Dubai contagion?

Dubai contagion?

The Dubai debt default  may create a larger crisis of confidence in heavily indebted economies. That's certainly the fear in European countries like Ireland and Latvia, but perhaps above all, here in Greece.

The Greek stock market tumbled last week, as investors took fright. Public finances are a mess; the government has just announced that the budget deficit is projected to be 12.7 per cent of GDP, which is more than double the previous estimate, and four times more than the theoretical limit set by the European Union. 

The Guardian today asks if Greece is the new Iceland. 

It's a baptism of fire for the new Socialist government. Here's the Finance Minister, George Papaconstantinou, giving his response with an op-ed in the Wall Street Journal.

Cynics will say that Mr Papaconstantiou's promises sound remarkably similar to those made by previous in-coming Greek finance ministers - to improve tax collection, reduce the size of a bloated civil service, and get public spending under control. Good intentions, but political will is another thing. Following through on these measures entails the risk of causing substantial social discontent, even disorder, on Greek streets.

As I write these notes, I'm looking out of the Al Jazeera office window in central Athens. It's a crisp sunny day, and the road outside parliament is blocked by a few hundred protestors. They're angry about cuts in the civil service. More strikes and marches are planned for later in the week.

It's going to be an interesting winter in Greece.