San Francisco  - California Governor Arnold Schwarzenegger warned Thursday of a "financial Armageddon" in the most populous US state and the world's eighth largest economy.

The warning came as lawmakers continue to stonewall his attempts to make up for plummeting revenues by cutting services and raising taxes. The state's budget director Michael Genest warned that California now faces a deficit of 42 billion dollars over the next two fiscal years. That's up from a prior 28-billion-dollar deficit projection as revenues continue to plummet.

"California faces a growing financial crisis," Schwarzenegger, a Republican, said. "If we don't put aside our ideological differences and negotiate and solve this problem we are heading toward a financial Armageddon."

The financial crisis prompted Standard & Poor's Ratings Services late on Wednesday to lower its rating on California's recently issued 5-billion-dollar revenue anticipation notes and to place 46.6 billion dollars of the state's general bonds on negative credit watch for a possible downgrade. (dpa)