Coming back to Chicago after a year was a journey to a land of palpable uncertainty. America and its entrepreneurial citizens are struggling to get their heads round a slew of negative indicators about the performance of their world powerhouse economy.

News was breaking that requests for building permits, a vital indicator of the health of the savagely depressed residential real estate market, had fallen by 3% in July. This offset a slight improvement in manufacturing, but the real bad news is that this is rapidly turning into a jobless recovery, if indeed it is a recovery at all. American firms cut their payrolls by 131,000 in July, the second successive monthly fall. At the same time, there are fears of inflation as wholesale prices for food, cars and other core producer prices rose for the ninth month in a row.

The impact of all this depressing news will have implications for the US economy for years, probably decades to come. Consumers are spending less and saving more, most notably the baby boomers now approaching retirement. The US Census Bureau revealed that people between the ages of 65 and 74 are now spending 12% less than a decade earlier. This reflects the damage that the recession has done to America’s wealth. Net household assets are down 18% since 2007. Americans are feeling poorer.

At the same time, the seeds for future problems are being sown. US junk bonds are selling at a record pace as investors cast around for a decent return on their savings. They bought $21bn of these higher-risk products in just the first half of August, traditionally a quiet month where sales have averaged only $6bn in the whole month over the past ten years. There has also been a surge in sales of securities backed by consumer loans. Sounds grimly familiar doesn’t it? It seems some lessons are never learnt.

But how does an embattled Chicago feel? In a word, quiet. The huge Nordstrom department store was all dressed up with glittering displays but few shoppers to serve as lunchtime approached. The surrounding mall was equally deserted and tables could be had at every unit in the food court. All around the business district, restaurants which admittedly were clearly struggling a year ago have now closed.

Almost the only busy environment on the whole trip was the non air-conditioned Immigration Hall at O’Hare airport. Here irritated visitors spent well over two sweaty hours waiting in line to come and spend their recently more valuable euros, pounds and Chinese renminbi, or take summer courses at Illinois universities. Interestingly, visitors seemed to outnumber incoming US citizens by a margin, suggesting that Americans really are travelling less, another indicator of troubled times.

Talking to Chicagoans, the mood was grim. Their vibrant spirit of enterprise seemed almost crushed by the toxic mixture of financial pressures and viciously partisan politics constantly being paraded across their television screens. One cab driver commented on China’s accession to number two in the league table of world economies, supplanting Japan. Things must be bad when ordinary Americans are taking notice of world news.

Without our addiction to risk, the Aussie government was hardly touched by the downturn.

Arriving in Sydney from the deep economic depression of the Eurozone was a refreshing but curious transition. Not only to the sunny uplands of financial rectitude, but also to a place sheltered from the recessionary storm by an accident of geography and geology.

Having an abundance of some of the word’s most sought after minerals, notably iron ore, and being located as the nearest and most convenient supplier of these riches to the world’s most rapidly growing major economy, China, has stood Australia in very good stead in recent years.

Add in a robust banking system with almost no involvement in the fantasy land of derivatives, sub-prime loans and addiction to risk, and you have the exception that proves most of the rules of the current financial game. Unemployment is a miserly 5% and government debt is only a fraction of the levels endemic throughout Europe.  Business investment is growing strongly. Australia boasts four of the top ten most financially secure banks in the world, according to one credit rating agency.

There is some indication that consumer confidence is recovering from a temporary blip brought on by uncertainty about the timing of the forthcoming general election, now called for next month.

So almost the only clouds on the otherwise sunny wintry horizon are inflation, rising interest rates and much nervousness about one of only two housing bubbles around the globe which has yet to burst (the other being in China).  The Economist’s latest survey of global house prices awards Australia the dubious accolade of having the most over-valued housing in the developed world, based on the relationship to rental values.

Commentators are also niggling away at tales of credit rationing starving small businesses of working capital, just as the wholesale cost of bank funding is escalating to levels which are expected to prompt at least two further interest rate rises in 2010. SME’s are less able to negotiate competitive pricing for their facilities, which makes them far more vulnerable to this upward cost pressure than their larger corporate cousins.

Despite these minor negatives, the glamorous Quay restaurant with its spectacular views of the Sydney Opera House in one direction and the Harbour Bridge in the other seems to have no problem filling all its tables. Even at A$155 per head (nearly £100) for a four course gourmet extravaganza, washed down by top-priced Aussie wines.

Hotels were largely full, as was the flight from Hong Kong, a stark contrast to the two thirds empty planes plying the previously bustling Transatlantic route between London and New York. The air corridor linking Sydney and Melbourne is now the busiest passenger route in the world.

And if there was any doubt that the luck of the Irish has migrated down under, what other government would find a A$5bn revenue windfall hidden away in its books, just after having to concede tax reductions of almost exactly the same magnitude to its vital mining industry and only a few weeks before facing its electorate? The UK’s new Coalition Government can only dream of such good fortune.

Fears are growing that a property bubble may burst - and a national obsession with gambling doesn't help, says Nick Hood.

The newspaper hoarding said it all: “Lending Falls as Fears of a Double Dip Grow”. Hong Kong is feeling the chill as China’s headlong growth rate threatens to fall to the crisis level of an annualised rate of only 10.6% in the second quarter of 2010, down from 11.9% in the first quarter.

Hong Kong’s economic soothsayers believe that the social stability of China depends on maintaining a growth rate that almost all the rest of the world can only marvel at and never hope to match.  And any problems in China will be magnified many times over in Hong Kong through the prism of its role as the economic conduit between East and West in both financial services and trade.

Fears are growing that a property bubble may burst as the Chinese authorities try to moderate rampant speculation, as well as about what impact there will be on bank liquidity and lending from some distinctly sub-standard returns on major mainland infrastructure projects.

Activity in the insolvency and restructuring markets is well below the expectations of many professionals, and not because the robust financial health of China means that there are no businesses or individuals to be rescued. Rather because many banks in Hong Kong are turning their face against work out proposals, mainly through indifference to the fate of their over-extended borrowers.

One unexpected source of work for these vampires of the recession is the continuing success of casinos in Macao, and the widespread gambling addiction of Hong Kong entrepreneurs. Several apparently thriving restaurants in Kowloon’s seafood district have changed hands recently as gambling debts have laid their owners’ credit ratings low.

It was no great surprise either when officials of the Hong Kong Jockey Club confirmed that total bets placed so far this year at the races are 11.5% up on 2009.  Feelings of uncertainty and insecurity only serve to fuel the Chinese passion for trying to beat the odds.

As always, Hong Kong’s streets and air-conditioned inter-building walkways were teeming, but there were few shoppers in the endless malls of luxury goods stores and the windows of Marks & Spencer were plastered with sale signs.

Empty taxis were in plentiful supply both at lunchtime and late in the evening, suggesting that the current depressed mood is reinforcing the saving habits of the Chinese community and curbing the rampant consumption habits of ex-pats.

There also seemed an air of listlessness about the crowds, with much less than the usual scurrying urgency. Perhaps betraying the financial uncertainties that are preying on so many of their minds, as well as concerns about the ever growing influence of Beijing.

How interesting then that for the very first time, the head of the Stock Exchange does not speak Cantonese but Mandarin. This is a clear sign that the greater concern is no longer with the Territory’s local business and investor community, but instead with the mainland authorities and the Mandarin-speaking investors from China’s nouveau riche cadre of factory owners and property developers. 

Nick Hood is surprised to find Rome relatively unscathed by the global recession, despite its past mistakes.

Italy was pilloried for its crony capitalism back in the boom, but now - despite having failed to report a budget surplus for over a quarter of a century - it is sitting relatively comfortably amid the government finance carnage in Euroland. Rome in late Spring showed little sign of the recession.

For sure, Fiumicino airport seemed relatively quiet, and Alitalia’s evening commuter flight home to London had empty seats, while the tourist hordes thronging the Pantheon were a little thinner than on previous visits. But pavement cafes in the Piazza Navona were bustling, as they dispensed sleep-repelling double espresso. And reservations were still needed at quality restaurants.

Talk to local professionals and bankers, and there is little sense of financial crisis. Their thoughts are focused much more on political interference in everything up to and including the judicial process - an unpleasant side-effect of Italy’s experiment with stable government.

Italy’s current government deficit is a mere 5% of GDP, within touching distance of the Eurozone’s much maligned Stability Pact norm of 3% and way below figures everywhere else in Southern Europe, and in allegedly more prosperous, stable economies such as the UK and the USA. Output has dropped sharply and unemployment is rising, but on a modest scale by comparison with, for example, Spain.

How has this miracle of recessionary rectitude happened, especially in the economy that apparently did everything wrong in the boom times?  ABN Amro’s attempt to storm the Italian banking sector by buying Banca Atonveneta was blocked, as was the proposed sale of Alitalia to Air France-KLM.  Now, it seems, this rejection of global markets turned out to be a major asset as the world’s financial system imploded.

Italy, the world’s eighth largest exporter, has another priceless advantage. Its iconic export brands, such as Ferrari, Maserati, Versace, Prada and Armani are focused in luxury markets, which have been surprisingly robust worldwide, while Fiat addresses the motor sector’s need for economy vehicles. A strong trade relationship with China has also helped.

The vibrant underground economy may also have played its part, as well as its largely protected core workforce. Counter-intuitively, these apparently negative factors have combined to provide a consumption buffer and smooth the unemployment shock felt elsewhere.

Not that everything is positive. The EU Commission has revised Italy’s growth forecasts downward, and government debt is already too high at 116%; it's expected to grow further in 2010 and 2011.  Fiat is battling with its unions over the closure of a production plant in Southern Italy, a key part of a restructuring programme put to its bankers.  Nevertheless, refinancing talks seem to be going well (although still at an early stage).

And Versace is in turnaround mode after a terrible 2009, when it posted a loss of €50m after revenues fell by 20%. It has been forced to expand its ranges to include outfits with broader appeal, after even Madonna and Penelope Cruz’s clothing budgets failed to pull it through the recession unscathed.

Still, it seems that the flame of relative prosperity will continue to burn strongly in the Eternal City - and there is no prospect that Italy will replace Ireland as the “I” in the PIGS acronym any time soon.   

Portugal’s unwelcome membership of the PIGS club (Portugal, Italy, Greece and Spain), the new sovereign pariahs’ group, is a sad reflection of ambition gone wrong and unsustainable burdens assumed in joining the Eurozone.  It must seem a long time since Lisbon was the proud host to Expo 1998, although the still unfinished iconic tower at the Expo site serves as a permanent reminder of financial pressures which long pre-date the current crisis.

Lisbon now portrays an image of faded glory, with innumerable crumbling historic facades.  And the generally downbeat impression is worsened by the most virulent attack of graffiti to be seen in any major European city.  Banksy would struggle to find enough clear wall space to leave even the smallest contribution to Portugese street art.

And pickpockets are a constant threat to even the most wary visitor, rivalled only as a challenge to strangers by an enthusiastic but chaotic public transport system, capable of whisking you 30 minutes up the coast to Cascais with pristine efficiency for a mere €1.70 one day, then stranding you on entirely the wrong side of Lisbon thanks to the ancient number 28 tram the next.

Economic progress is equally haphazard - the budget deficit is 9.3% of GDP, while Portugal’s foreign debt burden sits at a calamitous €177bn or 108% of GDP.  This compares badly even with everyone’s favourite Eurozone basketcase Greece, where foreign debt is equivalent to a mere 87% of GDP. Slashing this back to more acceptable levels is fraught with risk, as it is for so many other over-indebted nations.  Cutting too much too soon may well choke off any tentative signs of recovery.

The fundamental problem is the relevance of Portugal within the Eurozone family.  After decades of exploiting its low labour costs, the expansion of the EU into Eastern Europe and the lowering of trade barriers with Asia have both hit the economy hard.  Indeed the EU’s commissioner for economic and monetary affairs recently included Portugal alongside Greece and Spain as countries which have suffered ‘a permanent loss of competitiveness’.

The move in April by Standard & Poor’s to downgrade Portugal’s sovereign debt to junk status was another major blow. As a result of this and speculative pressure in bond markets, the rates it must pay have been pushed back up to the punitive levels it had to pay before it joined the EU.

But despite its economic travails, an occasional oasis of cultural and culinary class can still be found amid the tourist clip joints selling over-grilled sardines and over-priced warm beer to the thin dribble of Lisbon’s tourists this Spring.  

In the quiet leafy back streets of the commercial district just off the Avenida da Liberdade is the idyllic garden of Restaurant 33, offering unrivalled service, the best of Portugese fish and meat dishes washed down with very drinkable rosé or chilled white port, and all at a mere €35 a head.  So there is still hope.    

 

Romania has just slashed civil service salaries and pensions. A sign of things to come?

Flying into Timisoara, the day after Romania’s President announced swingeing cuts of 25% in salaries for civil servants and a 16% reduction in pensions for all those unlucky enough to be retired, was a sobering moment, writes Nick Hood. The pensions cut reverses most of a 20% increase rather recklessly brought forward by the previous government ahead of the 2009 election.

Even more interesting was discovering the next day that the Vice-President of the Central Bank had been an insolvency practitioner in a previous commercial life. With the current state of the UK’s public finances, this may yet be a path sensibly followed by our own Bank of England.

Romania’s own financial position is very far from healthy, although one local professional did comment cynically that they had been wise to access the IMF’s resources for their $17.1bn lifeline back in early 2009, before the PIGS crisis began to preoccupy markets and institutional bankers alike.  What, he asked, would have been left after Greece’s begging bowl had been filled, and then maybe Portugal and Spain’s?

A recent World Bank survey put Romania 55th in the league table for doing business, dragged down by poor ratings for the difficulty of employing workers and for tax burdens on enterprises. Education and skills levels amongst the 22m population are a major issue.

But maybe more of a problem is this conundrum: the banking system is relatively liquid, but there is an admitted reluctance by banks to lend to business following the impact of the world recession. The country’s banking system has already disclosed that 10% of all its loans are non-performing, a figure which will almost certainly rise further in 2010. So the instinct to avoid adding to this toxic financial waste dump is understandable.

This may reflect Romania’s curious trajectory through the crisis, starting as the only emerging European economy to grow faster in 2008 than in 2007 and then falling heavily back down to earth with a 15.5% negative swing into recession in 2009.

Worryingly, foreign direct investment collapsed from around $13.5bn in 2008 to under $5bn in 2009, reflecting hardships in developed countries and uncertainty about prospects in Central and Eastern Europe. Having Italy as your second largest investor is not a very comfortable economic model right now.

Whatever the harsh financial realities may be, there is a reassuring air of confidence among bankers and professionals as they discuss the way forward and out of the recession. And refreshingly, a number of Romania’s judges have been regular attendees for some years now at European legal events, designed to share Western knowledge and experience at using commercial common sense to make inflexible laws work in the real world.
 
And besides which, where else can visitors experience the joys of such delightfully mangled English as seen on the menu of Timisoara’s top restaurant - our puzzlement at what 'Sparrow Grass Sauce' might be turned into hysterical amusement when the sauce boat disgorged a fragrant Asparagus sauce... 

There was some air traffic in Middle England this past weekend, but sadly only the rather inelegant lifting off by a number of swans from the River Wye. Otherwise the skies were blissfully clear of noise, pollution and vapour trails, replaced by the deafening sound of business and leisure travellers gnashing their collective teeth.

The man at the local cider farm thought it might all be Iceland's fiendish revenge for our dear Prime Minister's cavalier use last year of anti-terrorist legislation to freeze the assets of the failed Icelandic banks. Another conspiracy theory going the Saturday night rounds was the frankly fanciful idea that the Russians had bombed the Eyjafjallajoekull volcano for some unexplained military or economic reason.

But it was an ill wind, or lack of it that was blowing frustrated tourists into hotels all round the ancient kingdom of Mercia, who had been expecting instead to be settling down for some suitable "ooh la la" in Paris and other foreign destinations. Many an extra bottle of wine and sticky toffee puddings were sold this weekend by way of balm for lost foreign travel moments.

Sadly, the idyllic, indeed bucolic joys of an unexpected English staycation could not prevent Blackberries and Wi Fi delivering news and messages of distress from further afield penetrating. An engineer working on an infrastructure project emailed to advise a potential crisis in Copenhagen, where hordes of stranded British tourists were threatening to eat their way through that lovely city's entire supply of herrings.

A distraught Edinburgh lady texted with rising panic from the bus station at Alicante, where she was being told that the next seat on a bus was not until four days later on a charabanc alleged but not certain to be ending up in Brussels. Could my international network of insolvency practitioners somehow spirit her away from this nightmare and home to Scotland, she pleaded?

Then came the saddest question of all, from an aviation sector executive, wondering if they would be eligible for redundancy if the cause could be shown to be an Act of God. This interrupted my final agonizing, which led me to cancel an imminent conference in Cyprus - just in time to prevent several delegates from India, Nigeria and other exotic destinations having to turn round half way to the Aegean. Sales of olives, taramasalata and retsina will surely slump as part of the ripples of collateral financial damage.

Signs that the UK's no-fly zones will be re-opened soon are uncertain, despite apparently successful test-flights and much protest from the industry. When they do eventually clear the long jam and get the air lanes open again, let's hope they stay that way. And let's hope that the economic damage is less serious than we fear. Most important of all, let's hope that Iceland's other nearby and much fiercer volcano remains quiescent.

However, there is a moral to this strange tale, this brief passage of disruption. We should all wonder how we came to take easy air travel so much for granted. How short will our memories be?  Probably too short, but one day it will happen again and it would behove us all to be better prepared next time.

Syria is edgy, isolated and overwhelmed by refugees, says Nick Hood.

Crossing the Jordanian border into Syria’s fertile plains takes the visitor from Western influence and relative affluence into a tense world of political autocracy; a country resolutely rejecting US threats and facing east towards its preferred international partners, Russia and China.  

Cars are old and battered, lorries and buses are reminiscent of rural India and Sri Lanka - although one rusty bus reached out tentatively to the English-speaking world with 'Good Gorney' painted in elegant italics down its side.

Like so many countries in the Holy Land, Syria’s current economic position is inextricably caught up with regional events.  Its implacable rejection of the state of Israel makes it an international pariah, still on the US list of sponsors of terrorism and hence a subject to a slew of US sanctions.  Despite a surplus of citrus fruits of a quality to rival any other Mediterranean producer, it is locked out of European markets.

But much worse is the impact of refugees. Arriving in Damascus in the chaos of rush hour, it is hard not to wonder how a city which relatively recently had a population of only 300,000 will ever cope with the 4m refugees mainly from Iraq and Palestine that now threaten to throttle it. Further north, the second city of Aleppo is somewhat more functional, but it too is swamped with refugees, this time 500,000 Kurds expelled from Turkey. Unsurprisingly, unemployment is estimated to be as high as 40%.

The good news is that the Syrian economy, because of its isolation, escaped the global recession in 2009. GDP growth was a respectable 4% for the year according to the IMF, led by a surging agricultural sector which now accounts for 25% of total output. This is a decline from a figure of 5.2% in 2008, but still a creditable performance, which would have been better still but for a 2.7% reduction in homebound remittances from the large Syrian diaspora, inevitably affected by the economic crisis around the world.

Two key relationships continue to support progress. Firstly, the generosity of the then President Putin in writing off Syria’s sovereign debt to Russia back in 2003 (possibly simply to spite the US but more probably to cement his influence over the young President Bashar al-Assad) has transformed the overall financial position.

More importantly, Syria benefits from substantial religious tourism from Iran. The wondrous Ummayad Mosque in Damascus is overwhelmed each and every day by tens of thousands of pilgrims from Iran, fulfilling their obligation to visit Islam’s holy sites.  These visitors also throng the rather disappointing souks, buying up the wealth of tatty imported goods spilling out from boxes clearly stamped “Made in China”.

Western tourism is also growing, attracted by a wealth of stunning ancient monuments from the amazing crusader castle, the Crac des Chevaliers, Aleppo’s Citadel and the world-renowned remains of the Greco-Roman city at Palmyra which make Rome’s Forum look like Toy Town.  

Business visitors may balk at a country where the lack of a GPRS system makes their Blackberries useless and where internet coverage is still patchy at best. Even cash can be hard to get, as most ATMs are empty outside banking hours.  But the hotels are good and whilst nobody should come for a gourmet experience, decent wines from Lebanon, Jordan & even Syria itself can help smooth away the slightly edgy environment.

What does the future hold for Syria?  Uncertainty for sure, as conservative influences seek to rein in President Assad’s modernising instincts - plus a long wait for acceptance by the US and other Western interests. But as a significant oil and citrus producer, any breakthrough in access to international markets could transform this isolated nation.

Jordan's tourist and phosphate industry is booming. But it still has financial problems, says Nick Hood.

The Middle East is divided into the have-oils and the have-nots. The other delineator is proximity to Palestine and Iraq.  Jordan lacks oil, and has the misfortune to border both the troubled land so viciously disputed by the Israelis and the Palestinians, and the devastated former home turf of Saddam Hussein.

But arriving in Amman is to experience a country with rising affluence, based on a thriving export trade in organic phosphates and a burgeoning tourist trade. There is abundant land, facilitating the development of prosperous suburbs with magnificent family villas - often housing three generations of the same family.
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Travelling is made by easy by good roads, notably the King’s Highway which follows part of the iconic Silk Route. Side turnings take hordes of visitors to exquisite ancient sites - most prominently to the splendour of Petra, truly one of the great travel experiences. Tourism is up 35% from a year ago, despite the persistent attentions of Bedouin urchins with their fake silver coins and trinkets, and herds of sway-backed, braying camels.

The Jordanian economy has seen some impact from the global recession. Growth has slowed from around 6% previously to just 2.8% in 2009. The construction sector has done best of all, surging by 12.8% on the back of a building boom - especially noticeable in Amman itself.

The situation is the result of a fascinating two-way pull between competing externally-imposed influences. The first is the negative drag of an impoverished 400,000-strong Palestinian refugee community, much of it still trapped economically in camps after over 50 years (although the original tents were replaced many years ago by low-grade housing). Much government effort and resource goes into improving the lot of these poor souls.

But ironically, the Iraq wars have brought unexpected financial benefits to Jordan: wealthy Iraqis have been fleeing to this safe haven, bringing with them hundreds of millions of dollars. The only downside has been rampant property inflation, as these non price-sensitive immigrants invested in land and palatial houses. Building land in one developing suburb of Amman has soared in ten years from $10 a square metre to over $250. Set against an average income per capita of only $5,000, this is fast becoming a major issue.

Another focus for the government is educating the Bedouins and improving their living standards - much as the policy is sternly resisted by many, and flies in the face of romantic notions of their nomadic existence. The establishment of fixed borders in the region has restricted free movement, and their herds of sheep and goats are now wreaking havoc with delicate eco-systems, so something has to be done.

Despite the many financial positives - not least a rising stock market up 2.1% last week - unemployment is still stubbornly high at 15%, and general inflation is running at nearly 16%. Another troublesome issue within the region is the paradox that Jordan is very much a Western-facing regime surrounded by militantly Arabic states. This makes for uncomfortable political positioning.

There are many challenges ahead for Jordan. It will decades before the Bedouin finally abandon their tents, camels and Taliban-like motor scooters for houses and cars, or for the 1m refugees to be fully integrated (or returned to their origins if they wish). But if hard work, enthusiasm and commitment can deliver progress, then eventually it will truly become the Promised Land.

Ireland is knee-deep in bust banks, negative equity and political uncertainty, says Nick Hood.

Dublin’s citizens seemed muffled up against more than just the chill March winds this week. Their empty wallets were also in need of some serious economic lagging.  With residential property prices in the capital down by up to 60%, every conversation was filled with horror stories about negative equity, told by depressed professionals and cabbies alike. Latest estimates suggest that Ireland has 316,000 new houses standing empty, a startling figure for a country with a population of only 4.5m.

The construction sector is in disarray. Tender prices have fallen by 17 per cent in the past twelve months and are now 27 per cent lower than in the middle of 2007. Worst hit is civil engineering, but both house building and commercial property development remain badly depressed. Experts talk of contracts being taken at a loss simply to keep builders’ doors open, suggesting that there will be many failures ahead and a further surge in unemployment.

Fears for tourism also abound, confirmed not just by the taxi drivers gloom at falling demand for their cheery chat, but by a room rate of just €140 a night for a luxury double at a prestigious five star downtown hotel. But with a pint of the black stuff costing around €8 and sterling falling through the floor, it’s not hard to see why there may be fewer Brits around, as golfers and stag parties seek out more affordable locations.

Even the safe haven of farming is struggling, with reductions in product prices hitting profits just as banks and other creditors are accused of hardening their attitude to risk in the sector - closing off overdraft facilities, calling in loans and paring back credit limits. Lending to agricultural businesses fell by 5% in the final quarter of 2009 alone.

Some issues are the same the world over. The Irish business pages are filled with screaming headlines on bank executives’ pay, while the ex-CEO of one bank is suing his former employer for €2.6m over the distress and harassment caused by his dismissal. The same bank had lent a total of €179m to its own directors before the financial music was finally stopped by the credit crunch.

Meanwhile, the jury is out on the newly-created National Asset Management Agency regime for working out the massive bad loans racked up by the banking sector. With a mere €77bn to be dealt with, it is to be hoped that the executive board currently being selected succeeds in its mission. The alternative is far too serious to be contemplated, despite the rampant cynicism of many commentators.

Unfortunately for those hoping for determined political action to pull Ireland out of the PIGS club of endangered Euro economies (that’s Portugal, Italy, Ireland, Greece and Spain), Brian Cowen’s embattled coalition suffered its fifth resignation in a month as Martin Cullen, the so-called Minister of Fun, quit for health reasons. It is now technically a minority government, pending three outstanding by-elections for Dáil seats.

But despite everything, there is a cheerful determination to make the best of a bad job, even if it is matched by a steely recognition that this is going to be a long haul.  The luck of the Irish may have run out for now, but nobody should bet against a resurgence in due course.

Nick Hood says Dubai remains reluctant to face its demons - and the worst may be yet to come.

Sixteen months since first experiencing Dubai’s financial mirage, the initial impression is that not much has changed in the Walter Mitty Gulf state. A romantic dinner for two at Pier Chic, looking out onto the graceful seven (yes, seven) star Burj Al Arab will cost the unwary host around $700 with a relatively average bottle of vino.  

All of the 46 restaurants at the Madinet Jumeirah complex were full, possibly signalling the last hurrah of the European tourists who, according to rumour, are starting to abandon the 'Disneyworld in the Desert' experience offered by this and the country’s other ‘deluxe’ leisure facilities.

Appropriate, then, that this should have been the chosen venue for an international conference of insolvency experts, who found themselves sharing BA business class on a Sunday evening with the serried ranks of the Dubai World restructuring team, returning for another week of hard toil trying to break through the cloak of denial that still obscures the reality of Dubai’s vast financial over-indulgence.

With Western newspapers commenting on the report by Moody’s that local banks faced $15bn exposure to Dubai World, it was curious to hear a senior Dubai official dismiss these stories as part of an American plot. The US, it seems, wants to pressurise governments in the Gulf to engage more proactively in the campaign to bring Iran to heel over its nuclear ambitions. It seems that conspiracy theory is now well practised in the region.

So all is not well, despite continued growth in the GCC area of 2.2% through the recession, a ‘minor’ correction to the average of over 6% between 2003 and 2008. The Dubai stock market fell 3% last week, but more revealing were the nervous expressions of hope that the Dubai International Boat Show might inject life into the moribund Middle East yacht market. When the super rich start going cold turkey on Bling, things must be tough.

Without any meaningful oil revenues of its own, Dubai is not a victim of energy price corrections, at least not directly; rather, it is simply suffering from its own extravagance. Forced now to play a high-stakes game of financial chicken with its sugar daddy up the highway in Abu Dhabi, it can only be hoped that the current tentative sense of reality will take a firmer hold.

In the meantime, relatively little pain is being felt by entrepreneurs meeting in plush hotel lobbies, or ex-pat professionals in their over-priced luxury offices in the Dubai International Financial Centre.  
The real problem for many of them is still to come, in the shape of worldwide Dubai-related carnage in the construction industry. Things are particularly bad in the UK as contractors, big and small alike, wake up to the nightmare of disputed contracts on abandoned projects in Dubai - projects that they rushed headlong into without proper consideration of the risks involved. Many of these deals were done without the protection of an international arbitration clause, leaving builders with the only option of suing for their unpaid millions in Shari’a courts. The sobbing is already audible - and for most, it will end in tears.

Nick Hood says Argentina's president is now so unpopular that the locals are offering to swap her for Gordon Brown.

As the Eurozone grapples with the potential contagion from the troubles of Greece, Portugal, Spain and other enfeebled debt-ridden EU jurisdictions, it can be comforting to spend time in a country that knows a thing or two about financial crises.

Welcome to Buenos Aires, capital of one of the world’s serial sovereign debt defaulters - currently on its seventh different currency of the past century or so. The official inflation figure is 7.7%; private estimates suggest that the real number is double that. The MerVal stock exchange index has shed 5.8% in the past week and the peso is sliding (although not nearly as badly as it might if the US dollar was stronger).

Argentina faces debt obligations of $15bn this year and is hobbled by its exclusion from international debt markets following its last debt default back in 2002. But the government, led by the deeply unpopular President, Mrs Fernández de Kirchner, has found a simple solution. Having previously nationalised private pension schemes, it is now proposing to raid the Central Bank’s $6.6bn foreign currency reserves to plug part of this gap.

When the Central Bank chief objected, he was removed by the President - after a month of stubborn resistance - and replaced, unsurprisingly by a close ally of the ruling party.  The President, universally referred to by her first name, Christina, by Argentines (usually with an ugly sneer in their voices), has approval ratings below 20% and has been offered to your correspondent by a number of locals as a direct swap for Gordon Brown, which speaks volumes.

The IMF would like to help, but complains that Argentina will not co-operate with the formalities; it's the only G20 member country not to have received an IMF visit since 2006, when, incidentally, it unilaterally cancelled all pending debts owed to the IMF. It may be unfortunate that the IMF official responsible for any dialogue is the former finance minister in Chile, with whom Argentina has a notoriously prickly relationship.

The twin pillars of the Argentine economy are tourism and agriculture - specifically beef production. Despite the presence of hordes of noisy Americans in airports and hotels from El Calafate near the glaciers in the South, through the picturesque Lake District, on into the wine region of Mendoza and up to the stunning Iguazu Falls on the Brazilian and Paraguayan borders, holidaymakers are thin on the ground.  A boutique hotel in Bariloche had only two rooms occupied out of twelve, and restaurants generally are half-full at the very best.

As for the beef industry, the core of Argentine culture and provider of wondrous steaks to millions of Asador barbecues each week, it is in disarray. The Buenos Aires City Butchers Association has called this week for Christina to 'normalize' the situation, complaining that prices had become unaffordable for the average consumer. Nationalisation seems to be a step too far, but some cynics pray that she may copy Marie Antoinette’s famous suggestion - 'let them eat cake' - and suffer a similar fate.  

Insolvency specialist Nick Hood reckons recovery will be a rough ride in 2010, wherever you are.

The talk this past year or so has been of the Global Recession. But in reality what we have suffered is a large number of quite different recessions in individual jurisdictions, all happening simultaneously and all prompted by the credit crisis – driven in turn by a decade or more of wildly excessive leverage.

While these recessions started more or less at the same time, they are ending well out of synch; recovery phases are playing out at widely varying speeds. The result is going to be a rather strange 2010, with one huge elephant in a number of different national rooms. Exactly what will happen when these economic patients begin to be weaned off the massive fiscal stimulus or quantitative easing packages currently acting as a life support for many of them?

Couple this uncertainty with the risk of debt default, and it is easy to embrace the latest gag going round the City: that sovereign risk is the new sub-prime. The prospects for a variety of European nations, previously thought safe within the Eurozone, are increasingly grim. Ireland remains shell-shocked, Spain’s property and unemployment crisis threatens its social stability and only a fundamental change in Greek attitudes to paying taxes will head off significant problems there.

Looking eastwards, the situation in the Baltic states and the Balkans, as well as the more developed former-Soviet satellites such as Hungary and Romania, is so dire that a return to anything like the previous prosperity could be many years ahead, if it is achievable at all.  

The United Kingdom probably qualifies as too important to fail, in the long run. But the scale of government debt to be forced down the throats of domestic and international investors, plus the strong possibility of a change of government, makes the short and medium term exceptionally murky.

South America has generally weathered the recession well, particularly Brazil.  The exception is poor Argentina, which lags far behind its regional partners on almost every significant economic indicator. There are genuine concerns about the chance of another instalment in its long and inglorious series of sovereign defaults.

But whatever shape the global turnaround turns out to be, and whatever speed at which it progresses, the sad truth is that corporate defaults will go on rising even after the technical ending of this recession. History shows that the recovery phase is by far the most dangerous part of any major financial correction, for the simple reason that as businesses begin to grow again they struggle to find the extra working capital they need. And banks around the world are still quite rightly repairing their ravaged balance sheets, so liquidity will be scarcer than in any previous recovery.

Governments the world over will also be cost cutting hard to correct unsustainable deficits, further threatening sectors dependent on public spending.

So nobody should be surprised when insolvency statistics soar this year to record highs, both in the UK and in other developed countries. No matter what the GDP figures may say, it could well be that 2009 will eventually be judged to have been the lull before the storm.

Farewell to 2009, the year the global financial system didn’t quite fail.

Travelling the world in 2009 was a curious experience. Initial denial of the depth of the financial crisis was gradually replaced by relentless over-optimism, driven by desperate politicians, guilt-ridden economists and a media bored with bad news. It was a year when the world’s financiers and investors failed to wake up and smell the coffee, never quite grasping the gravity of the situation.

Trips to the USA were instructive. Atlanta in high summer was a place of decimated shopping malls, but curiously the local Nieman Marcus luxury store was thriving. The mood in Chicago in late spring was flat, with even high-end popular restaurants offering discounted meal deals. On a return trip in the autumn, the mood had hardly improved.  

New York started the year in entrepreneurial shock, thanks to the negative implications of the likely slow pace of recovery. But by November this had been subsumed by a sudden and misplaced sense of horror that the taxes of rich professionals might have to rise in order to pay for healthcare for 45m dis-enfranchised Americans, a clear case of self-serving displacement outrage.  

One top lawyer complained about communists running the White House; another memorably commented that when he looked out of his window at Manhattan real estate, all he saw was leverage.  A veteran workout expert gave a memorable verdict on the US real estate market: 'Oh,' he said, 'we’re just sitting here watching the restructuring pig go through the snake, and it’ll be quite a while yet before it’s all digested'.

Europe was equally curious. Austria in April was a rare oasis of economic calm. In the same month, Warsaw seemed buoyant, boosted by the weakness of the zloty and Germans crossing the border to spend their 'cash for clunkers' money on Polish-made cars. But the near-empty tourist bars in the Pilsner Urquell brewery told another tale.  

In May, a chilly Dubrovnik had half-empty hotels and restaurants, its souvenir shops desolate for lack of tourists. France of course met the crisis in its own utterly Gallic way, its job preservation obsession still puzzling outsiders but nevertheless working well to limit the domestic impact of the crisis.

Stockholm in October was chilly, but the economic mood defied the plunging temperature. The prevailing sense then was that the crisis had skirted the Nordic region, although some bankers there were more cautious, sensing that problems lay ahead. Judging by what has happened to Saab, they may have had a point.

In February, Malaysia was positive, confident that its Asian crisis experience and heavily regulated banking system would keep it out of trouble, while Singapore’s harbour teemed with ships riding high at anchor, their lack of cargo or ballast revealing the depths of the shipping industry crisis. Despite a sharp initial correction, with eye-watering drops in GDP, Asia has recovered well - though nobody should be fooled by the doubtful economic statistics being peddled by the Chinese authorities. All is definitely not as it seems.

For all the doom and gloom, the world didn’t end in 2009, and nor did we hurtle lemming-like over the financial cliff. But we remain far too near the edge for comfort: 2010 looks like being a potentially even more painful year, as the lagging indicators of unemployment and business failures knock the fragile confidence generated by our narrow escape from financial meltdown. Travelling on business looks set to go on being a fascinating but sobering experience for the time being. Happy New Year!Publish

Nick Hood was shocked by Dubai's complacency. Now its chickens are coming home to roost, he says.

News of Dubai’s descent from the heights of financial stardom to the ignominy of potential sovereign default provoked a vivid sense of déjà vu, and a losing battle against the urge to shout 'I told you so' from the top of the Burj Dubai Tower.

Almost exactly a year ago, this inveterate traveller had left the UAE’s new miracle financial centre deeply frustrated after a week of meetings with local professionals, whose heads were buried so deep in the sands of denial that any meaningful conversation was impossible.

The sense of unease and unreality started on day one of the trip, with the startling realization that while Dubai might be home to 20% of the world’s construction cranes, very few of them were moving.  Having spent six years working in the construction sector in a previous career incarnation, a mothballed site was an obvious phenomenon and the area immediately surrounding the Dubai International Financial Centre was dotted with dozens of inactive sites.

But ex-pat lawyers were quick to boast they were still buying apartments off-plan, rejecting suggestions that property prices might just be a touch overheated. They should perhaps have shared lunch with a hard-bitten Scottish quantity surveyor I met, who said that his entire workload was suddenly concentrated on helping contractor clients mitigate the damages of withdrawing from unviable projects. Three months later his firm pulled out of Dubai after fifteen years, convinced that financial meltdown was imminent.  They were nine months premature, but not wrong.

Tourism is another antidote to Dubai’s chronic lack of oil revenues.  Questions about the impact of the global recession on visitor numbers - expected to climb to 30m a year - were swept aside. Of course the South Asian market would be exempt from consumer caution, and the unparalleled bling of the Burj al-Arab or the Atlantis with its $20m launch party would still pull the nouveau riche in, ready to play bad golf on brand new courses carved out of the desert.  

And somehow the financial services market would avoid price corrections or corporate governance scandals, unlike the rest of the world. Even if the financial tide did go out, there would be no Arab financiers swimming without their bathing trucks. Within a few months, this surreal complacency was shattered by the high profile defaults of the Saudi’s Saad Group and Investment Dar, a Kuwait fund which owns half of Aston Martin.

So what now for the Gulf’s financial wild child - or more particularly its global investment arm, Dubai World, owner of Turnberry and 20% of Cirque Du Soleil?  No doubt oil-rich neighbour Abu Dhabi will eventually provide some rescue funding, having made a point to its reckless cousins.  But it seems unlikely that things will ever be the same for Dubai, whose sovereign debt is now rated as more risky than Iceland’s.

My last meeting a year ago in Dubai was the only truly worthwhile encounter in a deeply shocking visit. A British lawyer, a grizzled veteran of 25 years in the Gulf, smiled as he shook my hand.  How interesting, he said, to find an insolvency practitioner doing field research in Dubai - and how timely. Busy times lay ahead, was his final prophetic comment.