Once yields on 10-year Spanish and Italian bonds had blown through 6 per cent, global leaders knew we risked a second and more dangerous Lehman-AIG debacle within days. You cannot let two world class sovereign states blow up together. "The situation was really grave," said Herman Van Rompuy, Europe's president. It is why President Barack Obama telephoned German Chancellor Angela Merkel to plead urgency.

It is why Britain's well-briefed Chancellor George Osborne abjured the central credo of Tory policy on Europe for twenty years and more or less urged EMU leaders to embrace fiscal union, warning of "the potential for a set of economic events that could be as damaging as 2008." Angela Merkel was steamrolled by events. Yielding with a gun held to your head is hardly a fair test of civic enthusiasm for EU integration. Eurosceptics can claim a less tainted vindication. They warned from the outset that EMU was unworkable as constructed and would lead ineluctably to the traumatic choice of break-up or fiscal union, with all the implications for democracy that such union implies. They have been absolutely right.

Whether Europe can muddle for more than just the summer depends on two conditions:

1) a return to brisk global growth, not obviously on offer as the fiscal squeeze intensifies across the West, and Europe's PMI surveys drop to a 23-month low. HSBC's manufacturing index for China falls below the contraction line of 50.

2) A willingness by the ECB to pursue ultra-stimulus, steering the euro towards 7 yuan or $1.15 to the dollar, and pulling the 1-year Euribor rate used to price mortgages in Spain from 2.2 per cent to 1.5 per cent. Such a policy would cause apoplexy in Germany, of course. There lies the rub.

Angela Merkel said Europe's leaders had finally tackled the "root problem". They did no such thing. The root problem is that vastly disparate nations with different growth rates, productivity patterns, debt structures, sensitivity to interest rates, legal systems, wage bargaining practices, and inflation proclivities, were meshed together by Hegelian politicians acting against the warnings of the Bundesbank and the European Commission's economists.

One "solution" to this root problem is for the Geman bloc to pay subsidies to the South equal in scale to Versailles reparations, for decades.

This is where fiscal union ultimately leads. Or GERMANIA CAN OPT FOR AN ORDERLY DEPARTURE FROM MONETARY UNION before sinking deeper into this morass. Take your pick.

The downgrade means Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it would offer a new rating after the debt swap was completed. "Once the distressed exchange has been completed, Moody's will reassess Greece's rating to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings," it said. Last Friday, Fitch Ratings said Greece would be declared in restricted default due to the steps taken in the new euro zone rescue package but that new ratings of a low speculative grade would likely be assigned once the bond exchange is completed.

Moody's said the combination of the announced EU support programme and debt exchange proposals by major financial institutions implied that private creditors would incur hefty losses on their Greek government debt holdings. It said that while the overall package carried a number of benefits for Greece, including lower debt-servicing costs and reduced reliance on financial markets for years to come, the impact on its debt burden would be limited.

The rating agency also warned that despite some debt reduction thanks to the new rescue package, the country still faced medium-term solvency challenges and significant implementation risks. "The announced EU programme along with the Institute of International Finance's statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," Moody's said. The IIF said that the bond-exchange deal would help reduce Greece's debt pile by 13.5 billion euros (11.8 billion pounds), and by offering a menu of new instruments it aims to attract 90 percent investor participation in the plan. But Moody's noted that Greece would still have a mountain of debt to service after that.

The waxing obsession with the planet Nibiru, which conspiracy theorists say is a planet swinging in from the outskirts of our solar system that is going to crash into Earth and wipe out humanity in 2012 - or, in some opinions, 2011 - shows that an astonishing number of people "are watching YouTube videos and visiting slick websites with nothing in their skeptical toolkit," in the words of David Morrison, a planetary astronomer at NASA Ames Research Center and senior scientist at the NASA Astrobiology Institute.

Morrison estimates that there are 2 million websites discussing the impending Nibiru-Earth collision. He receives, on average, five email inquiries about Nibiru every day. "At least once a week I get a message from a young person - as young as 11 - who says they are ill and/or contemplating suicide because of the coming doomsday," Morrison told Life's Little Mysteries, a sister site to SPACE.com.

What's the origin of this mass panic about Nibiru, which astronomers say doesn't exist? The idea that doomsday will result from a planetary collision was first proposed in 1995 by Nancy Lieder, a self-described "contactee." Lieder claims she has the ability to receive messages through an implant in her brain from aliens in the Zeta Reticuli star system.

The Nibiru conspiracies are so nonsensical that Morrison wonders whether even their purveyors believe them. Because many websites sell Nibiru books, tapes and even "survival kits," Morrison thinks they are purposely taking advantage of people who aren't able to distinguish credible sources from crackpot ones. "This is especially a problem for young people, which is why I am so angry at those who target children," he said.

President Barack Obama and congressional leaders struggled late on Sunday to break a partisan deadlock on a budget deal and bullion dealers said investors were ditching stocks in favor of safe haven assets, such as gold, until the outcome of talks become clearer. A slightly weaker US dollar at the start of early trading in Asia gave gold its initial lift, though bullion continued to firm even as the greenback later stabilized, according to bullion dealers. "Gold is moving on its own," a dealer said. US gold also hit a fresh record high at $1,624.30 an ounce.

Investors were putting money in what they consider more stable investments, such as exchange-traded gold funds rather than equities with their perceived risks from market fluctuations and the individual company, according to London-based stockbroker Ambrian Partners. "In the absence of deficit deal then the pressure is all on the greenback in the short term at least," said BNZ currency strategist Mike Burrowes. "But if they come up with a decent, credible plan for deficit reduction in the long term then that could pave the way for some US dollar strength."

Analysts and activists say the clashes, which lasted for several hours on Saturday night and injured scores of people, mark a deterioration in a relationship that has come under mounting strain in recent weeks. Several thousand activists from a spectrum of political groups had organised the march to press the military council to speed up trials of officials accused of killing 850 demonstrators during the revolt that toppled Hosni Mubarak, former president, this year.

But a day before the march, the military accused April 6, one of the youth groups that launched the uprising against Mr Mubarak, of seeking to turn people against the army. In language reminiscent of the Mubarak regime, a senior army general was quoted as saying the group had received training abroad to subvert the state. The council has also urged "honourable Egyptians" to confront actions that disrupt the return to normal life.

"I think we have reached a turning point," said Emad Gad, a political analyst and official of the Social Democratic party. "I am afraid we would go back to the situation before the revolution. We are living a similar moment. There is general tension and large sections of the population are ready to confront anyone who calls for a protest or a sit-in." Salma Said, a pro-democracy activist, said that after the "treason" allegations against April 6, "anything could happen, from a wave of arrests of activists which they can now justify, to attempts to fragment the revolutionary movement".

It is not clear who attacked the protesters, but Ms Said and others say troops blocked a road and stood by while assailants armed with knives, stones and fire bombs fought running battles with protesters. Under pressure from demonstrators camped in Tahrir Square, the prime minister has reshuffled his cabinet to bring in ministers with no ties to the Mubarak regime and promised faster trials for officials charged with corruption and killings.

The trial of Mr Mubarak on murder and corruption charges starts on August 3. Many Egyptians have been critical of the army's decision to keep the former president in hospital rather than in prison. "The closer we get to the trial, the more tensions there are," said Mr Gad. "The pressure is mounting and it can explode in many different ways."

But protesters say they fear the military may be trying to protect Mr Mubarak and that they may also want to preserve authoritarian rule under a veneer of democracy. The army is also seen as the last barrier standing between the country and chaos, and continues to enjoy enormous public support after their refusal to shoot at demonstrators during the uprising.

Congress and the White House remained at odds over an agreement and US House Speaker John Boehner pulled out of talks with President Barack Obama, killing hopes for a weekend deal, as had been widely expected. Concerns that a deal would not be forthcoming have been an equity headwind in recent sessions, though some positive earnings news helped offset the issue. Major indexes notched solid gains last week, with the S&P and Nasdaq rising more than 2 percent.

White House Chief of Staff Bill Daley over the weekend warned there would be a "few stressful days" ahead for financial markets, with the deadline to lift the $14.3 trillion US borrowing limit only nine days away. "The longer we go without a deal, the more you're going to see concerns on the negative side," said Alan Lancz, president of Alan B Lancz & Associates Inc, an investment advisory firm based in Toledo, Ohio. Though time remains for a deal to be struck, the lack of an agreement was expected to be the primary driver for stocks this week.

"This will offset any positive earnings or corporate news," said Lancz, adding that his firm had raised cash positions lately as a result of the uncertainty. "If we don't see progress by Wednesday, there could be a situation where no one is stepping up to buy."

Mr Breivik was a member of a Swedish neo-Nazi internet forum called Nordisk, according to Expo, a Swedish group monitoring far-right activity. Online writings attributed to Mr Breivik suggest he believes Muslims are trying to "colonise" Western Europe and that he blames multiculturalism and "cultural Marxism" for permitting this. In a post in Norwegian in an online forum on December 2009, a user named Anders Behring Breivik claims there is not one country where Muslims have peacefully lived with non-Muslims, stating that instead it has had "catastrophic consequences" for non-Muslims.

A 12-minute anti-Muslim video called Knights Templar 2083 in which images of Mr Breivik appear was also discovered online.

Knights Templar:

-Western military monastic orders that existed from 12th-14th Centuries

-Reputed to possess great wealth and power

-Fighting members took part in Crusades

- Many organisations today bear the Templar name - charitable ventures, bodies within lay Catholicism and within Freemasonry

-White supremacists, apparently including Anders Behring Breivik, also inspired by Knights Templar

The lawyer said Breivik had admitted to Friday's shootings at a Labour party youth camp and the bombing that killed seven people in Oslo's government district a few hours earlier. However, "he feels that what he has done does not deserve punishment," Lippestad told NRK public television. "What he has said is that he wants a change in society and in his understanding, in his head, there must be a revolution."

Oslo's acting police chief Sveinung Sponheim confirmed to reporters that Breivik would be able to speak to the court. It was not clear whether the hearing would be closed or in public. "He has admitted to the facts of both the bombing and the shooting, although he's not admitting criminal guilt," Sponheim said, adding that Breivik had said he acted alone. Police were checking this because some witness statements from the island spoke of more than one gunman, Sponheim said.

The killings would draw attention to the manifesto entitled "2083 - A European Declaration of Independence," Breivik wrote. "Once you decide to strike, it is better to kill too many than not enough, or you risk reducing the desired ideological impact of the strike," he added. The manifesto posted by Breivik, a self-styled founder member of a modern Knights Templar organisation, hints at a wider conspiracy of self-appointed crusaders and shows a mind influenced by the fantasy imagery of online gaming.

"The order is to serve as an armed Indigenous Rights Organisation and as a Crusader Movement (anti-Jihad movement)," he writes in the document, chunks of which are cut and pasted from other far-right, anti-Islam documents on the Internet. Breivik says he is not against immigrants who integrate and reserves a lot of his fury for a liberal European political establishment he views as promoting Europe's destruction.

He hints at a wider conspiracy in the document, saying that the Knights Templar, a medieval order of crusading warrior monks, had been reconstituted in London in 2002. Breivik attacks the "Islamic colonisation and Islamisation of Western Europe" and the "rise of cultural Marxism/multiculturalism." A video posted on YouTube called "Knights Templar 2083" showed pictures of Breivik, including one of him in a scuba diving outfit pointing an automatic weapon.

But it's largely because no one has believed default will happen. America's own debt drama has been one in which investors have been willing, if not happy, to leave the stage to the politicians. It was little surprise when talks between Obama and John Boehner, the top Republican in Congress, collapsed under the weight of these questions late on Friday. So that leaves a matter of days to achieve the far more modest objective of raising the debt ceiling and avoiding default. As negotiations enter a final, fraught week expect to see:

1, Markets take a greater role in this drama. Investors know a bounce in bond or stock markets isn't going to give the talks the sense of urgency they clearly need.

2, Plenty of worried head-scratching among investors because no one really knows to how to protect themselves if there is a default. US government bonds are the oxygen of the world's financial system. Pollute them and well...

3, Talk of America losing its AAA credit rating to increase. Ratings agency Standard & Poor's warned earlier this month that preserving it, and the lower borrowing costs that go with it, would depend on striking a serious long-term deal on the deficit. Raising the debt ceiling without it would, according to S&P, spell trouble.

4, Increasing signs of concern and anger from US businesses if a more ambitious deal isn't agreed. No one believes another 12 months of uncertainty and argument over the deficit will help an economy that slowed in the first half of the year.

Boehner's decision to abandon negotiations with President Obama puts an end to a deal that would have cut spending by up to $3.5 trillion over the next 10 years and increased tax revenues by close to a trillion dollars. But the $14.3 trillion debt ceiling must be raised by August 2nd to avoid a government default. "We have now run out of time," a visibly angry Obama declared at a hastily arranged press conference in the White House briefing room.

He said he has summoned Boehner, House Minority Leader Nancy Pelosi, Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid to the White House for an emergency meeting at 11am on Saturday. "I expect them to have an answer as to how they will get this thing done over the next week," Obama said. Both sides agree that a proposal should be hammered out over the weekend.

Talks now begin between Boehner and senate leaders on a far less ambitious a Plan B. Boehner held his own press conference after 7 pm Friday night and said the talks broke down because "The White House moved the goal posts." Boehner sent a letter to his Republican colleagues explaining his decision to pull out of talks for a "grand bargain." Here are some highlights:

"It has become evident that the White House is not serious about ending the spending binge that is destroying jobs and endangering our children's future," he wrote, adding, "A deal was never reached, and was never really close. The president is emphatic that taxes have to be raised... The president is emphatic that we cannot make fundamental changes to our entitlement programs," Boehner wrote. "For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders in the Senate in an effort to find a path forward."

Last night a campaigner against the excesses of medical research said he was disgusted that scientists were 'dabbling in the grotesque'. Figures seen by the Daily Mail show that 155 'admixed' embryos, containing both human and animal genetic material, have been created since the introduction of the 2008 Human Fertilisation Embryology Act. This legalised the creation of a variety of hybrids, including an animal egg fertilised by a human sperm; 'cybrids', in which a human nucleus is implanted into an animal cell; and 'chimeras', in which human cells are mixed with animal embryos.

Scientists say the techniques can be used to develop embryonic stem cells which can be used to treat a range of incurable illnesses. Three labs in the UK - at King's College London, Newcastle University and Warwick University - were granted licences to carry out the research after the Act came into force. All have now stopped creating hybrid embryos due to a lack of funding, but scientists believe that there will be more such work in the future.

Last night he said: 'I argued in Parliament against the creation of human-animal hybrids as a matter of principle. None of the scientists who appeared before us could give us any justification in terms of treatment. Ethically it can never be justifiable - it discredits us as a country. It is dabbling in the grotesque. At every stage the justification from scientists has been: if only you allow us to do this, we will find cures for every illness known to mankind. This is emotional blackmail.'

'Of the 80 treatments and cures which have come about from stem cells, all have come from adult stem cells - not embryonic ones. On moral and ethical grounds this fails; and on scientific and medical ones too.'

Josephine Quintavalle, of pro-life group Comment on Reproductive Ethics, said: 'I am aghast that this is going on and we didn't know anything about it. Why have they kept this a secret? If they are proud of what they are doing, why do we need to ask Parliamentary questions for this to come to light? The problem with many scientists is that they want to do things because they want to experiment. That is not a good enough rationale.'

Human-animal hybrids are also created in other countries, many of which have little or no regulation.

But in other markets closely watched for signs of contagion, rallies petered out. Italian and Spanish bond yields rose and the euro dropped against the dollar. "The trouble with all this is that the crisis will only be on its way to full resolution when it becomes clear the eurozone, and in particular the periphery have achieved satisfactory growth rates," said Andreas Utermann, chief investment officer at RCM, the equity fund manager owned by Allianz.

Other investors criticised the failure to put in place a proper firewall between Greece, Ireland and Portugal, which have all received bail-out deals, and Italy and Spain, which have been the focus of nervousness in recent weeks. The 109 billion euros bail-out unveiled late on Thursday involved an estimated 26.5 billion euros reduction in Greece's 350 billion euros debt load. "We would have argued for a 40 per cent haircut," said Kian Abouhossein, an analyst at JPMorgan. "The real mistake here is that EU regulators are not pushing the banks to raise capital, as happened in the US through the Tarp programme."

Angela Merkel, the German chancellor, defended the Greek rescue agreement. "I want Europe to come out of the crisis stronger than it went in," she said. "It is our historic task to protect the euro. Europe without the euro is unthinkable." In Brussels, EU officials hailed the agreement as a decisive response to the crisis and a new chapter in European integration. YET THEY STRUGGLED TO EXPLAIN ITS COMPONENTS, with confusion among diplomats about the numbers behind the second rescue plan and how much represented new money.

Adding to the uncertainty, EU officials acknowledged that many of the numbers involved - particularly governing private bondholder participation - were estimates and would not be fixed for some time.

There were rainfall totals as high as 7 inches as the storm moved noisily through the Chicago area after midnight, resulting in flash flood warnings from the National Weather Service and enough flooded roads and highways to make life miserable for passengers headed to or from O'Hare International Airport and make a mess of traffic overnight and into Saturday morning. The north side got the brunt of the rain, with O'Hare International airport getting 5.53 inches in two hours, according to ChicagoWeathercenter.com. Some other totals of note reported by the Weather Center: 6.41 inches in Glenview, 5.4 inches in Arlington Heights and 5.49 inches in Elk Grove Village.

At Little Village Academy on Chicago's West Side, the total was 7.84 inches, and the rain still hasn't left town for good. More rain is expected when some storms move in from the west. The storm also interrupted electrical service for some. About noon, ComEd reported that about 74,000 customers were without power: 40,000 north of the city, 27,000 in Chicago, and 3,000 west and south of the city. The utility, which has about 350 crews out working to restore power, said that more than 150,000 customers experienced power outages at some point.

Many of the old all-time high temperature records in the Northeast were set during the Dust Bowl era with several occurring on dates during the blistering summer of 1936. In a number of other locations, the nasty heat waves during July 1966 and August 1918 set the marks to beat. Elsewhere, the all-time list is scattered about various decades through the past century. The high at Washington Dulles Airport was among those that set new all-time records. The mercury soared to 105 degrees, breaking the previous all-time high of 104 set on July 16, 1988. Newark - New Jersey, Reading - Pennsylvania, Hartford and Bridgeport both in Connecticut were also cities which tied or broke their all-time records.

AccuWeather.com RealFeel(R) Temperatures will be significantly higher than the actual temperatures. In some cases, the RealFeel topped 120 degrees during the hottest afternoon hours! While similar to the apparent temperature and heat index, the RealFeel temperature incorporates a half-dozen or so additional variables and gives a more accurate "how it really feels" temperature. Relief is coming to the Northeast in a gradual sense over the weekend into next week. However, no real relief is in sight for the South Central states.

Survivors of the shooting spree have described hiding and fleeing into the water to escape the gunman, but a police briefing Saturday detailed for the first time how long the terror lasted - and how long victims waited for help. The shooting came on the heels of what police told The Associated Press was an "Oklahoma city-type" bombing in Oslo's downtown: It targeted a government building, was allegedly perpetrated by a homegrown assailant and used the same mix of fertilizer and fuel that blew up a federal building in the US in 1995.

In all, at least 92 people were killed in the twin attacks that police are blaming on the same suspect, 32-year-old Norwegian Anders Behring Breivik. Earlier in the day, a farm supply store said they had alerted police that he bought six metric tons of fertilizer, which can be used in homemade bombs. That's at least one metric ton more than was found at the farm, according to police.

Police confessed to not knowing much about the suspect, but details trickled out about him all day: He had ties to a right-leaning political party, he posted on Christian fundamentalist websites, and he rented a farm where police found 9,000-11,000 pounds (4,000-5,000 kilograms) of fertilizer.

Police have charged Breivik under Norway's terror law. He will be arraigned on Monday when a court decides whether police can continue to hold him as the investigation continues. Authorities have not given a motive for the attacks, but both were in areas connected to the Labor Party, which leads a coalition government.