The Californian company bankrolls businesses hoping to profit from technology that helps reduce global warming and carbon emissions. Mr Blair secured the job thanks to his "influence" and high level international contacts, whom he will be expected to lean on to open doors. He has told friends he needs 5 million pounds a year to fund his lifestyle.

Khosla Ventures confirmed it was hiring him, but declined to confirm his salary, which was estimated by industry sources. Khosla said that "with Tony's advice and influence we will create opportunities for entrepreneurs and innovators to devise practical solutions that can solve today's most pressing problems."

In a statement yesterday, Mr Blair said: "Solving the climate crisis is more than just a political agenda item; it's an urgent priority that requires innovation, creativity and ambition." He has taken up several lucrative posts since leaving office three years ago. He has a 1 million pounds deal to advise the ruling royal family of Kuwait and has been paid a 4.6 million pounds advance for his memoirs. Public speaking engagements, which earn him 100,000 pounds a time, are estimated to have brought in another 9 million pounds.

The M3 figures - which include a broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened. The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6 per cent.

The assets of insitutional money market funds fell at a 37 per cent rate, the sharpest drop ever. "It's frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015. Larry Summers, President Barack Obama's top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200 billion to keep growth on track. "We are nearly 8 million jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.

Mr Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, deeming it too erratic to be of much use. This may have been a serious error since double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed raised rates - gave a second warning that the economy was about to go into a nosedive.

Paul Ashworth at Capital Economics said, "You could argue that M3 has been going down because people have been taking their money out of accounts to buy stocks, property and other assets."

Netanyahu told a parliamentary session commemorating Israel's capture of East Jerusalem from Jordan in the 1967 war that "Jerusalem" and its alternative Hebrew name "Zion" appear 850 times in the Old Testament, Judaism's core canon. "As to how many times Jerusalem is mentioned in the holy scriptures of other faiths, I recommend you check," he said.

Citing such ancestry, Israel calls all of Jerusalem its "eternal and indivisible" capital - a designation not recognised abroad, where many powers support Arab claims to East Jerusalem as the capital of a future Palestinian state. The dispute is further inflamed by the fact East Jerusalem houses al-Aqsa mosque, Islam's third-holiest shrine, on a plaza that Jews revere as the vestige of two biblical Jewish temples.

Heckled by a lawmaker from Israel's Arab minority, Netanyahu offered a lesson in comparative religion from the lectern. "Because you asked: Jerusalem is mentioned 142 times in the New Testament, and none of the 16 various Arabic names for Jerusalem is mentioned in the Koran. But in an expanded interpretation of the Koran from the 12th century, one passage is said to refer to Jerusalem," he said.

Responding to Netanyahu's citations, Palestinian chief negotiator Saeb Erekat said: "I find it very distasteful, this use of religion to incite hatred and fear. East Jerusalem is an occupied Palestinian town, and East Jerusalem cannot continue to be occupied if there is to be peace."

"If you put our coasts under siege in any future war, I say all military, civilian and commercial ships heading to Palestine's coasts on the Mediterranean will be under the fire of the Islamic resistance fighters," he said via a video-link in a ceremony marking the 10th anniversary of Israel's withdrawal from south Lebanon.

Earlier this year Nasrallah threatened to hit Israel's Ben Gurion airport if the Jewish state struck Beirut's international airport in any future conflict. "We are capable of hitting it and are determined to go into this... if they besiege our coasts," he said. Tension is high in the region after Israel accused Syria in April of supplying Hezbollah with long-range Scud missiles capable of hitting deep inside Israel. Syria denied the charge and accused Israel of fomenting war.

Nasrallah refused to confirm or deny that his group obtained Scud missiles from Syria. He also said he did not want war but if Israel launched one, his group was capable of hitting deep inside Israel.

Despite government assurances that the drill is a yearly routine, political leaders in Lebanon and Syria have accused Israel of warmongering. Whether by accident or design, the five-day exercise has fuelled speculation over a renewed military clash between Israel and Hizbollah, the Lebanese Shia group backed by Iran and Syria. Israeli officials have warned that the next war against Hizbollah would have catastrophic consequences not only for the Shia group but also for Lebanon as a whole.

Israel's northern neighbours are not alone in voicing concerns about the potential for more bloodshed. In recent weeks, Israeli politicians have repeatedly warned that the threat posed by Hizbollah's rapidly improving arsenal is reaching a critical level.

They are particularly concerned about Syria's alleged transfer of Scud missiles to Hizbollah. Damascus has denied passing on these weapons and there is, at least outside Israel, no consensus on whether Hizbollah has managed to obtain Scuds, which have a longer range and a bigger warhead than other weapons in its arsenal. Hizbollah, however, is estimated to have at least 40,000 missiles and rockets - and the capability to hit Tel Aviv and other Israeli population centres.

The menacing backdrop to this debate is Iran, the principal supporter of Hizbollah and the country whose nuclear programme is viewed as an existential threat by Israel.

The volume of abandoned rockets, shattered satellites and missile shrapnel in the Earth's orbit is reaching a "tipping point" and is now threatening the $250 billion (174 billion pounds) space services industry, scientists said. A single collision between two satellites or large pieces of "space junk" could send thousands of pieces of debris spinning into orbit, each capable of destroying further satellites.

Global positioning systems, international phone connections, television signals and weather forecasts are among the services which are at risk of crashing to a halt. This "chain reaction" could leave some orbits so cluttered with debris that they become unusable for commercial or military satellites, the US Defense Department's interim Space Posture Review warned.

There are also fears that large pieces of debris could threaten the lives of astronauts in space shuttles or at the International Space Station. The report, which was sent to Congress in March and not publicly released, said space is "increasingly congested and contested" and warned the situation is set to worsen.

The syndicates are attempting to block efforts by the oil giant to claim on cover held by the rig operator Transocean. BP, which had no external insurance in place for the accident, is trying to claim up to $700 million through a policy held by Transocean, the owner of the Deepwater Horizon rig that BP has blamed for the April 20 blast. A spokesman for BP said: "We believe we may be entitled to coverage for the incident under Transocean's insurance."

But in legal documents filed in a Houston court, 38 separate Lloyd's underwriting syndicates plus a string of other international insurers affected by the disaster, rejected BP's claim. The Lloyd's syndicates claim that BP's contract to lease the rig from Transocean specifies that its insurers would only be held responsible for damage to the rig itself - not for pollution caused by a leak from it.

BP, which declined to comment further on the litigation, and Transocean are already facing more than 130 lawsuits relating to the spill. On Monday, BP said the cost of the clean-up had hit $760 million - a figure that excludes claims from fishermen and other industries affected by it. Analysts for Swiss Re have estimated that the total insured losses from the accident could reach $3.5 billion. However, according to UBS, the final bill could be as much as $12 billion.

Israeli officials and scientists who study the freshwater lake hope the ban will allow the population of St Peter's fish, a local breed of tilapia popular with locals and tourists, as well as other species to regenerate their numbers. In announcing the moratorium, Netanyahu said fishermen would receive financial support while game officials restocked the freshwater lake in northern Israel. The fishing ban will be in effect for two years.

Scientist Ilia Ostrovsky, who studies the lake and serves on the committee overseeing aquatic populations, said the fishermen of the Galilee began using nets with smaller and smaller mesh over the years, catching more small fish to match the tonnage of big fish they caught in decades past.

"The fishermen ... are sawing off the branch they are sitting on," he said. In recent years, up to 80 per cent of fish pulled from the lake were under legal size limits, he said. The ban will put 200 licensed fisherman out of work, but tourism is unlikely to be affected.

The worst flooding to strike Poland in more than a decade continued on its destructive path on Tuesday, leaving behind it apocalyptic scenes and 15 dead. Much of the flooding has been centered on the Oder and Vistula rivers, and the flood surge is expected to reach Germany later this week as it pushes north towards the border.

Flooding on Poland's Vistula River northwest of Warsaw, which experienced some of the heaviest damage over the weekend, continued to intensify on Monday. The situation is "worse than expected," Polish Interior Minister Jerzy Miller told reporters. After the banks burst on the river near the city of Plock, around 100 kilometers (62 miles) from Warsaw, 18 communities had to be evacuated. And the Polish media is reporting that the Vistula had flooded an area of around 8,000 hectares (around 20,000 acres), including 23 towns and villages.

The flood peak is expected to reach the German stretch of the Oder River by the end of the week, said Eberhard Schmidt of the Center for Flood Monitoring in Frankfurt an der Oder, a city located on the German-Polish border. By then, he said, water levels are expected to be significantly higher than those required to declare alarm level three, the second-to-highest level. Floods are first considered catastrophic when they hit level four.

For many, the disaster unfolding in recent days has been reminiscent of the devastating 1997 Oder River floods, but Brandenburg state Environment Minister Anita Tack of the Left Party told public radio station RBB the state was better prepared this time. "Together with the disaster services and the depot in Beeskow, where sand bags and technical equipment is being stored, we are well prepared," Tack said.

South Korea's response to confirmation that the North torpedoed a Southern naval vessel in March seems proportionate, merited and economically minor - sanctions will hit an annual trade of only $286 million, about 0.3 percent of South Korea's GDP. The effect on the already impoverished Northerners may even be mitigated by China, Pyongyang's traditional ally.

In more settled economic times, markets could probably absorb this increase in Korean tension without too much difficulty. Everyone knows North Korea is dangerously unpredictable. Investors usually respond to provocative actions with only a brief flurry of worry. They sometimes even interpret aggression as desperation, and dream of potential gains from eventual Korean unification.

This time could be different. As of Tuesday, the Korean stock market had dropped 8 percent since the official report on the sinking, and the won had fallen by a similar proportion against the dollar. Investors may be thinking South Korean companies will face higher capital costs or that military expense will hold back the country's growth. Or they may just be blindly shunning geopolitical risk.

The fear is likely to be exaggerated. An all-out war can probably be avoided, even if North Korea's announcement of a freeze in relations leads to direct military confrontations. What's more, while the Korean economy is bigger than Greece's, it accounts for only 1.5 percent of global GDP. The euro zone contributes 22 percent.

The political forces which threaten the Koreas are completely different from those that are shaking confidence in the euro zone. But there is one unfortunate similarity. Until a few months ago, the governments, which had responded so powerfully to the financial crisis, were a comfort to markets. But weak and wild policies around the globe are undermining that conviction.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says. The recession has erased 8 million private jobs. Even before the downturn, private wages were eroding because of the substitution of health and pension benefits for taxable salaries.

Economist Veronique de Rugy of the free-market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs. Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism. "People are paid for being rather than for producing," he says.

The dramatic deterioration in ties came as US Secretary of State Hillary Rodham Clinton visited Seoul on Wednesday for talks expected to focus on how to deal with North Korea. The North's announcement late Tuesday came hours after South Korea began taking steps that were seen as among the strongest it could implement short of military action - ranging from slashing trade, resuming propaganda warfare and barring the North's cargo ships.

Tensions have risen since last week, when a team of international investigators concluded that a torpedo from a North Korean submarine tore apart the Cheonan warship off the west coast on March 26, killing 46 South Korean sailors. The North flatly denies involvement in the sinking of the Cheonan, one of the South's worst military disasters since the Korean War, and has warned that retaliation would mean war.

North Korea is cutting all ties with the South until President Lee Myung-bak leaves office in early 2013, the country's Committee for the Peaceful Reunification, which handles relations with South Korea, said in a statement. It also said North Korea would expel all South Korean government officials working at a joint industrial park in the northern border town of Kaesong, and South Korean ships and airliners would be banned from passing through its territory. North Korea would start "all-out counterattacks" against the South's psychological warfare operations. Pyongyang called its moves "the first phase" of punitive measures against Seoul, suggesting more action could follow.

He said China's extensive claims to islands and waters in the region were "generating increasing concern broadly across the region and require address". The admiral's remarks follow complaints by Japan in recent weeks about aggressive behaviour from a Chinese coastguard vessel in contested waters and a Chinese military helicopter in international waters.

Some of China's neighbours have been watching the People's Liberation Army's modernisation and efforts at expanding the navy's reach with unease, and defence experts see this expansion as one factor behind a developing arms race in south-east Asia.

Adm Willard was speaking ahead of talks with Ma Xiaotian, deputy chief of general staff of the PLA, the first meeting between senior US and Chinese military officers since Beijing suspended bilateral military-to-military dialogue in January after US arms sales to Taiwan.

Italy will take measures to reduce public sector pay and will put a freeze on new recruitment. Public sector pensions and local government spending are also expected to be hit. Added to these, a clampdown on tax avoidance is also planned. The cuts are equal to some 1.6% of gross domestic product (GDP). Similar reductions in spending measures have already been announced by Greece, Spain and Portugal.

Some Italian workers have already been out protesting. In Rome, workers at the Italian Institute for the Professional Development of Vocational Training of Workers (Isfol) held protests against the cuts at their headquarters. One worker, Simone Casadei, said, "We demand that the money needed to face this problems... is obtained through a tough action against tax evasion. The state cannot always take the money from the same sources, that is workers and pensioners."

The government hopes to bring its deficit down to below 3% of GDP by 2012 - from 5.3% now - in order to help maintain the confidence of international investors and prevent the spread of a Greek-style debt crisis.

It came after shares in Asia had seen sharp falls. Stocks in South Korea and Japan had been affected as North Korea reportedly went on to military alert. Japanese stocks fell by 3.1%, and shares in South Korea fell by 2.7%. In London, the FTSE 100 has fallen by more than 10% in little more than a month after hitting a 22-month high in April.

Another factor worrying investors was the weekend rescue of Spanish bank Cajasur by Bank of Spain, only the second time the central bank has saved a regional lender. Amid concerns over solvency in the sector, and in the wake of the Cajasur rescue, four Spanish savings banks then announced plans to merge.