Key risks in emerging Europe, M.East, Africa

Debt in Dubai and the interplay of politics and IMF deals in Ukraine, Romania and Latvia provide the main political risks to regional emerging markets in December, while in Nigeria presidential health will be in focus.

Below find the key risks in Europe, the Middle East and Africa for the coming weeks.

DUBAI DEBT CRISIS

Dubai's proposal last week to delay repayment on billions of dollars of debt from state owned conglomerate Dubai World has sent global markets reeling in the largest sovereign-linked credit event of the financial crisis so far.

Most investors still hope oil-rich fellow emirate Abu Dhabi will provide financial support but most expect it will exact a price.

The failure of Dubai to honour implied sovereign guarantees to support Dubai World might also deter investors across emerging markets from investing in quasi-sovereign state owned companies

Things to watch for:

-- Details of restructuring, details of support from Abu Dhabi for Dubai and Dubai for its firms.

-- Market reaction, does disquiet over Dubai spark wider global or regional selloffs.

UKRAINE INSTABILITY

Rulers of Ukrainian default worried markets last month, a reminder that mainland Europe's most troubled economy has the potential to unsettle emerging and developed Europe both through default risk and a potential gas dispute with Russia..

Credit default swaps markets have priced Ukraine's debt as the world's riskiest, with an upcoming Jan. 17 presidential election heightening tensions. That helps delay a $16.4 billion International Monetary Fund bailout programme.

Opinion polls show President Viktor Yushchenko losing the election to Prime Minister Yulia Tymoshenko or Viktor Yanukovich but most expect the election to go to a second round three weeks later.

Ukraine's acting finance minister last month sought to calm foreign investor fears of outright sovereign default following the forced restructuring of loans to the state gas firm Naftogaz and state railway company .

Things to watch for:

-- Ukraine's repayment of Eurobond coupons. It says it will but any failure would prompt global alarm.

-- Rhetoric with Moscow. This has calmed in recent weeks after Prime Minister Vladimir Putin said existing gas deals with Ukraine were a guaranteed of stable energy supplies to Europe and he hoped for a New Year without any shocks .

ROMANIA ELECTION

Like Ukraine, Romania has seen its IMF-led bailout package put on hold as a consequence of politicking before a presidential election that will see a second round vote on Dec. 6 after the first round proved inconclusive.

Although President Traian Basescu led by a slim margin in the first round, he is now seen at a disadvantage after leftist leader Mircea Geoana won backing from the centrist Liberals, the third largest party in parliament, and struck a deal to form a new government after the presidential vote.

It now looks impossible for Bucharest to meet the IMF's demand for it to approve a budget by Dec. 10, together with a law overhauling budget-making rules by the end of the year. Because of jockeying before the election, there is little consensus on how to tackle the issues and genuine reform remains difficult.

For the economic plans of Romania's presidential candidates.

Things to watch:

- Who wins. If Geoana does, he is expected to quickly form a new cabinet, while Basescu is expected to struggle because Geoana's Socialists and the Liberals have rejected cooperating with his Democrat Liberal allies.

- Drawing up a 2010 budget -- key to unlocking a 1.5 billion euro IMF aid tranche needed to fianance the budget and avoid further economic turmoil.

- How the next government tackles IMF-prescribed reforms.

LATVIA RISK

Worries over economic crisis in Latvia prompting a failure of its currency peg and wider emerging European crisis look to have eased in recent weeks, but the Baltic state remains the EU's riskiest economy.

Investors had worried political crisis might block a 7.5 billion euro bailout from the EU and IMF, but both praised Latvia last week for efforts to slash its 2010 budget deficit with a mission from both institutions arriving this week .

Parliament is due to give the budget a second and final reading on Tuesday. Despite early squabbles, the five parties of the ruling coalition say they will back the bill and Latvia's president said it would be madness to reject it.

Latvia is slashing spending including pensions and public sector salaries and raising taxes to make savings of 500 million lats each in 2009 and 2010, hoping to reach Euro adoption by 2014 while retaining its currency peg all the way. Unions are protesting.

Things to watch:

-- The budget vote. In the unlikely event this fails on Tuesday, the IMF and EU plan will again be endangered building pressure on the currency and raising fears of a new crisis.

-- Social instability. Recent protests have been peaceful but a demonstration in January ended in a riot and the government collapsed shortly after.

NIGERIA PRESIDENTIAL HEALTH

Nigerian President Umaru Yar'Adua traveled to Saudi Arabia for medical treatment last week, potentially raising investment risks in Africa's most populous country and major oil producer.

His spokesman said he was being treated for pericarditis having complained of chest pains. It was unclear when he would return home although Vice President Goodluck Johnson said on Friday he had spoken to the president.

The ruling party said his condition was improving and he would returnsoon.

Yar'Adua has travelled to Saudi Arabia in the past for treatment for a kidney problem, raising questions about whether he will be fit enough to stand for a second term in 2011.

For details on what the Nigerian constitution says about a presidential absence, click here .

things to watch:

-- Further bulletins or updates on the president's health.

-- Does the President send a declaration to the Senate and House of Representatives that he is temporarily on leave or otherwise unable to carry out his official functions, transferring those duties to the vice president?