)

Der DAX ist heute übrigens nach einem festen Start in das negative Terrain gerutscht, nachdem so mancher Anleger von den Kursen in Dubai erfahren hatte.

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