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."

President Barack Obama, who came to office pledging to bring troops home, said the US left behind a "sovereign, stable and self-reliant Iraq". Some 4,500 US soldiers and more than 100,000 Iraqis have died in the war. It has cost the US some $1 trillion. Republicans have criticised the pullout citing concerns over Iraq's stability, but most Americans support the move. In a speech to troops just returned from Iraq in North Carolina on Wednesday, Mr Obama hailed the "extraordinary achievement" of the military and said they were leaving with "heads held high".

"Everything that American troops have done in Iraq, all the fighting and dying, bleeding and building, training and partnering, has led us to this moment of success," he said. "The war in Iraq will soon belong to history, and your service belongs to the ages." He said the war had been "a source of great controversy" but that they had helped to build "a sovereign, stable and self-reliant Iraq, with a representative government that was elected by its people". Some 1.5 million Americans have served in Iraq since the US invasion in 2003. In addition to those who died, nearly 30,000 have been wounded.

In the city of Falluja, a former insurgent stronghold which was the scene of major US offensives in 2004, people burned US flags on Wednesday in celebration at the withdrawal. "No-one trusted their promises, but they said when they came to Iraq they would bring security, stability and would build our country," Ahmed Aied, a grocer, told Reuters news agency. "Now they are walking out, leaving behind killings, ruin and mess."

Concerns have also been voiced in Washington that Iraq lacks robust political structures or an ability to defend its borders. There are also fears that Iraq could be plunged back into sectarian bloodletting, or be unduly influenced by Iran.

I've just completed a two-week speaking tour of Australia, hosted by the Q Society, an Australian human rights group. While there, I heard the Q Society's Vickie Jansen report on the situation on the ground in Australia: "La Trobe University has its Muslim-only toilets and prayer rooms. The group Aussie Muslims is campaigning for exclusively Muslim prayer rooms in a western Australia hospital on the basis that they need to avoid the idolatry that may occur if they share. Our public schools are adapting to a Muslim Perspectives curriculum project in which, among many other things, not just female-only swimming is recommended for our Muslim students, but exclusively Muslim-only swimming (these are all sounding much like apartheid practices). Some public schools are catering to diversity by ensuring truckshops [cafeterias] are exclusively halal."

This coincides with similar initiatives in the US, where (until public attention compelled them to take it down) the Muslim Brotherhood group known as the Muslim Students Association's website featured a "Muslim Accommodations Task Force" page. It included PDFs of pamphlets titled "How to Achieve Islamic Holidays on Campus," "How to Establish a Prayer Room on Campus" and "How to Achieve Halal Food on Campus."

The demands of Muslim groups all over the Western world for separate facilities are in the service of a supremacist ideology that emanates from the Koranic assertions that Muslims are the "best of people" (3:110), while unbelievers are the "vilest of created beings" (98:6). Unbelievers are unclean (9:28) which leads to the conclusion that Muslims should avoid contact with them. Every capitulation made to demands for Muslim accommodation only feeds these supremacist notions, working directly against the principles of equal justice and equal rights for all.

Nevertheless, Left-leaning Western politicians are eager to accommodate these demands. While I was in Australia, the Deputy Premier of Queensland, Andrew Fraser, denounced the Q Society for fliers protesting against the sale of halal meat that was not labeled as such, and the introduction of misleading and whitewashed material about Islam into Australian schools. "Modern Australia has a proud multicultural heritage," thundered Fraser. "This kind of prejudicial rubbish has no place anywhere, let alone here in Queensland." So in Fraser's view, to advance an apartheid-like systems that institutionalize the oppression of women and non-Muslims serves Australia's "proud multicultural heritage," but to resist that system in the name of freedom and equality of rights for all is "prejudicial rubbish."

In reality, such demands are part of the stealth jihad that endeavors to advance Islamic law in Western countries through nonviolent means and what better way to accomplish this than by playing on the West's fears of racism and bigotry to win concessions as a victimized group? The irony here is that the Australian and American politicians who allow themselves to be used in this way are abetting the advance of a system that is far more repressive and ridden with inequalities than anything in any modern Western country. But they will probably only realize this when they themselves fall victim to that system, as - if it continues to advance - they certainly will.

Mr Sarvari told the Iranian student news agency ISNA: 'Soon we will hold a military manoeuvre on how to close the Strait of Hormuz. If the world wants to make the region insecure, we will make the world insecure.'

Parviz Sarvari, a member of the Iranian parliament's National Security Committee, said his country was preparing to close off the crucial Strait of Hormuz as part of a military exercise. Around a third of all shipped oil passes through the four mile-wide Strait between Oman and Iran and US warships patrol the area to ensure safe passage. Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar is transported through the channel.

Iran has warned it will respond to any attack by hitting Israel and US interests in the Gulf and analysts say one way to retaliate would be to close the Strait of Hormuz.