California’s economy, which would be the eighth biggest in the world if the state was a separate country, is teetering on the brink of a financial crisis intensified by the credit crunch.

California is weeks away from running out of money. In a letter to Hank Paulson, the US Treasury secretary, Arnold Schwarzenegger, California’s governor, last week admitted an immediate $7bn (€5bn, £4bn) was needed to pay for essential public services, such as police and fire-fighters.