Chanel is to cut 200 jobs as fears grow that the supposedly recession proof luxury market is falling victim to the global credit crisis.

The staff cuts are a direct result of declining sales, part of the overall slide in luxury spending that was not alleviated by the recent holiday shopping season. Among the jobs are 16 posts at the brand’s boutique on rue Cambon in Paris in the heart of Paris’s fashion district.

The job losses, described by some commentators as the label’s worst crisis since founder Coco Chanel fired all her staff at the outbreak of war in 1939, represent almost 10% of the company’s production workforce.