Traders jittery after UAE bank's bid to restore confidence is overshadowed by emirate's refusal to guarantee debts


Emarati men follow the latest stock changes at the Dubai financial market

The unfolding events in Dubai continued to weigh on stock markets across Europe today, despite attempts by the central bank of the United Arab Emirates to contain the financial crisis.

On the first day of trading after the Eid holiday, stock markets in the UAE had their first chance to react to the announcement last week that Dubai World – the owner of P&O shipping and extensive property in the UK – was struggling to meet repayments on its $59bn (£36bn) debt. In Dubai, the stock market plunged 7.3% while in Abu Dhabi, the fall was 8.3%. A combined $9bn was wiped off UAE markets.

In London, where many banks have large exposure to the Dubai economy, continued anxiety about the potential repercussions of the crisis dragged the FTSE 100 index of leading shares 1.1% lower, to close at 5190.68, erasing gains made on Friday. James Hughes, market analyst at CMC Markets, said the session had been "dominated by nervousness surrounding the debt situation in Dubai" and there remained "suspicions that we could well get yet more surprises".

On Sunday, the UAE central bank, which is largely propped up by oil revenues from Abu Dhabi, provided some comfort by saying it "stands behind" local banks in the region, including branches of foreign operations, by offering emergency funding to head off the threat of a possible run. But while the comments appeared to ease fears, later remarks by the Dubai government that it would not stand behind the debts of Dubai World again unnerved investors.

In an interview on local television, the director general of the department of finance made it clear that the government does not believe itself under any obligation to guarantee the debts of the state-owned company.

The comments sparked anger about the perceived lack of transparency in Middle Eastern markets.

One broker said investors had expected to hear more from the Dubai government. "They are doing what they can to differentiate between the government and companies," he said. "People's expectations aren't going to be met with this announcement and we will enter a new reality in the region and one that, over time, will put increasing pressure on all issuers to improve transparency and corporate governance."

Part of the concern among investors has come from the repeated reassurances from officials that Dubai was not in any financial difficulty.

KPMG is leading a committee of creditors – including Lloyds, HSBC, Royal Bank of Scotland and Standard Chartered and two local banks – in seeking meetings with Dubai officials.

But with the local markets set to close again between Wednesday and Sunday for a national holiday, it is not expected to secure one until next week. The banks were among the biggest fallers in London, with Lloyds Banking Group down 5.9% and Standard Chartered 4.5% lighter. Germany's DAX and France's CAC-40 also ended the day 1.1% lower.

Dubai World is shouldering the majority of the $80bn debt accrued in Dubai during the boom of the last decade that sought to reshape the city state as a glittering millionaires' playground and tourist destination. The downturn has resulted in property prices dropping from their peak by 50% this year.

A local investment bank, EFG-Hermes, worsened sentiment when it suggested a truer figure for Dubai's debt could actually be between $120bn to $150bn, if non-public information were included.

Investors have been looking impatiently at Dubai's oil-rich neighbour, Abu Dhabi, in the hope that it might step in and help to stabilise the situation.

But Abu Dhabi officials have made it plain that they will not write a blank cheque to Dubai, regarded in the region as an errant and wayward state by the more conservative parts of the UAE.

On Saturday, Abu Dhabi said it would "pick and choose" what parts of Dubai it would step in and help. "We will look at Dubai's commitments and approach them on a case-by-case basis," a government official said.

In a turbulent four-hour trading session in Dubai, shares in Dubai World fell by 15%, while Nakheel, its property arm, and the developer of the man-made islands in the shape of a palm tree, requested that trading in three of its listed Islamic bonds be suspended until its restructuring could be finalised. Emaar, the state-run firm behind the world's tallest building, Burj Dubai, fell 9.9%.

In a statement, the National Bank of Abu Dhabi said it had $345m exposure to two Dubai World units, knocking 9.7% off its shares. The credit ratings agency Moody's said contagion effects for the neighbouring state was unavoidable.

Catholics and evangelicals join forces to put abortion at centre of Senate debate on healthcare reform


Anti-abortion activists protest in May at Notre Dame University in Indiana against the college's decision to invite Barack Obama to address students and to award him an honorary degree.

Catholic bishops and Protestant evangelists in the US have unleashed an intense lobbying campaign to force fresh limitations on access to abortion into healthcare legislation under debate in the Senate this week.

Pro-choice groups have described the attack on proposed health reforms mounted by the religious right – which last month pressured the House of Representatives to effectively block women from using medical insurance to pay for abortions – as one of the most serious threats to abortion rights in recent years.

The campaign has thrust the divisive issue back to the forefront of US politics, pitting the White House and its allies against religious leaders, who have accused Barack Obama's administration of being part of a "culture of death".

Ten days ago more than 150 bishops and other religious leaders issued a declaration denouncing Obama's position on abortion and threatening civil disobedience against new laws affecting that and other social issues, such as gay marriage.

Anti-abortion activists were reinvigorated ahead of the opening of the healthcare legislation debate in the Senate today by their success in garnering support in the House of Representatives over an issue that was widely regarded as having lost its political potency with the election of a pro-choice president.

At the core of the strategy by the Catholic church and Christian evangelists is a campaign to rally churchgoing voters to pressure members of Congress to ensure that new healthcare laws bar government funds from paying for abortions.

The measure's supporters say it merely extends existing policy. But Naral Pro-Choice America, one of the country's largest abortion rights groups, says the effect of such legislation would be to prevent insurance companies that presently pay for abortions from covering terminations. This, they say, is because government funds would be used to run a new insurance exchange designed to make the market more competitive and to subsidise coverage for low-income families.

Naral's director of communications, Ted Miller, called the inclusion of the amendment "a wake-up call for America's pro-choice majority".

"It's clear that the election of a pro-choice president and the perception of a pro-choice majority in Congress led many Americans to believe that they could be complacent about a woman's right to choose," he said.

"It goes far beyond the status quo. The amendment would make it nearly impossible for private insurance plans to cover abortion.

"The status quo is that about 85% of private insurance plans currently cover abortion services. It really prevents women from being able to use their own money to purchase an insurance plan that includes abortion coverage.

"That's far, far out of step with the current private insurance market."

Pro-choice advocates had thought the anti-abortion camp was in retreat after recent political gains, including Obama's election victory and seven failed attempts to curb abortion rights by public ballot in four states since 2005. Opinion polls showed younger voters were less passionate about the issue than their elders.

But there were flickerings of the old fire when abortion emerged as a central issue in a New York state congressional race last month.

Sarah Palin joined other prominent rightwingers in rejecting the Republican candidate, Dede Scozzafava, because she was pro-choice and supported same-sex marriage. They threw their weight behind a hard right independent candidate who eventually lost to a Democrat after Scozzafava withdrew from the race.

Last month more than 150 Christian leaders and activists,led by conservative evangelicals and Catholics, issued a long declaration denouncing abortion, along with gay marriage and liberal social policies, and threatening to break laws that compromised their beliefs.

The Manhattan Declaration: A Call of Christian Conscience says Obama's stated aim of reducing the need for abortion is a "commendable goal". But it alleges that his policies will have the effect of increasing the number of terminations, while accusing the government of being part of "a culture of death".

"The present administration is led and staffed by those who want to make abortions legal at any stage of foetal development and who want to provide abortions at taxpayer expense," the declaration says. "Majorities in both houses of Congress hold pro-abortion views."

Among the signatories are 15 Catholic bishops and leading evangelical Christians such as James Dobson, the founder of Focus on the Family.

The declaration says supporters will be "united and untiring in our efforts to roll back the licence to kill that began with the abandonment of the unborn to abortion". Measures would include defiance of the law if laws protecting individuals from having to act against their conscience were changed, for example, if religiously affiliated hospitals were obliged to assist in abortions or research involving the destruction of embryos.

"Through the centuries Christianity has taught that civil disobedience is not only permitted, but sometimes required," the declaration says. "We will fully and ungrudgingly render to Caesar what is Caesar's. But under no circumstances will we render to Caesar what is God's."

While a resurgent opposition to abortion has brought various religious interests together, they are divided about the broader healthcare reform legislation.

Catholic leaders strongly favour ensuring that undocumented immigrants are covered, and a recent opinion poll of Catholic voters showed 73% in favour of a government-run health insurance plan. The evangelical right is passionately against both measures.

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