With insufficient revenues to prop up the rouble - and a powerful speculator on its back - Russia was faced with a choice of printing more money and risking hyperinflation or defaulting on its debt On 17 August, it pressed the default button. The first step, perhaps, is to look at where the last shock emanated from - Russia.It is worth recalling what happened a year ago. On 13 August, Mr Soros called on Russia to devalue the rouble by up to 25 per cent and peg it to the euro or the dollar. More recently, the woes of the ailing Korean car maker Daewoo led to fears of another Asian crisis, wiping almost 4 per cent off Seoul's stock market. But more of this later.The three-trillion dollar question is where the next shock will come from. Even within the past few weeks, two relatively minor events have sent a tremor through the financial markets.The first was a crowd-pleasing comment by a Brazilian presidential candidate hinting at a default on debts to the International Monetary Fund (IMF), which caused panic in the Latin American stock markets.

And 12 months before that, the Asian crisis, sparked by the devaluation of the Thai baht, was well under way. There is certainly a febrile atmosphere. The coincidence of these anniversaries, combined with the giddy heights achieved by stocks on Wall Street, has led to forecasts of another financial crisis. It was a year ago next week that a few words from thefinancier George Soros triggered a crisis in Russia that started a chain of events that almost led to a global recession. IF AUGUST tends to be the season for financial markets to get jittery about a crash, then this month should see dealers really sweating. These companies suffered big losses in the upheavals of 1997 and 1998.The surprise, perhaps, in the Unctad figures is that Korean companies bucked the trend last year.Korea's outward FDI increased by 7 per cent to a record $4.8bn in 1998. However, this was due mainly to a sharp rise in financing existing overseas operations, including servicing their debts.Unctad predicts, in its World Investment Report due out in September, that FDI flows from developing Asia will fall further in 1999.. More than half this stock is located in other economies in the region.

And more than half of that has gone into China, mainly from Hong Kong and Taiwan.Throughout the Nineties, multinationals owned by overseas Chinese and Korea's chaebols have been the two major forces for outward FDI from developing Asia. Although the level of foreign direct investment (FDI) by Asian countries remained close to its annual average for the decade in 1998, at $36bn, it still represented the lowest figure this decade and accounted for a smaller share of world FDI. The annual tables show that amongst the top 10 outward investors in Asia, six countries experienced a sharp decline in their outflows last year.These were Hong Kong, Taiwan, Singapore, Malaysia, China, and Thailand.The stock of overseas investments from developing Asia had reached $317bn by the end of 1998, accounting for more than four-fifths of the value of overseas investment by the entire developing world. THE FINANCIAL crisis in emerging markets in Asia has slashed Asian companies' direct investment overseas by a quarter, according to new figures from the United Nations Conference on Trade and Development (Unctad). Tony Blair and Gordon Brown should not forget that, in business, time means money.Christopher Huhne, a Liberal Democrat MEP, is on the European Parliament's Economic and Monetary Affairs Committee. And if they are multinational, their decisions on consolidation may lead them to place a higher share of their restructured production capability in the currency-risk free environment of the euro- zone Meanwhile, British consumers will continue to lose out.

According to Morgan Stanley, the average European company has a market capitalisation of $7.4bn, just half that of the average US company. Indeed, the US scale economies are probably the most important remaining explanation for lagging European productivity levels. Moreover, the US is not resting on its laurels.British businesses are certainly not standing aside from this consolidation, but unless they are already multinational in their scope, they will be partially protected from these new pressures to perform by our decision not to participate in EMU. There are nine machine tool makers making up half the European market, against just four making up half the US market; seven insurance companies against four; 12 banks against six; two car companies against one and so forth.Excluding the utilities sector (where Europe is highly concentrated due to the legacy of public ownership), there are 110 European companies making up 50 per cent of sales in their respective sectors in Europe against just 77 companies in the United States.

In sector after sector, there are far more European companies producing goods and services than US companies, despite the similar size of the markets. The financial-services industries are arguably the best example of this feature of EMU."We have already had BNP's bid for Societe Generale and Paribas, Banco Santander-BCH, Fortis-Generale de Banque, San Paolo-IMI, and Credito Italiano- Unicredito But this wave of consolidation is probably just beginning. And there is, indeed, an unparalleled merger boom going on in Europe, with mergers and acquisitions activity in the first six months of this year reaching nearly $500bn, five times the peak of the last European merger boom in 1990. As Ben Funnell of Morgan Stanley pointed out in his recent study: "There are several factors driving mergers and acquisitions in Europe, the most important of which is EMU.