Russia's financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default, according to The Telegraph .
The cost of insuring Russian bonds against bankruptcy rocketed to extreme levels yesterday. Spreads on credit default swaps (CDS) reached 1,123, higher than Iceland's debt before it sought a rescue from the International Monetary Fund.
Moves by Hungary, Ukraine and Belarus to seek emergency loans from the IMF have now set off a dangerous chain reaction across Eastern Europe.
Romania had to raise overnight interest rates to 900pc on Wednesday to stem capital flight, recalling the wild episodes of Europe's ERM crisis in 1992. The CDS spreads on Ukraine's debt have topped 2,800, signalling total revulsion by investors.
The threat of further redundancies hung over the City last night as it emerged that the investment bank Goldman Sachs is expected to cut at least 600 jobs in London, reports The Guardian.
A wide-ranging cull of hedge funds in the capital was also predicted as the fallout from the banking crisis spread to vulnerable sections of the finance industry.
Goldman plans to cut 10% of its worldwide workforce to reflect the worsening economic conditions. It has about 6,000 staff in London. Sources close to the company said no decision had been taken on which countries or business lines would take the brunt of the cuts, but there was an expectation all operations would be hit.
Recently bailed out by the US government and a $5bn (£3bn) injection from the investor Warren Buffett, Goldman has seen many of its most lucrative business areas, including debt financing for mergers and takeovers, in effect closed down.
A senior executive at the European Central Bank has signalled that it is minded to cut interest rates across the Continent again in the short term to throw a lifeline to struggling businesses, says The Times.
Jose Manuel Gonzalez-Paramo, a board member at the European Central Bank, said that the central bank believed it could "diminish rates without adding to inflationary risks in the medium term".
His comments mark a significant departure for the central bank which has been loathe to cut interest rates for fear of stoking inflation.
Only two weeks ago, the ECB slashed the cost of borrowing by half a percentage point to 3.75 per cent.
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