The announcement that the government of Dubai would suspend payment of debts incurred by its investment group, Dubai World, has rattled global markets, sparking fears of another dip in the global economy.

The chief concern is that the cash-strapped country, a member of the United Arab Emirates, could spark a similar move by other heavily indebted nations. That threatens to reverse progress that has been made in shoring up the balance sheets of the financial institutions that underwrote its profligacy. If they get the jitters, the rest of the world could feel the pain, as happened a year ago.

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