Dubai yesterday shocked investors by asking for a creditor standstill at Dubai World, the government’s heavily indebted flagship holding company behind some of the world’s most extravagant real estate developments.

The move raised the spectre of default in the Middle East’s trading hub. Dubai generated phenomenal growth during the boom years but was badly hit by the global credit crisis.

The surprise move angered some investors who had been reassured by months of soothing messages from Dubai officials that the emirate would meet all obligations on its $80 billion (€53 billion) of gross debt. Two hours after announcing it had raised $5 billion from two Abu Dhabi banks, the department of finance asked for a standstill until May 30th on all financing to Dubai World and its troubled property unit Nakheel. – (Copyright The Financial Times Limited 2009)