The Ministry of Defence added that snipers in Lynx and Puma helicopters will patrol the skies of London. Typhoon jets will move to RAF Northolt in west London from bases in Scotland and Lincolnshire so they can be scrambled to the Olympic site within minutes. And Royal Navy warships and RAF fighter jets bristling with fearsome weaponry will also be on standby to ensure the sporting showcase does not come under attack. Crack special forces units are also understood to have been practising manoeuvres to prevent fanatics targeting the Olympics. Defence Secretary Philip Hammond said security would remain police-led but the Armed Forces would make a 'significant contribution'.

He said the Games, which will feature 10,500 athletes from 105 countries with an estimated 10.8 million spectators, was 'the biggest security challenge this country has faced for decades'. Military personnel would contribute to 'ensuring a safe, secure and enjoyable Olympics', he said.

Security chiefs are acutely aware that the Olympic and Paralympic Games would be a prized target for terrorists. The Olympic Park in Stratford, east London, will itself contain the 80,000-seat Olympic Stadium, Aquatic Centre for swimming events and the athlete's village.

"Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble," he said. The comments came as Portugal slides deeper into recession, with the economy expected to contract by 3 per cent next year. Protesters marched through Lisbon on Thursday denouncing plans by the new conservative government to raise the working week to 42 hours. Wages are being cut 16 per cent for higher paid, and 8 per cent for lower paid public workers.

The parliament passed a fresh austerity budget earlier this month under the terms of its 78 billion euros loan package from the EU and the International Monetary Fund. Mr Nuno Santos said Europe's southern states should join forces to resist the austerity dictates and contractionary policies being imposed by the core powers. "It is incomprehensible that the peripheral countries don't do what the French president and the German Chancellor do. They should unite," he said.

Left-leaning parties in Europe are becoming increasingly defiant, accusing the Right of exploiting its grip on the European machinery to force through polices that are in effect dismantling parts of the welfare state or undermine trade union power. Germany's Angela Merkel, France's Nicolas Sarkozy, and Holland's Mark Rutte are all conservatives, and will soon be joined by Spain's Mariano Rajoy. Francois Hollande, France's Socialist leader and front-runner in the presidential elections, has vowed to renegotiate last week's EU summit deal if elected next May, saying it violates the fiscal sovereignty of the French parliament, imposes perpetual austerity, and fails to offer struggling states any way out of economic crisis. "There must be growth," he said

Oskar Lafontaine, a leader of Germany's Linke (Left) party, said the euro was hurtling towards destruction on current policies. He blamed Germany's system of screwing down wages to undercut other EMU countries - or "wage dumping" - for causing the imbalances behind the eurozone crisis. "A shared currency cannot work without coordination of wage policy. Once wages have diverged as far as they have in recent years, devaluation and revaluation is the only way out." He accused Merkel and Sarkozy of driving Greece into a downward spiral and now trying to inflict the same "demented" policies on the whole of Europe.

The downgrade could raise the cost of borrowing for these banks. Fitch cut the "issuer default ratings" at the banks to "reflect challenges faced by the sector as a whole". The ratings agency said: "These challenges result from both economic developments as well as a myriad of regulatory changes". Credit ratings of the world's biggest lenders have come under pressure from weak economic growth and concerns about whether European politicians have done enough to end the Eurozone debt crisis.

Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+. Barclays, Deutsche Bank and Credit Suisse were downgraded to A from AA- while BNP Paribas fell to A+ from AA-. Meanwhile, Germany's attempt to save the Eurozone was hanging in the balance as Hungary and the Czech Republic claimed it would be damaging and protesters in Warsaw demanded Poland stands firm against Angela Merkel.

Amid fresh warnings that Europe is triggering a 1930s-style global depression, the German chancellor faced open rebellion against the key plank of her Brussels accord. The leaders of Hungary and the Czech Republic told a joint conference in Budapest they were ready to reject the planned treaty changes and implied a move towards a centralised tax system. Czech prime minister Petr Necas said he was "convinced that tax harmonisation would not mean anything good for us".

Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe. "The only kind of co-operation we can have with the eurozone is one which does not damage Hungary's competitiveness," he said. Poles marched under banners that read: "We want sovereignty, not the euro." They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralised spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it.

The head of the Armed Forces warned that economic issues pose a "strategic risk" to Britain. Senior British commanders and officials are concerned that US plans to cut defence spending will be followed by other allies in Europe and elsewhere. Reductions in allied military capabilities could put a greater burden on Britain's stretched forces in Afghanistan and elsewhere, it is feared.

The military planning work has come to light after The Daily Telegraph disclosed last month that British embassies in the eurozone have been told to PREPARE EMERGENCY PLANS FOR THE DEMISE OF THE EURO AND THE POSSIBLE CIVIL DISORDER THAT COULD FOLLOW.

Senior ministers are increasingly convinced that the break-up of the single currency is a real possibility. "Over time, a thriving economy must be the central ingredient in any UK Grand Strategy. This is why the eurozone crisis is of such huge importance not just to the City of London but rightly to the whole country and to military planners like me."

CGIL leader Susanna Camusso told Reuters that Prime Minister Mario Monti's government was "deeply conditioned" by its need for support from the party of his predecessor, Silvio Berlusconi, and its austerity plan spared the rich and demanded excessive sacrifices from ordinary Italians. "We see every risk of a social explosion," Camusso said in an interview, warning that anger was rising over a pension reform she said was unnecessary, measures that cut already weak purchasing power and a worsening labor market.

The left-wing CGIL and the two smaller and more centrist unions, CISL and UIL, are holding a series of strikes this week to protest against the 33 billion euro plan that aims to shore up public finances and combat Italy's debt crisis. Camusso, the first woman leader in the CGIL's 105-year history, acknowledged that Monti had made some concessions to union demands by reducing cuts to low pensions and slightly easing a housing tax, but this did not go far enough.

"It would be absolutely excessive to say we are satisfied; the solutions are insufficient," she said, announcing that the CGIL and its partner unions would hold a national street demonstration just before Christmas. More than half of the CGIL's 6 million members are pensioners.

"(There is) the risk that the Arab awakening leads to fissures and internal conflict that could be exported, including militant Islamism," Richards told a defense thinktank, the Royal United Services Institute, in London. "They have diasporas reaching back to this country, as does Pakistan and other states struggling with instability."

A year after protests that led to the Arab Spring began, moderate Islamist parties have taken control in Tunisia and Morocco and look set to follow suit in Egypt, though militant Islamists have so far failed to take advantage of the chaos. However, Richards had no doubt where the chief threat lay. "I am clear that the single biggest strategic risk facing the UK today is economic rather than military ... This is why the euro zone crisis is of such huge importance," Richards said.

"No country can defend itself if bankrupt."

Iranian Intelligence Minister Haidar Moslehi met with Saudi Crown Prince Nayef Bin Abdul Aziz, who is also the Saudi interior minister; Saudi intelligence director Prince Muqrin; and other top Saudi royals, Saudi Press Agency said yesterday. Iranian and Saudi officials "reviewed a number of issues of common concern," the Saudi news agency said.

Saudi leaders and their Gulf allies have publicly accused Iran of fomenting unrest in local Shiite communities and remain sharply critical of Tehran's nuclear program. Riyadh has indicated Iran's drive for nuclear weapons may lead them to seek weapons as well, potentially sparking an arms race in the volatile Middle East region.

Iraqi officials have charged both Iran and Saudi Arabia of respectively backing warring Shiite and Sunni insurgencies in their country, which they say is being used as a proxy battle-ground by the two leading contenders for hegemony in the Gulf.

Riyadh and its Gulf allies have also sought to isolate the Alawite dominated government of embattled Syrian president Bashar al-Assad, a key player in Tehran's regional axis of influence. It is widely held Assad's fall would benefit Saudi aspirations, which include expanding the Gulf Cooperation Council and converting the body into a unified pan-Arab diplomatic and military confederation.

Saudi political analyst Abdullah Al Shamri told Gulf News. "I think there were indications from our side the last two months that the patience of Saudi Arabia might run out," Al Shamri said. Analysts, and Saudi Policy makers, contend the Iranian people may be the one's to solve Riyadh's imbroglio with Tehran for them. "I really, sincerely hope Iranians listen to their wise people," Saudi Arabia's intelligence Chief Prince Muqrin told The Wall Street Journal earlier this month. "They are really playing with fire."

And there is widespread anger in Jefferson County that swingeing sewerage rate hikes could have been avoided but for the greed, corruption and incompetence of local politicians, government officials and Wall Street financiers. Sewerage rates and water rates, which are levied on drinkable water, vary widely across the United States. But they are generally rising faster than inflation as cities are forced by federal government to replace worn-out sewerage facilities.

The two rates have been combined into a single bill in Jefferson County, which has increased by 329% over the past 15 years, making it among the highest in America, as the county has struggled to service the mountain of debt it took on to pay for a new sewer system. The facility, which has been under construction since 1996, was meant to cost about $300 million. But the bill soared to $3.1 billion after construction problems and a series of bond and derivatives deals that went sour in the financial meltdown of 2008.

"THESE PEOPLE ARE GOING TO END UP RIOTING ABOUT THIS," she says. "If they let this stuff happen they are going to get the biggest riot the South has ever seen. Over this sewer business. I can see it coming."

When he was Republican mayor of Birmingham's neighbouring city of Hoover, Mr Petelos recalls attending a presentation by a Wall Street bank about the same kind of bonds that would later prove to be the downfall of Jefferson County. He says: "I turned to my finance director and said, 'did you understand that?' He said, 'no I didn't'. So I said, 'we had better not buy it then'."

Perhaps if Jefferson County's previous commissioners had made the same decision, some of their poorest residents would not be facing daily life without basic sanitation and running water.

But on Tuesday The Daily Telegraph managed to gain access through a tight security cordon and witnessed the new reality in this coastal village. Thousands of Wukan's residents, incensed at the death of one of their leaders in police custody, gathered for a second day in front of a triple-roofed pagoda that serves as the village hall.

Wukan's troubles began in September, when the villagers' collective patience snapped at an attempt to take away their land and sell it to property developers. "Almost all of our land has been taken away from us since the 1990s but we were relaxed about it before because we made our money from fishing," said Yang Semao, one of the village elders. "Now, with inflation rising, we realise we should grow more food and that the land has a high value."

Thousands of villagers stormed the local government offices, chasing out the party secretary who had governed Wukan for three decades. In response, riot police flooded the village, beating men, women and children indiscriminately, according to the villagers. Since then, the police have retreated to a roadblock, some three miles away, in order to prevent food and water from entering, and villagers from leaving. Wukan's fishing fleet, its main source of income, has also been stopped from leaving harbour.

The plan appears to be to lay siege to Wukan and choke a rebellion which began three months ago when an angry mob, incensed at having the village's land sold off, rampaged through the streets and overturned cars. Although China suffers an estimated 180,000 "mass incidents" a year, it is unheard of for the Party to sound a retreat.

Sir Jonathan Sacks, chief rabbi of the United Hebrew Congregations of the Commonwealth, traveled to the Vatican December 12 to speak with Pope Benedict XVI about united efforts to bring morality back to the marketplace and to deliver a major speech at the Pontifical Gregorian University.

Speaking to reporters after both events, Rabbi Sacks said he and the pope focused "on principles we share about the need for moral markets and a people-centered approach to economics that His Holiness set out two years ago in his document, 'Caritas in Veritate' ('Charity in Truth')" and that the Jewish community shares."My real concern is that a clear voice be heard" in the midst of the global economic crisis, "a strong religious and moral voice," he said.

The market economy worked when people trusted one another and were prudent, the rabbi said. "In the end, we do not put our faith in systems, but in the people responsible for those systems and, without morality, responsibility, transparency, accountability, honesty and integrity, the system will fail. And, as it happens, it did fail," he said.

Rabbi Sacks said Jews and Christians must strengthen their protection of areas of their lives that are not part of the market economy, but are important for human dignity, creativity and a future of hope. THE FIRST IS THE SABBATH OR THE LORD'S DAY, a "day we focus on the things that have value, but not a price," he said. Next come marriage and family, education and "the concept of property itself," which sees what we have as a gift from God to be held in trust.

Preserving those values, the rabbi said, Jews and Christians remind themselves and proclaim to the world the truth that the worth of things cannot always be determined by the market.

Human rights groups accused the president of deserting his principles and disregarding the long-established principle that the military is not used in domestic policing. The legislation has also been strongly criticised by libertarians on the right angered at the stripping of individual rights for the duration of "a war that appears to have no end".

The law, contained in the defence authorisation bill that funds the US military, effectively extends the battlefield in the "war on terror" to the US and applies the established principle that combatants in any war are subject to military detention. The legislation's supporters in Congress say it simply codifies existing practice, such as the indefinite detention of alleged terrorists at Guantanamo Bay. But the law's critics describe it as a draconian piece of legislation that extends the reach of detention without trial to include US citizens arrested in their own country.

"It's something so radical that it would have been considered crazy had it been pushed by the Bush administration," said Tom Malinowski of Human Rights Watch. "It establishes precisely the kind of system that the United States has consistently urged other countries not to adopt. At a time when the United States is urging Egypt, for example, to scrap its emergency law and military courts, this is not consistent."

But another conservative senator, Rand Paul, a strong libertarian, has said "detaining citizens without a court trial is not American" and that if the law passes "the terrorists have won". "We're talking about American citizens who can be taken from the United States and sent to a camp at Guantanamo Bay and held indefinitely. It puts every single citizen American at risk," he said. "Really, what security does this indefinite detention of Americans give us? The first and flawed premise, both here and in the badly named Patriot Act, is that our pre-9/11 police powers were insufficient to stop terrorism. This is simply not borne out by the facts."

The Prime Minister told a meeting of the 1922 Committee that he was winning support for Britain's position with other European leaders, following phone calls with Swedish premier Fredrik Reinfeldt and Irish prime minister Enda Kenny. Meanwhile, the euro continued to slide as France tried to play down the impact of the likely loss of its AAA credit rating, which it has held since 1975. Ratings agency Standard & Poor's warned that 15 eurozone countries faced a downgrade ahead of last week's crunch talks.

Of the six AAA-rated nations, FRANCE WAS SINGLED OUT FOR A TWO-NOTCH DOWNGRADE. Analysts warned that such a move could shatter confidence, push up interest rates for the government, households and businesses, and tip the economy back into recession. One said it would be 'THE START OF REAL NIGHTMARE' FOR FRANCE. Mr Sarkozy has previously made keeping hold of the top-notch rating a point of pride, amid warnings that its loss could spell disaster for him in next year's elections.

German Chancellor Angela Merkel struck a different tone to Mr Sarkozy yesterday, saying it was 'beyond any doubt that Britain would remain a very secure partner' in the EU. A Downing Street source said Mr Cameron would not be responding to Mr Sarkozy's outburst, and preferred to maintain a 'dignified silence'. The Conservative leader in Brussels, Martin Callanan, dismissed the 'childish insults and sinister threats' against Britain, adding: 'Angela Merkel seemed to extend an olive branch to the UK in her speech and we will happily take it.'

If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control. The growth of the M2 money supply slumped to 12.7% in November, the lowest in 10 years. New lending fell 5% on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains.

The question is whether the People's Bank can do any better than the US Federal Reserve or Bank of Japan at deflating a credit bubble. Chinese stocks are flashing warning signs. The Shanghai index has fallen 30% since May. It is off 60% from its peak in 2008, ALMOST AS MUCH IN REAL TERMS AS WALL STREET FROM 1929 TO 1933. "Investors are massively underestimating the risk of a hard-landing in China, and indeed other BRICS (Brazil, Russia, India, China)... a 'Bloody Ridiculous Investment Concept' in my view," said Albert Edwards at Societe Generale

"The BRICs are falling like bricks and the crises are home-blown, caused by their own boom-bust credit cycles. Industrial production is already falling in India, and Brazil will soon follow. There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surprise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, RISKING A TRADE WAR," he said.

Wolfgang Schauble told the journalists that it had been his idea to stop the flow of aid to Athens. That move had helped convince Athens to drop its controversial plans for a referendum on new austerity steps, calming financial markets. Schauble had personally delivered the news in a phone call to his Greek counterpart Evangelos Venizelos, in hospital at the time with stomach pains. "Yes, indeed it was the finance minister who stopped the payment," a somewhat startled Merkel acknowledged. "He was the one who reacted first."

Reporters glanced at each other in surprise. Here was Europe's most powerful leader being called out in public by one of her ministers. Instead of rebuking Schauble, Merkel had deferred to him, admitting he was right. The unusual exchange in early November gives a glimpse into the complex relationship between Merkel and Schauble. Once his deputy, Merkel is now Schauble's boss. Their bond has survived two decades of slights and reversals - and it is now central to the euro-zone debt crisis.

Schauble, a 69-year old political veteran, has been confined to a wheelchair since being shot by a deranged man a week after German reunification. Long committed to the cause of European unity, he has heavily influenced Berlin's response to the crisis.

"WHEN THINGS GET REALLY DIFFICULT ... SUDDENLY SOLUTIONS WHICH SEEMED IMPOSSIBLE BECOME POSSIBLE," Schauble said. "Because of this, the crisis represents an opportunity. I'm not saying that I enjoy being in a crisis, but I'm not worried. EUROPE ALWAYS MOVED FORWARD IN TIMES OF CRISIS. SOMETIMES YOU NEED A LITTLE PRESSURE FOR CERTAIN DECISIONS TO BE TAKEN."

"The US withdrawal from Iraq will no doubt create a power vacuum," said Abdulaziz Sager, chairman of the Gulf Research Centre, noting that the US presence in the region empowered Gulf Arab countries with "whom they share interests and are bound by security agreements. This (US) presence gave them (Gulf countries) a sense of stability and security due to America's military capabilities," said Sager, adding that the troop withdrawal will "strengthen Iran's military and intelligence influence," in Iraq.

After nine years in Iraq, the US will withdraw its last remaining troops by the end of 2011, a year that so far has seen unprecedented uprisings in the Arab world that have unseated three entrenched dictators in Tunisia, Egypt and Libya, but also fuelled the sectarian and religious divide in the region. Gulf Arab countries are primarily concerned about what Iran might do in what is today a Shiite-led Iraq, as well as their intentions in the broader region, including Saudi Arabia and Bahrain where Sunni regimes have harshly quelled Shiite dissent in recent months.

According to Sager, Iran's increased clout may not pose a "direct threat to Iraq" but will rather be used by the Shiite nation to challenge its rivals in the primarily Sunni Gulf, and to compensate for the potential loss of its ally Syria which is experiencing a mass uprising. Iraq shares a religious link with Iran, and both nations have expressed similar critical views of the mounting regional and international pressure on Syrian President Bashar al-Assad to resign.

Political analyst Sami al-Nisf, meanwhile, said the timing of the American withdrawal from Iraq was unfortunate and will only complicate the region's existing political and sectarian challenges. "The Americans should have stayed (in Iraq) as they did in Germany and Japan so the country does not become totally under Tehran's control," Nisf said, adding that "unfortunately, we are moving in that direction."