Signs of further disunity in eurozone capitals hammered stock markets, as French finance minister Christine Lagarde openly rejected claims by German Chancellor Angela Merkel that the single currency's continued existence is in danger. Images of a 24-hour general strike in Greece also haunted trading floors, as investors fretted that Athens will fail to push through draconian deficit-cutting plans.

Making matters worse, US figures showed that jobless benefit claims unexpectedly rose last week for the first time since the beginning of April, suggesting America's rebound is stalling. Underlining the grim mood, analysts at Royal Bank of Scotland claimed we may be facing 'Great Depression II' as deflation engulfs global economies. Barclays Capital economist Julian Callow said: 'Europe is pitifully uncoordinated at this particular stage. 'The sad fact is that when Europe needs coordination most, that seems to be when it is lacking.'

However he added that the sovereign debt woes afflicting the euro area are prompting traders in other countries, including the US, to take a hard look at the shattered state of their own government finances. 'The US is also heading to some very high government debt numbers,' said Mr Callow.

'It's like you look through the window and see what's going on in the euro area, but you also see a reflection of yourself.'

Despite all the years of Six Party nuclear disarmament talks, of financial inducements to disarm and, latterly, punitive economic sanctions the international community headed by China and the United States is still no closer to persuading Kim to accept the norms of international behaviour. The evidence presented in Seoul on Thursday, including almost the entire tail section of a CHT-02D torpedo, a variety which the North offers "for export", was as incontrovertible as it is possible to be.

South Korea has already indicated that it plans to refer this extraordinary act of aggression by its estranged, renegade brother to the United Nations Security Council, where it will rightly demand stern and unanimous action against Pyongyang. This is where the international spotlight will fall, with uncomfortable brightness, on China.

However, the early signs of whether China will live up to its new responsibilities as an emerging Great Power are not encouraging. While the rest of the world, including Britain, issued unequivocal condemnation of Pyongyang and called for action against the Kim regime, the best that China's deputy foreign minister Cui Tiankai could manage was that the sinking of the Cheonan was "unfortunate". It was, of course, nothing of the kind. The sinking was a deliberate, pre-planned operation in which a North Korean submarine commander armed a torpedo, plotted a firing solution and then pulled the trigger, killing 46 young sailors in cold blood.

The fact that China appears unable to join the chorus of condemnation for this wanton act of provocation is simply unbecoming a nation that, day by day, demands a greater say in how the world is run. With rights must come responsibilities.

The White House announcement stated that the move is intended to realize Obama's "vision of active US engagement with other nations and international organizations," a goal sometimes pursued, noted National Review Online columnist Brett D Schaefer last Thursday, "even when there is little or no chance that doing so will advance US interests."

The US decision is also meant to support the Alliance goal of "improved understanding and cooperative relations among nations and peoples," the statement said. The group claimed in its first report in 2006 that global tensions were driven primarily by the conflict between Israel and the Palestinian Authority. The same report referred to "a perception among Muslim societies of unjust aggression stemming from the West" in a discussion relating to the September 11, 2001 attacks on the United States by the international Al Qaeda terrorist group.

Since Obama took office a year ago, he has worked hard to reach out to the Islamic community of nations in a series of gestures that make it clear he is bending over backwards to strengthen ties with the Muslim world. Since his speech from Cairo last June, Obama has reached out to Iran and Syria, restoring full diplomatic relations with Damascus and returning an ambassador to the Syrian capital. The US has also joined the anti-Israel UN Human Rights Commission. Both these moves are reversals of prior Bush administration decisions.

An official report, carried out by South Korean investigators together with teams from the United States, Britain, Australia and Sweden, said the evidence pointed "overwhelmingly to the conclusion that the torpedo was fired by a North Korean submarine." It added: "There is no other plausible explanation." South Korea vowed "resolute countermeasures" against the North and is likely to appeal to the United Nations for further sanctions on the rogue state.

Barack Obama immediately offered his "strong and unequivocal" support to Lee Myung-bak, his South Korean counterpart. "This attack constitutes a challenge to international peace and security," the White House said. Britain, Japan and Australia all joined the chorus of condemnation. William Hague, the British Foreign secretary, said North Korea had a "total indifference to human life and international obligations". He said Britain was working on an "appropriate multilateral response to this callous act".

Robert Gibbs, the White House spokesman, said: "This act of aggression is one more instance of North Korea's unacceptable behaviour and defiance of international law... Such unacceptable behaviour only deepens North Korea's isolation." He said the attack "constitutes a challenge to international peace and security".

However, North Korea strongly denied responsibility for the attack, calling the investigation a "fabrication orchestrated by a group of traitors". It said it would "promptly" react to any retaliation and further sanctions with "various forms of tough measures including an all-out war". In recent weeks, North Korea has begun massing more troops on the border with the South.

On arrival, it will raise the number of US carriers off Iranian shores to two. Up until now, President Barack Obama kept just one aircraft carrier stationed off the coast of Iran, the USS Dwight D Eisenhower in the Arabian Sea, in pursuit of his policy of diplomatic engagement with Tehran. For the first time, too, the US force opposite Iran will be joined by a German warship, the frigate FGS Hessen, operating under American command.

The USS Truman is just the first element of the new buildup of US resources around Iran. It will take place over the next three months, reaching peak level in late July and early August. By then, the Pentagon plans to have at least 4 or 5 US aircraft carriers visible from Iranian shores.

In its big naval exercise last week, Iran exhibited the Velayat 89 long-range missile for striking US aircraft carriers and Israel warships from Iranian submarines.

One day after the army moved into the Red Shirt protestor encampment in the centre of the capital, sparking a night of violence in which 35 buildings were torched, residents of Bangkok were struggling to regain some sort of normality. But the extension of the first curfew in 18 years was a sign that the chaos of recent months and days had not been banished by the extensive army deployment.

The government quelled most of the violence in the battered Thai capital after a major military operation that killed at least 13 people and left 88 wounded. But underlying political divisions that caused Thailand's crisis may have been exacerbated, and unrest spread to provinces in the north and northeast. While leaders of the anti-government Red Shirt movement surrendered, sporadic clashes between troops and remaining protesters continued.

As night fell on Wednesday, the skyline was blotted by flashes of fire and black smoke from more than two dozen buildings set ablaze including Thailand's stock exchange, main power company, banks, a movie theatre and one of Asia's largest shopping malls.

The organisation, which carried out 65,000 abortions last year, has circumvented a ban on the commercials because it is a charity and does not make a profit from its services. But the move has been condemned by viewer watchdogs, religious groups and family campaigners, who claim it is "grossly inappropriate" to "sell abortions" alongside products such as soap powder and cars. They are now launching a legal battle against the move.

The charity, which carries out most of its abortions on behalf of the NHS, said it was right to advise people on their choices as a YouGov poll of over 2,000 adults showed only 42 per cent would know where to go if they or their partner were in such a dilemma. Julie Douglas, marketing manager at the charity, said: "We thought it was the right to bring abortion out into the open. It has been legal for 40 years, one in three women will have one before they are 45. It doesn't help to keep it under wraps."

The commercial advertising of abortion services is currently banned by the Broadcast Committee of Advertising Practice (BCAP) but it only applies to private profit making companies. Anthony Ozimic , spokesman for the Society for the Protection of Unborn Children, said: "Marie Stopes may claim to be a non-profit organisation, but they have a financial interest in drumming up demand for abortion. Neither Marie Stopes nor any similar organisation should be allowed to advertise the killing of unborn children. We are taking advice regarding the legality of the scheduled advertisement."

Power lines are also down in some places. Kingfisher County Emergency Management Director Steve Loftis says the town of Kingfisher, about 45 miles northwest of Oklahoma City, is without power. The National Weather Service says it also received reports of a series of brief, small tornadoes in southwest Kansas. The service says they aren't related to the supercell tornado outbreak in Oklahoma.

As floods caused by days of heavy rain in Central Europe slowly started to subside on Wednesday morning, the German authorities are now preparing for the flooding to reach them. Stefan Laps of the weather service, Meteomedia, told Spiegel Online that the high waters would reach the Oder River, in the area around Frankfurt, between Friday and Saturday. Additionally heavy rain and thunderstorms are also expected toward the weekend.

Although by Tuesday evening the number of flood alarms had been reduced and some of those evacuated from their homes had been allowed to return, there were still thousands of houses, fields and streets under water in Poland, the Czech Republic, Slovakia, Serbia and Hungary. A total of seven people have lost their lives in the flooding, while thousands were evacuated from residential areas near flooded rivers and for the first time ever, the memorial on the site of the former Nazi death camp Auschwitz-Birkenau was closed due to threat of flooding.

The Polish cities of Warsaw and Krakow were both threatened by the flooding as was the regional capital of Opole in the south of Poland. Bridges and roads were closed and train travel was disrupted, cutting off some districts. Additionally thousands of households in the eastern Czech Republic were still without power and the Serbian town of Trgoviste, population around 2,000, was without drinking water after a flash flood.

Germany's surprise ban of naked short-selling in some securities spooked financial markets and hammered the euro to a four-year low against the dollar. The unilateral step suggested Europe remained unable to form a united front in addressing its debt crisis. It worried investors by increasing uncertainty over market regulation.

Worries about the crisis intensified in recent weeks and risk-averse investors have begun pulling out of Asian stocks. Wall Street slipped on nervousness about the disarray in Europe and on worries the crisis would hurt growth. That came on the heels of losses in Europe for the third in four sessions. "Investors are entitled to be a little hesitant about putting a toe into the shark-filled waters," said Richard Morrow, director at EL&C Baillieu Stockbroking. "Only one thing is certain: this volatility is likely to stay around at least in the short term. This is a trader's market."

South Korean assets were dealt an extra blow by rising tensions in the Korean peninsula as Seoul exchanged tough rhetoric with its northern neighbor over the cause of a navy ship sinking that killed 46 sailors from the south.

North Korea is clearly responsible for the sinking of a South Korean navy ship and there is sufficient evidence to take the issue to the United Nations, South Korea's top diplomat said Wednesday. Foreign Minister Yu Myung-hwan's comments came a day before the release of a much-anticipated report on the incident and are the first by a South Korean official clearly saying North Korea was behind it.

Speculation has steadily increased that a North Korean torpedo brought down the 1,200-ton Cheonan on March 26 in the Yellow Sea near the two countries' disputed western sea border. A total of 46 sailors from the 104-man crew died.

The government launched a joint military-civilian probe with help from foreign countries including the United States. It has determined that a "strong underwater explosion generated by the detonation of a torpedo" caused the ship to split apart and sink, Yu said in a speech to Seoul-based European business executives.

Cramer said Europe's debt woes have sunk price-to-earnings multiples here in the States, but to such levels that could only be justified by a Lehman Brothers-type event. If we don't get that event, then American investors are going to have to readjust to a Europe that's merely bad, one where austerity reigns, business slows and the euro continues to decline.

As of yet, though, nothing he has seen justifies that "dramatic" drop in PE ratios, which means that stocks just might snap back. "Something bad has to happen soon," Cramer said. "Or else [the US] market's going to go higher."

The euro hit another a four-year low against the dollar. It fell to below $1.215 before recovering to $1.222. Analysts said comments by German chancellor Angela Merkel that the "current crisis" facing the euro was "the biggest test Europe has faced in decades" were doing nothing to help stop the euro's falls.

Meanwhile oil fell to $68 a barrel, as concern over tighter financial regulation sparked a move away from riskier assets.

The German financial regulator has banned traders in the country from "naked" short-selling of euro-denominated government bonds and of shares in the country's 10 most important financial institutions. Short-sellers usually borrow shares, sell them, then buy them back when the stock falls and return them to the lender, keeping the difference in price. "Naked" short selling occurs when a trader sells a financial instrument that has not yet been borrowed.

BBC business editor Robert Peston said the regulator saw a ban on the shorting of government bonds - or debt - as an attempt to stop "what it would see as mischievous bets by investors that the financial difficulties of the likes of Greece and Portugal will worsen. It thinks that such bets are what force down the price of Greek and Portuguese government bonds, which then spook investors, and make it much more difficult and expensive for the likes of the Greek and Portuguese governments to borrow vital new money," he added.

The reordering of power will sweep away Labour legislation and new criminal offences deemed to have eroded personal freedom. It will involve the end of the controversial ID cards scheme, the scrapping of universal DNA databases - in which the records of thousands of innocent people have been stored - and restrictions placed on internet records. The use of CCTV cameras will also be reviewed.

Dubbed the "Great Reform Act", the measures will close down the ContactPoint children's database. Set up by Labour last year, it includes detailed information on all 11 million youngsters under 18. In addition, schools will not be able to take a child's fingerprint without parental permission. In an attempt to protect freedom of speech, ministers will review libel laws, while limits on peaceful protest will be removed. Mr Clegg said the Government wanted to establish "a fundamental resettlement of the relationship between state and citizen that puts you in charge".

In a speech in London he will say: "This Government is going to transform our politics so the state has far less control over you, and you have far more control over the state. This Government is going to break up concentrations of power and hand power back to people, because that is how we build a society that is fair."

Mr Clegg will add: "It is outrageous that decent, law-abiding people are regularly treated as if they have something to hide. It has to stop. This will be a government that is proud when British citizens stand up against illegitimate advances of the state. That values debate, that is unafraid of dissent."

In quick succession Tuesday night, the jittery inhabitants of Washington's marble halls found three more reasons to worry about their staying power. Pennsylvania Senator Arlen Specter, the Senate's patron saint of resilience, was turned out in a Democratic primary in favor of an unwanted rival, Representative Joe Sestak, who had neither major union support nor White House support.

In Arkansas, Senator Blanche Lincoln, a model of southern Democratic moderation, was forced into a primary runoff by a self-styled outsider, Bill Halter, challenging from her left. And in Kentucky, the Washington establishment's chosen Republican Senate candidate, Trey Grayson, fell to the son of a libertarian outlier who carried the flag of another party. "I have a message, a message from the Tea Party, a message that is loud and clear and does not mince words: We've come to take our government back," declared Rand Paul, son of Representative and former presidential candidate Ron Paul, upon winning by a double-digit margin.

With less than six months to go before the midterm elections on November 2, all signs are pointing to a tidal wave. Electoral railbirds, steeped in historical stats, point to the many bad signs for Democrats. In polls, Republicans and conservatives demonstrate much more enthusiasm than Democrats and liberals. The President's approval rating is below 50%, and more registered voters say they expect to vote for Republicans than Democrats for Congress. "This is as favorable an election for Republicans, as hostile for Democrats, as any in recent memory," says Mark Blumenthal, the editor of Pollster.com.