Banks are under stress and depositors have begun to “jog,” Zoellick wrote in an editorial in the Financial Times on Thursday.

“The European Central Bank, like the US Federal Reserve in 2008, has sought to reassure markets by providing generous liquidity, but collateral quality is declining as the better pickings on bank balance sheets are used up,” he added.

To prevent investors from fleeing in panic, Europe must be ready with more than liquidity injections to contain the consequences of a possible Greek exit. “If Greece leaves the eurozone, the contagion is impossible to predict, just as Lehman (Brothers’ collapse) had unexpected consequences,” Zoellick said.

What is needed is a so-called “euro-sovereign” guarantee of bank deposits and other liabilities, as the guarantees of some national sovereigns are unlikely to be sufficient. In the editorial, Zoellick argues Europe needs to deploy euro zone bonds, recapitalize banks by using funds from the European Stability Mechanism (ESM) and provide medium-term funding assurance to countries such as Spain.

The creation of euro zone bonds has been a controversial subject with France’s new President Francois Hollande calling for the currency bloc to issue common bonds and Germany rejecting such a move on the grounds it will weaken fiscal discipline.

But Zoellick argues time is running out and euro zone leaders “may be nearing a 'break the glass' moment: when one smashes the pane protecting the emergency fire alarm.”

The Vatican may look like a medieval fortress, but the apparent impregnability of its bastions, buttresses and revetments is illusory. Not even the Swiss Guards in their flamboyant harlequin uniforms managed to prevent the worst security breach in the Holy See's recent history - the theft of hundreds of confidential documents, some of them stolen from the desk of Pope Benedict himself.

Smuggled out of the secretive city state, they were handed to an Italian journalist, Gianluigi Nuzzi, who dropped a metaphorical bomb on the Holy See by publishing them as a book: His Holiness - The Secret Papers of Benedict XVI. The sensitive documents paint a startling picture of the Vatican in disarray, with the 85-year-old Pope apparently too wrapped up in his theological musings to prevent toxic feuds and vendettas between rival factions in the Curia, the opaque, archaic Vatican bureaucracy.

The leaks may be evidence of GROUPS OF BITTERLY OPPOSED CARDINALS JOCKEYING FOR POSITION IN THE HOPE OF SELECTING THE NEXT POPE, as Benedict looks increasingly frail. The documents cast in a particularly bad light Tarcisio Bertone, who as secretary of state is the Pope's right-hand man and effectively the prime minister of the world's smallest state.

A group of anti-Nazi demonstrators have clashed with far-right activists marching in the city's Wandsbek district. The leftists erected barricades of trash bins and set them ablaze to stop their rivals from passing. After the police used water cannons to extinguish the flames, protesters attacked officers and the far-right demonstrators with pyrotechnics, bottles and stones. At least eight officers have been injured by the projectiles, thelocal.de reports.

The police put around 700 demonstrators into custody. Both leftist and rightist marches on Saturday were coordinated with the city authorities and scheduled for the same date. Over 1,000 police officers and a police helicopter were deployed in the city to try and control the opposing groups.

Meanwhile, more than 10,000 people demonstrated peacefully against the far-right march near the City Hall. In a separate incident eight police vans and three cars were burned on Saturday morning. Investigators believe the attack might be connected to the neo-Nazi demonstration.

"Spain is a very solid country, although right now, no one seems to remember this," he said. Doubts about Spain's solvency rocked global markets this week and saw the interest rate on 10-year government bonds hit a record 5.48 percentage points on Friday, as Spanish markets slumped to lows not seen since April 2003.

But Rajoy insisted the country "will get through the storm through its own efforts and with the support of our European partners. Because what's at stake isn't just the economic future of Spain but the very future of European monetary union."

With Europe’s debt crisis cited last week for canceled IPOs, weaker-than-expected Chinese manufacturing figures and a rise in the US jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds. Now, some “come along and ask for euro bonds, saying all we need are equal interest rates and everything will turn out all right,” Merkel said in a speech to members of her Christian Democratic Union in Berlin yesterday. Instead, what’s needed is an economic overhaul to tackle the lack of competitiveness in Europe, she said.

Merkel, the head of Europe’s biggest economy and the largest contributor to bailouts for Greece, Portugal and Ireland, is the pivotal player in efforts to resolve the crisis now in its third year. As Spain struggles to avoid becoming the next country to call for a rescue and the euro slides near a two-year low against the dollar, [Mr] Obama added to pressure from the European Central Bank, France and Italy to do more to halt the spread of contagion.

[Mr] Obama, speaking at a Chicago fundraiser on June 1 as he bids for re-election in November, said that a report showing the slowest month of US employment growth in a year was in large part “attributable to Europe and the cloud that’s coming over from the Atlantic.” The “whole world economy has been weakened by it,” he said. “Europe is having a significant crisis in part because they haven’t taken as many of the decisive steps as were needed to deal with the challenge,” he said at a separate event in Minneapolis.

By Thursday we should know if her siren calls for the UK to make further interest rate cuts and create more electronic money have been fended off by the nine-strong committee, although the odds on that are shortening. Poor economic news on Friday (May's PMI survey was a shocker) has been described by Deutsche Bank's George Buckley as a "game changer".

Meanwhile, Citi's Michael Saunders muses: "We continue to expect that worsening economic prospects will prompt the MPC to expand QE [quantitative easing] markedly further – to a total of about £500 billion – and that the next instalment will occur soon. On balance, WE FORECAST THE MPC WILL EXPAND QE BY ANOTHER £50 BILLION at the June meeting." Surely the Bank's nonet of middle-aged men wouldn't consider frustrating the French temptress?

In the fifteen months that the Republican-controlled House of Representatives - led by Speaker John Boehner - has effectively enjoyed a constitutional veto over federal spending, the federal government’s debt has increased by about $1.59 trillion. Article 1, Section 9, Clause 7 of the Constitution says: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” A law appropriating money cannot be enacted unless it is approved by the House.

The approximately $1.59 trillion in new debt accumulated since the Republican-controlled House gained a veto over federal spending legislation is more than the total increase in the federal debt between 1789, when the first Congress convened, and October 1984, when the 98th Congress was nearing the end of its second session.

"We may not know exactly what Mother Nature will bring this year, but we are leaning forward in our preparations, utilizing the 'Whole Community Approach,'" Napolitano says in a statement. "As part of this approach, we are engaging the broadest possible set of partners in our preparedness efforts — integrating planning across federal, state, local, tribal and territorial governments as well as with private sector, community, non-governmental, and faith-based partners."

Napolitano wants to make sure Americans are prepared. Federal Emergency Management Agency administrator Craig Fugate wants Americans to "focus on the need to be prepared."

"When it comes to preparing for disasters, don’t simply focus on the calendar … focus on the need to be prepared," Fugate said. "You can go to www.ready.gov and find all of the tools and information you need to prepare your home, business and family." Hurricane season started yesterday and lasts through the end of November.

Germany's Salafist Muslims are back in the spotlight. Since early May, hardly a week has gone by without another regional or national politician in the country proposing new ways to counter the group's extremist version of Islam or a major German newspaper publishing yet another exposé on the group's insular isolation from the mainstream. Just on Friday, interior ministers from Germany's 16 states, at a regularly scheduled conference with federal Interior Minister Hans-Peter Friedrich, resolved to be increasingly firm in their dealings with the Salafists.

Such hand-wringing in Germany about its Muslim population, extremist or otherwise, is not uncommon. This one, however, is different. Far from being an accidental upheaval of angst resulting from the publication of a book by the likes of the anti-immigration treatise by Germany's provocateur-in-chief Thilo Sarrazin or comments from the country's top politicians, its timing and nature was determined far from the country's conventional opinion makers. It is a particularly unique case of the tail wagging the dog - and in this case, the tail is the tiny, Islamophobic political party Pro-NRW.

"It is always difficult for small parties at election time," Pro-NRW head Markus Beisicht told Spiegel Online, reflecting recently on his party's recent turn at the helm of a national debate. "We have a hard time competing with the larger parties. We had to find ways to have an effect with relatively small amounts of resources."

Ahead of mid-May elections in North Rhine-Westphalia, Germany's most populous state, Beisicht's stump strategy centered around a breath-taking campaign of provocation. He launched a caricature contest, collecting some 400 cartoons from mostly amateur artists, aimed at finding the most concisely trenchant critique of Islam possible. And the more provocative - Muslims might say insulting - the cartoons, the better.

Science fiction author Elizabeth Moon last week rekindled the debate on whether it's a good idea to "barcode" infants at birth in an interview on a BBC radio program. “I would insist on every individual having a unique ID permanently attached — a barcode if you will — an implanted chip to provide an easy, fast inexpensive way to identify individuals,” she said on The Forum, a weekly show that features "global thinking" discussing a "radical, inspiring or controversial idea" for 60 seconds. Moon believes the tools most commonly used for surveillance and identification — like video cameras and DNA testing — are slow, costly and often ineffective.

In her opinion, human barcoding would save a lot of time and money. The proposal isn’t too far-fetched - it is already technically possible to "barcode" a human — but does it violate our rights to privacy?

Opponents argue that giving up anonymity would cultivate an “Orwellian” society where all citizens can be tracked. “To have a record of everywhere you go and everything you do would be a frightening thing,” Stanley, senior policy analyst at the American Civil Liberties Union, told the Daily News.

But there are also concerns about security breaches by hackers. If computers and social networks are already vulnerable to hacking and identify theft, imagine if someone could get access to your personal ID chip?

The blaze maintained its rapid growth Friday through what New Mexico Governor Susana Martinez termed "impossible" terrain, as forecasters predicted thunderstorms and dry lightning that could spark even more fires.

Fire authorities said the blaze in the Gila National Forest - the largest on record in New Mexico as well as the country's biggest current blaze - had burned through 340 square miles, or 218,000 acres, of terrain. The extended forecast called for more hot, dry weather. The wildfire near the Arizona border is fueling experts' predictions that this is a preview of things to come across the West as several states contend with a dangerous mix of wind, low humidity and tinder-dry fuels.

Looking at a blanket of smoke stretching for miles, Martinez used words like "daunting" and "enormous," fitting since fire managers said the blaze could smolder until the region gets significant rainfall. "It's going to keep going up," she said of the acreage burned. "Be prepared for that."

The "Vatileaks" scandal, in which the pope's private papers are alleged to have been pilfered by his own butler, pales in comparison to the scandals of centuries past when popes were accused of violence, nepotism and sexual excesses. Pope Benedict has angrily charged that "totally gratuitous" accounts in the media "offer an image of the Holy See which does not correspond to reality."

Archbishop Angelo Becciu, the third-ranking official in the world's smallest state, bemoaned the "distorted image" presented of the Vatican and said the internal debates revealed by the documents were perfectly normal in any organization. "We are not mummies," he said with the kind of historical allusion that seems to come naturally in the corridors of the world's oldest continually operating institution. But the allegations have caused a sensation round the world and defied Vatican attempts to play down their importance.

Italian newspapers have devoted pages and pages to the crisis, often with graphics showing the exact layout of the pope's apartment or a bird's-eye view of Vatican City, although written reports have often been highly speculative in the face of the Holy See's deep secrecy. Intrigue seems encouraged by the Vatican's organizational model, which borrowed from Renaissance royal courts and shields its inner workings from outside scrutiny. A remnant of the time when the popes were also temporal rulers over Rome and parts of Italy, the tiny city-state is headquarters for the 1.2-billion-strong Roman Catholic Church, the world's largest. As the Catholic saying goes, "the Church is not a democracy."

Opinion polls had suggested a "Yes" camp win. A "No" vote would not have blocked the pact, but it would have barred Ireland from emergency EU funding when its bailout package expires in 2013. In late 2010 Ireland received an EU-IMF bailout worth €85 billion (£68 billion; $105 billion) after debts overwhelmed its banks. The treaty must be approved by 12 of 17 Eurozone countries, but Ireland was the only one putting the issue to a public vote.

Speaking after the results came in, Mr Kenny said Ireland had to now work with the EU to boost growth across the eurozone. "The developing situation in Europe's banking sectors needs a comprehensive solution and Ireland's banking debt must form part of that solution," Mr Kenny told a news conference. He said the move would not solve all of the country's problems, but that it was "one of the many foundation stones" needed to ensure the future stability of Ireland's economic position. It would enable investment and create jobs, he said, as well as allow Ireland access to funds from the European Stability Mechanism should it require it.

Returning officer Riona Ni Flanghaile said the "Yes" campaign won by a margin of just over 300,000 votes, with a total of 955,091 casting ballots in favour, compared with 629,088 against the agreement. Fewer than half of the 3.1 million registered voters turned out on Thursday. Speaking earlier, "No" voter Gerard Cunningham told the Associated Press: "Banks in Germany and Britain and elsewhere were just as responsible for the mess we're in. We're sick to the back teeth of being told it's all our own fault."

The insight comes from Barton Biggs, hedge fund manager running Traxis Partners, who spoke with a Saudi Arabian businessman close to the country’s royal circles. Biggs met the man for a business lunch and asked for an overview of the Middle-Eastern country’s policies in the medium and long terms, reports Business Insider citing Biggs’ note published by Itaú BBA. "You have to understand our geopolitical equation and vulnerability,” the Saudi businessman is cited as saying.

“Our two most dangerous enemies are Iraq and Iran. Both are Shia, and both are trying to destabilize the Arab world and our Sunni kingdom by funding terrorism. Our only weapons against them are our wealth and our oil. Their current vulnerability is their financial fragility. Their financial reserves are a fraction of ours, and they desperately need money to prop up their economies,” he said. The Saudi ruling council’s plan is to ramp up oil production over the next two years and seize the moment to strike at Iran and Iraq, the businessman, who is described as “very rich and presumably well-connected”, explained.

“Iraq and Iran need to produce and sell their oil at well over $100 a barrel. In the next 24 months, we will gradually increase our production with the objective of breaking the price of crude down to sixty dollars a barrel,” he said. The businessman, who is not part of the Saudi extended royal family, added that the plan has the backing of other Persian Gulf monarchies.

It found that 61 per cent of Britons and Italians, 63 per cent of the French and 70 per cent of Greeks were opposed to further integration. Across the EU, support for Brussels had fallen in every country apart from Germany.

Researchers from the Pew Research Centre in Washington found that 54 per cent of Spaniards were doubtful about their country’s membership of the EU. The only country where enthusiasm for the EU was growing was Germany, which many critics claim is profiting from the debt crisis. Sixty-five per cent of Germans were keen on membership of the EU, up two per cent since 2009.

But despite the negative attitudes towards Brussels, there was still little enthusiasm for scrapping the euro in eurozone countries. Only 23 per cent of Greeks wanted a return to the drachma. In the UK, 73 per cent of voters said being outside the euro was a good thing for the country. Bruce Stokes, director of Pew’s global economic attitudes project, said: “The irony here is that people who have the euro still want to keep it.”