Ever since she became the managing director of the International Monetary Fund (IMF) last July, Christine Lagarde, 55, has been lamenting the state of the world economy. The Frenchwoman recently said that the outlook for the global economy was "quite gloomy" and that if the international community failed to act decisively to halt the downward trend it could lead to a great depression such as the one in the early 1930s. "There is no economy in the world... that will be immune to the crisis," she said.

That is true. Nevertheless, there are countries that are doing better than others despite all the current global difficulties - and this includes Germany, the core of the ailing euro zone, which Lagarde has pointed to as the cause of the current problems. Most leading indicators and economic statistics in Germany point toward an improvement for the coming year. Wages and salaries are expected to rise in 2012, as is the number of jobs. Exports are predicted to continue to grow along with domestic demand.

Over the past year, the German economy has already shown itself to be astonishingly resilient amid the global economic turmoil sparked by the euro crisis, the sluggish recovery in America and a weakening of economic growth in China. Germany's gross domestic product (GDP) rose this year by approximately 3 percent, much more than in neighboring countries and in the US and, more importantly, far more than in the crisis-stricken peripheral countries of the euro zone.

There have always been risks and dangers to the world economy looming everywhere, but the combination of the euro crisis and flagging growth in Asia makes it difficult for economists to predict future developments. In their scenarios they still only concede a slight possibility that the European monetary union could collapse, but if the euro actually does implode in 2012, all their predictions will be obsolete.

The debt is projected to fall within $100 billion of the current cap by December 30, when the United States has $82 billion in interest on its debt and payments such as Social Security coming due. President Barack Obama is expected to ask for authority to increase the borrowing limit by $1.2 trillion, part of the spending authority that was negotiated between Congress and the White House this summer.

Under the agreement struck in August during the showdown over the government's debt limit, the cap is automatically raised unless Congress votes to block the debt-ceiling extension. Lawmakers have 15 days within receiving the request to vote, which is largely symbolic because the president can veto it and Congress would be unlikely to muster the two-thirds majority to override it. Moreover, the US House of Representatives also is in recess until January 17.

The deal called for raising the debt ceiling by $2.1 trillion to serve the nation's borrowing needs into 2013 and also included mandatory cuts to the federal budget deficit. Since then, the extension has been increased twice by a total of $900 billion. The debt limit currently stands at $15.194 trillion and would increase to $16.394 trillion with the request.

It is estimated that the payments for the whole of 2011 could amount to 9.9 million pounds for firms to disconnect their wind farms from the National Grid. The huge sums mean some renewable energy companies were paid more to switch off their turbines than they would have earned with them left on. Payments are made when too much electricity floods the grid, leaving the network unable to absorb any excess power generated. The cost is ultimately paid for by consumers through energy bills.

Sir Bernard Ingham, of Supporters of Nuclear Energy said: "What a total and utter farce. There has not been a single wind turbine built in this country without a subsidy and now we are subsidising them to be shut down." Energy Minister Charles Hendry said the National Grid is reviewing the way it calculates payments.

The record amount was deposited just a week after the ECB lent 523 eurozone banks a total of 489 billion euros in cheap loans in an attempt to keep credit flowing through the economy and prevent a full-scale credit crunch. Banks borrowed the money at the ECB's benchmark rate of 1 per cent, but receive an overnight rate of just 0.25 per cent, well below what they could earn in wholesale markets.

This means lenders are depositing any new cash back with the ECB at a loss in order to guarantee safety. Banks will also be searching for safe havens in an attempt to reduce their risk profile for end-of-year accounts, as was seen during the end of 2008. The ECB data came as a leading think tank warned that the ongoing eurozone crisis could send Britain into a double-dip recession.

The Institute for Public Policy Research (IPPR) said that Britain faced a "bleak" start to 2012, although it added that a fall in inflation, forecast by the Bank of England next year, would boost consumer spending power. "As we enter 2012, it seems the word that best describes the outlook for the UK economy is 'bleak'," the think-tank's chief economist Tony Dolphin said. Mr Dolphin also warned that the "extreme austerity measures" adopted by several eurozone countries meant the eurozone economy as a whole was already back in recession.

The rule adopted in 1967 banned sales to communist countries, and those involved in international conflicts or subject to United Nations sanctions. It later became a blanket ban on exports and on the development and production of weapons with countries other than the United States, making it impossible for manufacturers to participate in multinational projects.

The government's security council agreed to the relaxing of the ban to allow Japan to take part in the joint development and production of arms with other countries and to supply military equipment for humanitarian missions, chief cabinet secretary Osamu Fujimura said.

"The new standards [on weapons exports] are a result of the government considering measures that required attention amid recent changes to the environment surrounding international defence equipment," Fujimura said, referring to rising arms costs that could put strain on the government, with public debt twice the size of its economy.

The relaxing of the rules does not mean Japan will begin openly selling its military products to the world. Exports will be limited to strategic allies like the US. It could still allow companies such as Mitsubishi Heavy to join the development of Lockheed Martin's F-35, which Tokyo picked last week as its next frontline fighter, planning to buy 42 machines at an estimated cost of more than US$7 billion. "The regulations on weapons exports are based on the concept that as a pacifist country Japan should aim to avoid fanning international conflicts, and we will keep a close watch on exports," Fujimura said.

The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies. Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad.

Capital flight from weak euro nations to countries such as the UK would drive up sterling, dealing a devastating blow to the Government's plans to rebalance the economy towards exports. Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe. The plans emerged as Spain's new finance minister Luis de Guindos warned the country's economy was set for negative growth in the last quarter.

Speaking yesterday he warned the next two months "are not going to be easy". Britain's response to the possible break up of the euro would reflect measures taken by Argentina when it dropped the dollar peg in 2002, according to sources. In addition to the risk of an appreciating currency, dealing with potential UK corporate exposures to the euro poses a considerable challenge for the Treasury.

The Ministry of Defence has been consulted about organising a mass evacuation if Britons are trapped in countries which close their borders, prevent bank withdrawals and ground flights. Treasury officials would not comment on the specifics of any plans but said the Government always had contingency plans that cover a full range of eventualities.

The stench of death pervaded the region, a sign that many corpses still remained unrecovered on land, Ana Caneda, the regional civil defence chief said. Tropical storm Washi brought heavy rains, overflowing rivers and flash floods to the southern Philippines from December 16 to 18, sweeping away whole villages built on sandbars and riverbanks.

"There are still a lot of areas we have examined that are stinking of dead bodies. We don't know how many people are buried under that mud," Ms Caneda told AFP, adding the toll could reach 2,000. "There are so many bodies being found, floating in the bays. If not for the small islands in the bays, they would be in the Pacific already," she said.

More than 376,000 people were displaced by the storm and almost 55,000 are still huddled in crowded makeshift evacuation centres, the disaster council said.

The coordinated attacks struck a dozen mostly Shiite neighborhoods on Thursday in the first major bloodshed since US troops completed a full withdrawal this month after nearly nine years of war. They also coincided with a government crisis that has again strained ties between Iraq's Sunnis and Shiites to the breaking point, tearing at the same fault line that nearly pushed Iraq into all-out civil war several years ago.

The claim of responsibility made no mention of the US withdrawal. Instead, it focused its rage on the country's Shiite-dominated leadership, which Sunni insurgents have battled since it came to power as a result of the US led invasion that toppled Saddam Hussein in 2003. "The series of special invasions (was) launched... to support the weak Sunnis in the prisons of the apostates and to retaliate for the captives who were executed," said the statement in the name of the Islamic State of Iraq.

According to the SITE Intelligence Group, a US based organization that monitors jihadist Web traffic, the claim of responsibility was posted late Monday on militant websites. The group said the attacks were proof that they "know where and when to strike and the mujahedeen will never stand with their hands tied while the pernicious Iranian project shows its ugly face." The remark was in reference to accusations by Sunni militants that Iraq's Shiite-dominated government has allied itself too closely with neighboring Shiite power Iran, a bitter enemy of Iraq under the regime of Saddam Hussein.

The Baghdad military spokesman, Major General Qassim al-Moussawi, said Al Qaeda in Iraq - no longer focused on fighting US forces - is hoping to take advantage of the current political tension to re-ignite sectarian warfare. "It has become a clear scheme to draw Iraq into a sectarian war again," al-Moussawi said. "Al Qaeda in Iraq played a major role in 2005 and 2006 in pushing the county into a civil war and they succeeded."

A senior Iranian lawmaker says the ongoing Velayat 90 naval drill aims to send a warning to the West that the Strait of Hormuz will be closed if Iran is threatened. The lawmaker stated that military drills also aim to increase Iran's deterrence power and prove its regional dominance. "The exercises send an important message to the whole world, especially the colonialist powers... and also show the power of [Iran's] armed forces, particularly [the country's] Navy," she noted.

Elahian added foreign media have admitted that Iran and its Navy are so powerful that if threatened, the country can take control of the Strait of Hormuz as the global economic and energy conduit. On Saturday, December 24, Iran's Navy launched a massive 10-day Velayat 90 naval exercise, covering an area stretching from the east of the Strait of Hormuz in the Persian Gulf to the Gulf of Aden.

Different classes of submarines, including Tareq and Qadir, the newest ground-to-sea missile systems and torpedoes have been employed in the maneuvers. Over the past years, Iran has made important breakthroughs in its defense sector and attained self-sufficiency in producing important military equipment and systems. The country has repeatedly clarified that its military might is merely based on the nation's defense doctrine of deterrence and poses no threat to other countries.

Opposition politicians characterized Asif Zardari, the president, on Sunday as bowing to US policy to roll back Pakistan's nuclear weapons program. They dredged up his offer in November 2009 to abandon Pakistan's "first strike" nuclear weapons posture against India in return for a comprehensive peace agreement.

India and Pakistan have waged three wars against each other since gaining independence from British colonial rule in 1947. They conducted tit-for-tat nuclear weapons tests in May 1998. "Our nuclear weapons are in safe hands, but they are under threat from the policymakers," Shah Qureshi, who until February was Pakistan's foreign minister, told an estimated 100,000 people at an opposition rally in Karachi.

Zardari's offer to abandon the first-strike policy was rendered irrelevant within days by the November 2009 terrorist attacks on Mumbai, India's biggest city, carried out by the Pakistan-based terorrist group Lashkar-i-Taiba. Considered India's 9/11, the attacks over three days claimed the lives of 164 people. Subsequent tensions with India prompted Pakistan to rescind the offer. Pakistan adopted a "first-strike" posture in 2000, citing the overwhelming superiority of India's conventional forces.

Pakistan has built a 10,000-man military force to guard its nuclear arsenal, partly in response to US concerns that a nuclear warhead could be seized by al Qaida or associated Pakistani militant groups. The Stockholm International Peace Research Institute, a leading global watchdog on arms proliferation, estimates Pakistan's nuclear arsenal at some 100 warheads - about 20 more than India.

The rising political rhetoric over Pakistan's nuclear weapons program coincided with the start on Monday of two days of confidence-building talks between India and Pakistan - the first in four years - aimed at reducing the risk of accidental war. The talks also coincided with India's preparations for the test in February of Agni-V, a 5,500km-range missile dubbed the "China-killer" by Indian defense analysts.

Pakistan has, to date, not tested any missile capable of travelling more than 2,100kilometers - the maximum distance to any Indian territory when various payloads are factored in, Pakistani strategic experts said. Pakistan was unlikely to respond to India's forthcoming missile test, because its own program is technically more advanced than India's, they said.

The UK government has pledged 20 million pounds to the fund - in addition to 40 million pounds already promised - but an estimated 45 million pounds shortfall is still expected next year. The international community must "wake up" to the challenge, he said. The CERF was set up in the wake of the Indian Ocean tsunami on Boxing Day 2004. It includes a grant element based on voluntary contributions from governments and private sector organisations and individuals.

BBC News correspondent Jonathan Beale says the fund was designed by the United Nations to speed up relief in crisis zones with one central fund, though many countries still choose to give bilaterally. ActionAid spokeswoman Jane Moyo told BBC Breakfast: "The importance of this fund is that it pre-positions money where it is most needed and it is important that people - other governments - pull their weight because then we can help people who are most in need, in their time of most need."

The fund has been hit hard by a series of natural disasters this year - the tsunami in Japan; an earthquake in New Zealand; famine in the Horn of Africa; and floods in Pakistan and the Philippines. Mr Mitchell said the increasing numbers of people living in low-lying or famine-prone areas meant the scale of future tragedies would be greater.

He said many countries wait for events to happen before offering money but he said this could affect critical emergency response work. He said in the first few hours of a disaster, when survivors are trapped in the rubble of an earthquake, delays and lack of resources could mean the difference between life and death. "This year the world has been rocked by devastating disasters and the evidence suggests this trend is likely to continue."

DONORS TO CERF IN 2011

UK - 94 million pounds

Sweden - 74 million pounds

Norway - 67 million pounds

Netherlands - 54 million pounds

Canada - 41 million pounds

Spain - 20 million pounds

Germany - 16 million pounds

Australia - 13 million pounds

US - 6 million pounds

Japan - 3 million pounds

France - 720,000 pounds

China - 500,000 pounds

Source: UN CERF website

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen-yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

China is Japan's biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world's second and third largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.

"Given the huge size of the trade volume between Asia's two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd. China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.

Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the US and Europe.

Japan has repeatedly expressed its willingness to help Europe contain its debt crisis, but has also stressed it wanted to see a convincing action plan before making any firm commitments. "Japan like other non-euro countries is prepared to do something, but unless European countries take decisive action it is hard to make those steps effective," a senior Japanese government official said. Lifting the combined size of the current bailout fund (EFSF) and the new permanent European Stability Mechanism (ESM) beyond the current 500 billion euros (419 billion pounds) would be a major step and an encouraging signal.

"We expect European countries will review the combined ceiling of 500 billion euro of EFSF (European Financial Stability Fund) and ESM in a very positive manner," the official told Reuters. European leaders agreed in Brussels earlier this month to accelerate the launch of the ESM by a year to mid-2012 with an effective lending capacity of 500 billion euros ($650 billion), but questions have arisen about the size and timing of contributions. Japanese officials said that while bringing forward the launch of the fund was positive, a more ambitious ceiling might be needed given that Europe had little success in bringing in outside investors to boost the firepower of the EFSF fund.

Japan, the United States, Canada and others have voiced their frustration with Europe's piecemeal progress and repeatedly called for bold steps that would create effective "firewalls" around the euro zone's weaker, heavily indebted economies.

PLO Executive Committee member Hanan Ashrawi said in an interview on Voice of Palestine radio that taking a Palestinian decision to withdraw recognition of Israel "will be the last option in case all other possible means fail." Ashrawi added that the PLO's decision to withdraw recognition of Israel has not been discussed, however.

"Prosecuting Israel is the first step in response to the Israeli racist projects, including announcing Jerusalem as a capital of the Jewish people and escalating settlement activities," she said, according to the WAFA news agency. She added that first grievances must be filed against Israel with international bodies over "settlement expansion" - Jewish construction in Judea, Samaria and Jerusalem.

He had actually witnessed a prisoner receive drugs from his visiting girlfriend as they kissed, while officers simply looked on. Mr Hardwick said: "I looked at the guys on the desk and they had it all on CCTV. I said, 'Did you see that? What are you going to do?' They said, 'Oh no, we can't stop them doing that, they're allowed'."

This incident indicated how prison officers had developed a "fatalistic" attitude about not being able to control drugs in jail, he said, adding: "Your starting point has to be that it is absolutely not acceptable. Your aim should be about getting people off drugs, not maintaining them."

The latest figures show a record 87,393 people spent Christmas behind bars this year. About half of all prisoners are thought to reoffend within a year of their release. Last year research found three in four criminals did not give up their life of crime. Mr Hardwick said: "There is obviously a revolving door for too many people."