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Will the worldwide economy unravel because of Dubai?

Despite the fact that governments and leaders around the world have united in trying to play down the impact of the potential Dubai state debt default there are concerns that it will at least have a short-term impact. Whether this will be enough in itself to unravel the worldwide economy and undo the good work done over the last 12 months is highly debatable, but there is no doubt it has had and continues to have an impact upon confidence in the money markets and investment markets. So what next?

Rumours in the market suggest that the Abu Dhabi authorities are willing to at least bailout part of the Dubai economy and no doubt there will be other investors stepping forward with potential assistance. While it would be wrong to put Dubai forward as a "perfect" new economy, it is one which has literally grown from relatively small to potentially enormous in just a decade. However, during this period of untold wealth in the region investors appear to have lost their focus and there is more "fat" on the Dubai economy than ever before.

The next few weeks, months and years ahead will see this "fat" cut from the economy and it is likely we will see a trimmer and more controllable Dubai economy in the medium to longer term.

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