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Monday, August 17, 1998 Published at 14:43 GMT 15:43 UK

World: Europe

Panic as rouble slides

The rouble nosedived in early trading on Monday

President Boris Yeltsin has been holding talks in Moscow with his Prime Minister and officials after Russia gave up its fight to defend the value of the rouble.

The surprise move triggered panic currency buying in Moscow. Foreign exchange offices ran out of dollars as Russians formed long queues.

The president's economic adviser also resigned.

The BBC's Moscow correspondent Alan Little: "It's a huge gamble"
The Central Bank lifted controls to maintain the rouble's value, and said its worth would be set daily in market trading. Amid panic on the markets in Moscow, the currency fell by 12%.

The government has also imposed a 90-day moratorium on repayment of foreign debt. Meanwhile, an International Monetary Fund delegation is paying an emergency visit.

[ image: Mr Yeltsin had earlier ruled out a devaluation]
Mr Yeltsin had earlier ruled out a devaluation
President Yeltsin cut short his holiday and returned to Moscow, where he held talks with Prime Minister Sergei Kiriyenko about the crisis.

Mr Yeltsin's economic adviser, Alexander Livshits, said he bore partial responsibility as he submitted his resignation.

The BBC's Moscow correspondent, Rob Parsons, tells BBC World the man in the street will suffer
And the lower house of parliament, the Duma, has announced an emergency session on Friday, to which Mr Yeltsin has been invited.

The Duma has been delaying proposed government austerity measures, with the Communist group - which holds the majority in the chamber - warning that it could cause social unrest.

'Not a devaluation'

[ image: Mr Kiriyenko explains the financial shake-up]
Mr Kiriyenko explains the financial shake-up
Prime Minister Kiriyenko denied the changes amounted to a devaluation - something President Yeltsin had earlier ruled out.

Mr Kiriyenko said both moves were necessary to restore financial stability and protect the Russian people.

Moscow correspondent Robert Parsons says success may hinge on whether Mr Kiriyenko can convince the country that the government is in control.

But the correspondent says first reactions are not encouraging. Dozens of exchange points all over Moscow have run out of dollars as people rush to trade in their roubles.

Market reaction

Independent financial adviser Yaroslav Lisovoliak
News of the changes to the rouble's exchange rate had an immediate impact on Asian financial markets, where regional currencies already hit by the weakness of the yen fell further against the dollar.

In Europe, the German mark similarly fell in value against the dollar, in what economists described as a knee-jerk reaction.

German banks - Russia's largest creditors - have lost between two and three percent of their share values.

Other shares were also down at the Frankfurt stock exchange. But Chancellor Kohl said his government would continue to work to help Russia out of the crisis.

There were smaller losses in Paris, and in London the financial markets were said to be extremely volatile.

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