The whole world has been so pessimistic concerning the market during the previous trading days after Dubai World, the largest corporate entity in the Gulf region city-state, announced that it has problems paying back its massive $60 billion debt and wants to delay the payment for 6 month.

Negative responses have been the only reaction form investors around the world and these responses have been so quick and stroke all the market instruments. Predictably, banks are taking a drubbing, and pulling down regional indexes along with them.

Dubai World didn’t help the situation by trying to bury its news on the eve of important holidays in the Middle East and the United States, or by cancelling a phone conference with debt holders.

Such moves raised investor doubts and fears. As a result, Friday, the first chance for U.S. trading since the news broke, was a lousy day. Sooner or later, something had to come to test the financial reforms that have been made as a result of the credit crisis. In that sense, the Dubai crisis will offer an important real-word stress test of the global financial system.

But if the global economy can get through this without too much more damage, it will be an important milestone on the road to recovery. Director general of Dubai’s department of finance said in a TV interview Monday that “The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government.”

But whether or not Dubai’s government, essentially Sheikh Mohammad bin Rashed al-Maktoum, likes it, his country has to work out its finances quickly.

Economists believe that this crisis would be in the favor of the European countries as the Middle East have been attracting investors from all over the world and making them stray from investing in the western countries, specially that Dubai has been hiding any thing about its financial state during the previous years, which encouraged investors to trade in this risky environment.