The global credit crisis took a new turn on Thursday as Hungary and Ukraine approached international institutions for support in an effort to avoid following Iceland into financial turmoil.
The moves came as new figures showed that US industrial production plummeted 2.8 per cent in September, its largest monthly decline since 1974, though the decline was aggravated by hurricane disruption and a strike at Boeing, the aerospace company.
The Philadelphia Fed survey of regional business conditions – which remained positive in September – meanwhile plunged to minus 37.5 in October, its worst reading since 1980, suggesting that the economy deteriorated further this month.
The mood in Europe was unsettled as Budapest received a €5bn credit facility from the European Central Bank for credit and Kiev confirmed it was seeking an IMF loan to “stabilise Ukraine’s financial system”.
It was the first time in the 15-month credit crunch that multilateral agencies such as the International Monetary Fund had taken steps that are likely to lead to a bail-out of continental European countries – a clear sign of the acute difficulties debtor nations face raising finance from credit-starved markets.
“Many countries seem to be experiencing problems because of the repatriation of private capital by foreign investors or the reduction of credit lines from foreign banks,” Dominique Strauss-Kahn, IMF managing director, said in an interview with the Financial Times. “We are ready to support these economies and we are in discussions with a number of them.”
The eastern European moves came amid more turmoil on global markets, with investors focusing on emerging signs of a global recession.
In a day of extreme volatility, the S&P fell sharply in early trading, recovered, fell again and then surged back to close up more than 4 per cent at 946.43.
Japan’s Nikkei 225 index fell 11.4 per cent, its worst one-day decline since the 1987 stock market crash. The FTSE 100 in London closed down 5.3­ per cent at a five-and-a-half year low.
Hungary has run into trouble with borrowers taking out foreign currency loans, which are now drying up, compounded by heavy budget deficits. Ukraine’s banks face difficulties repaying foreign credits just as the current account is widening.
But authorities in both countries insisted they were not in difficulties. Hungary’s forint, which lost 7 per cent the day before, edged up 1.5 per cent.
In Kiev, the hryvnia dropped 3 per cent against the dollar and equities plunged 5 per cent, down nearly 80 per cent on the year.
The International Monetary Fund (IMF) is preparing a series of loans to both Hungary and Ukraine as financial problems are hitting the two countries. Hungary has already received a 5 billion credit line from the  (ECB). Ukraine is seeking a loan of up to 14 billion. 

Dominique Strauss-Kahn says the IMF is prepared to give loans to Hungary and Ukraine if needed.

The credit line to Hungary will be used to cover banks’ shortage of euros. Hungary has a severe debt problem with them posting an account deficit of €5.3 billion or 4.9% of GDP this year. As a result of this, Hungary is unable to find suitable credit to store up its supply of euros. 

"We are in close dialogue with the Hungarian authorities and the EU to discuss further responses to the current challenges, including possible technical and financial support by the IMF", said Dominique Strauss-Kahn, Managing Director of the IMF. "I have informed the authorities that the IMF stands ready to assist their efforts. We will provide technical assistance as needed and, in the context of a supportive policy setting, are ready to undertake decisions on possible financial assistance, responding rapidly."

Ukraine's Finance Minister  met with an IMF team on Thursday. In a statement, Pynzenyk said "the parties discussed a situation of influence the world financial crisis had on the economy of Ukraine." It is not yet known how much the IMF is expected to lend to Ukraine but it is expected to be between $3 billion to $14 billion. It is also not known what type of conditions might be placed on the loan. 

In addition to financial uncertainty, Ukraine is suffering from political turmoil with the current President, Viktor Yushchenko, calling a snap parliamentary election for December. The Prime Minister, ,  has made moves to stop the election. Ukraine's yearly trade deficit has increased by almost $7 billion since last year. 

The credit line by the European Central Bank is the first time publicly that it has extended help to countries other than the 15 that make up the . 

According to , Hungary might be able to start the process of joining the euro quicker then expected. Currently, Hungary is on track to join the euro in 2011 or 2012, but if sped up, it is possible it could join as early as 2010. This might protect Hungary from further financial problems.