British prime minister Gordon Brown said today he and top regulator Mario Draghi were confident that the Dubai debt problem was containable and localised.
"I've talked to the chairman of the Financial Stability Board, Mario Draghi, in my capacity as president of the G20," he told broadcasters in Trinidad and Tobago where he is attending a Commonwealth summit.
"I believe that we are satisfied that (with) the arrangements in place, the mechanisms that we've got in place to monitor what's happening, we can be sure that this is something that is both containable and is localised," he said.
The Financial Stability Board is an international body of regulators and central bankers.
The crisis began on Wednesday when Dubai, part of the United Arab Emirates federation, asked to delay payment on billions of dollars of debt issued by conglomerate Dubai World and its main property subsidiary Nakheel.
Fears the emirate could default and even derail world economic recovery prompted a sell-off in global markets.
Mr Brown said he believed the world financial system was strong enough to cope with the setback.
"The world economy has put in place mechanisms by which, when a problem starts in one country, we are in a far better position to monitor it and gauge the effects," he told a news conference in Port of Spain.
"While it is a setback I think we will find it is not on the scale of previous problems we've dealt with," he said.
"I think we are going to have issues like this at different points and different times because of fallout from what's happened over the last two years but my own view is the world financial system is stronger now and able to deal with problems that arise," he added.
Asked if Dubai's debt problems would delay a global economic recovery, Mr Brown said: "I think global recovery has depended on monetary action and fiscal stimulus."
"There is five trillions (dollars) of fiscal stimulus in the world economy. That is what is bringing the economy up and the monetary easing with low interest rates and with quantitative easing in Britain and America."
He said he had talked to Dubai officials this week and they had told him they planned to go ahead with a project that Dubai has for developing ports in Britain.
He said the project would create a large number of jobs, but had faced planning issues in Britain.
"My view is this is one of the projects that is an important one for Britain and obviously there are other commercial operators wishing to do things as well. We are very happy to look at it but Britain needs new investment in ports," he said.
Reuters