Weak banks, especially in Spain, have bought more of the debt of their weak sovereigns, while foreigners have sold down their holdings. Markets, seeing banks holding the dubious debt of the sovereigns that stand behind them, grow ever nervous. Again, Europe and the global economy approach the brink. The architects of current policy and their allies argue that there is insufficient determination to carry on with the existing strategy. Others argue that failure suggests the need for a change in course. The latter view seems to be taking hold among the European electorate. This is appropriate. Much of what is being urged on and in Europe is likely to be not just ineffective but counterproductive to maintaining the monetary union, restoring normal financial conditions and government access to markets, and re-establishing economic growth.

The premise of European policymaking is that countries are overindebted, and so unable to access markets on reasonable terms, and that the high interest rates associated with excessive debt hurt the financial system and inhibit growth. The strategy is to provide financing while insisting on austerity, in hopes that countries can rein in their excessive spending enough to restore credibility, bring down interest rates and restart economic growth. Models include successful International Monetary Fund programs in emerging markets and Germany’s adjustment after the expense and trauma of reintegrating East Germany.

Unfortunately, Europe has misdiagnosed its problems in important respects and set the wrong strategic course. Outside of Greece, which represents only 2 percent of the euro zone, profligacy is not the root cause of problems. Spain and Ireland stood out for their low ratios of debt to gross domestic product five years ago, with ratios well below Germany’s. Italy had a high debt ratio but a very favorable deficit position. Europe’s problem countries are in trouble because the financial crisis under way since 2008 has damaged their financial systems and led to a collapse in growth. High deficits are much more a symptom than a cause of their problems. And treating symptoms rather than underlying causes is usually a good way to make a patient worse.

The cause of Europe’s financial problems is lack of growth. In any financial situation where interest rates far exceed growth rates, debt problems spiral out of control. The right focus for Europe is on growth; in this dimension, increased austerity is a step in the wrong direction.

Gross domestic product shrank 0.3 percent in January-March from the previous quarter according to preliminary National Statistics Institute data, unchanged from October-December and compared to a Reuters poll expecting a 0.4 percent contraction. Madrid is under intense pressure from its European peers to streamline the euro zone's fourth largest economy, reduce a massive public deficit and fix a banking system battered by a four-year economic slump and a burst property bubble.

On an annual basis the economy contracted by 0.4 percent compared with growth of 0.3 percent in the previous quarter, the data showed. Economists polled by Reuters, as well as the Bank of Spain, had forecast a slippage of 0.5 percent. "Spain's still very much in recession and we think that this isn't going to improve soon. It's likely they'll have to create more fiscal tightening in order to catch up if they wish to avoid going in to plan, and that's going to be counterproductive," economist at Citi Guillaume Menuet said.

The trip to Beijing would have been challenging for Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner even without a human rights dispute over Chen Guangcheng, who a US-based group says is hiding in the US Embassy in Beijing. The May 3-4 Strategic & Economic Dialogue is the last of such annual consultations before political seasons heat up in the United States and China, giving leaders in both countries less flexibility over contentious economic and security issues.

The United States goes into full campaign mode for the November presidential election, while China's ruling Communist Party enters a leadership transition in the fall that has been complicated by a scandal that toppled senior leader Bo Xilai. Bob Fu, whose religious and political rights advocacy group ChinaAid is the chief source of information about Chen, said he had confirmed "intensive talks" between the United States and China began right after the activist took shelter in the embassy on Friday.

"I was told the Chinese top leaders have been deliberating a decision to be made very soon," Fu said on Sunday by telephone from Texas. A "Chinese official response (is) expected in the next day or so," he added. The United States has not confirmed reports that Chen, who slipped away from under heavy surveillance around his village home in eastern Shandong province, fled into the US Embassy. China has also declined public comment on Chen's reported escape.

Chen, a self-schooled legal advocate who campaigned against abortions forced under China's "one child" policy, had been held under extra-legal confinement in his village home in Linyi since September 2010 when he was released from jail. Washington and Beijing both confirmed on Saturday that the high-level talks would proceed as scheduled, which analysts said indicated efforts to contain fallout from Chen on the larger relationship.

The ILO said the situation was likely to get worse amid slowing global growth and more people entering the workforce. High unemployment has been a concern in the US and other major economies and has hurt the global economic recovery. "It is unlikely that the world economy will grow at a sufficient pace over the next couple of years to both close the existing jobs deficit and provide employment for the more than 80 million people expected to enter the labour market during this period," the agency said in its latest report.

The ILO report comes at a time when some of the biggest economies in the eurozone are having to cut government spending in the wake of the region's ongoing debt crisis. The agency was critical of the austerity measures taken by Europe's economies, saying not only had they failed to bring down deficits but they had hurt economic growth and as a result impacted the jobs market. Data out last week showed that the unemployment rate in Spain hit a new record high of 24.4% at the end of March.

Unemployment in France also rose for the 11th straight month during March. The ILO warned that unless there was a change in policy direction, the job market would remain subdued until the end of 2016 and economic growth in the region may slow further. The ILO warned that a "new and more problematic phase" was emerging in the global labour market. It said that more than 40% of jobseekers in advanced economies had been without work for over a year, indicating that it was taking much longer for people to find jobs.

In an interview with several regional papers, German Chancellor Angela Merkel has reiterated that the ‘fiscal treaty’ on budgetary discipline “can’t be re-negotiated” – a clear response to the French Socialist presidential front-runner François Hollande’s recent pledge to block the ratification of the treaty unless a growth clause is added to it.

In Die Welt, Brussels correspondent Florian Eder writes, “IF IT CONTINUES LIKE THIS, THAT’S THE END OF THE EUROZONE”, noting that “the fiscal pact is the best thing Europe has. Now it has come to an end even before its introduction… If the rescue of the eurozone looks like that, then goodnight!” A separate article in the paper notes that up TO TEN EUROZONE COUNTRIES COULD SEEK TO RELAX THEIR STRICT AUSTERITY TARGETS, setting the scene for a showdown with Germany at the next meeting of EU finance ministers on 15 May.

Meanwhile, the EU/IMF/ECB troika yesterday completed the sixth review of the Irish bailout, praising Ireland for its implementation of the programme but also warning that “significant challenges remain” particularly in regards to its high deficits. European Council President Herman Van Rompuy has suggested that the EU could hold an informal summit focused on growth before the next meeting of EU leaders in June.

An increasing number of debtors cannot repay their credits on time. With their backlog of 143,8 billion Euros, the country's banks, in fact, can only refinance themselves through the European Central Bank. Italy is also slipping into the downward spin of cutbacks, growing unemployment, decreasing purchasing power and increasing social spending and, like Greece a few years ago, must already readjust its savings goals. Greece has been fully drawn into this development.

Last year, 68,000 enterprises went bankrupt - the volume of incoming orders has dramatically shrunk. A high number of bankruptcies is also expected this year. This offers German enterprises good opportunities for acquiring the fillet morsels of state enterprises at rock-bottom prices.

The time is right for cheap "bargain deals" in Greece. The disastrous economic situation is rapidly shrinking the value of public property now being put up for sale. Already last February, the Greek government was forced to radically reduce its original prognosis of expected receipts for 2015 from its privatization measures from 50 billion to merely 15 billion Euros.

Hence, it seems that particularly German companies are profiting from Athens' economic collapse, for which the austerity policy imposed by Berlin bears the brunt of the responsibility.

“The United States Air Force has deployed F-22s to Southwest Asia,” service spokesman Captain Phil Ventura said in a statement. “Such deployments strengthen military-to-military relationships, promote sovereign and regional security, improve combined tactical air operations and enhance interoperability of forces, equipment and procedures.” According to the report, the F-22 Raptor, manufactured by Lockheed Martin, is considered “the most sophisticated fighter in the world,” and the timing of the deployment could serve as a signal to Iran regarding the Islamic republic’s controversial nuclear program.

Air Force spokesperson Lieutenant Colonel John Dorrian would not specify what the mission of the F-22 would be, nor did he say how many planes were deployed, according to ABC News. Dorrian claimed, however, that the fighter jets posed “no threat to Iran.” The F-22 Raptors are now stationed at the Al Dafra Air Base in the United Arab Emirates, approximately 200 miles from Iran and 800 miles from Tehran.

Mr Pickles is currently obliged to fly the flag – a circle of 12 golden stars on an azure background – for a week each year, starting from Europe Day on May 9. But under the proposed change, drafted by the European Commission and due to take effect within the next two years, the flag would have to fly permanently outside any organisation which managed development funding from Brussels. Under the new rules, Mr Pickles, who is Secretary of State for Communities and Local Government, could even face being fined by the EU if he fails to comply.

Mr Pickles hit back: ‘Any organisation which forces others to fly its flag betrays a lack of confidence and a deep sense of political insecurity. Will forcing people to fly the flag help balance the EU budget? I don’t think so. Flying a flag should be a pleasure not a chore. There needs to be a more grown-up approach and a sense of proportion on this whole issue.’

The Minister was joined by Chris Heaton-Harris, Tory MP for Daventry, Northamptonshire, who last night said: ‘In a free country people should be able to choose if they want to fly a flag. This symbolises much of what is wrong in the EU – using propaganda tactics to prove they have influence over people. It is completely unacceptable and this idea should be dumped.’

The whole ghastly process is now set in motion. Not just for Chancellor Angela Merkel, but also for anyone who still had a modicum of hope that the worst of Europe's debt crisis had already been overcome. The opinion pollsters were right - François Hollande won the first round of the French presidential election last Sunday. According to all the polls, he will also win the runoff vote on May 6. If he wins, he would become the second Socialist president of the Fifth Republic, following in the footsteps of François Mitterrand.

For France's neighbors and the fight against the sovereign debt crisis in Europe, that will set everything back to square one. Hollande has said that if he's elected, he will seek to renegotiate parts of the already painstakingly negotiated European fiscal pact. He has disparagingly called it the "Merkel-Sarkozy" pact and says he wants to renegotiate it or block it if necessary. He is demanding that "austerity policies be complemented by growth." And while he's at it, he also wants to change the statutes of the European Central Bank so that it would also be given the official duty of facilitating growth.

One might argue that the calendar is about to be set back 40 years and that we are landing right back in the 1970s, in an era when economic policymakers had been infected by the ideas of John Maynard Keynes, and believed they could bridge economic downturns with ever more multi-million programs financed with debt. It was precisely this phase of recent economic history in which governments began to declare it as their right to accrue ever more debt, and it also laid the foundation stone for the policy of racking up debts that is now standard in all industrialized nations.

"The people of Europe expect that we, the people of France, will provide Europe with another perspective, another direction, another orientation," Hollande recently told his supporters. But what orientation will that be? It certain won't be one that leads to less debt and to living within one's means.

It's so nice to see Europe in agreement once again. Whether it's German Chancellor Angela Merkel, European Commission President José Manuel Barroso or French presidential candidates François Hollande and Nicolas Sarkozy - everyone seems to think a "growth pact" for the continent is a good idea. But it is precisely this agreement that should make one skeptical - because all the vague phrase really does is verbally lump together Europe's tremendous conflicts of interest.

The suggestion came from European Central Bank (ECB) President Mario Draghi. "We have had a fiscal compact," Draghi told the economic and monetary affairs committee of the European Parliament on Wednesday, referring to the treaty European governments signed in March, pledging to toughen their spending rules. "What is most present in my mind now is to have a growth compact."

Since then, the concept has garnered acceptance from all sides. "Growth is the key, growth is the answer," European Commission President Barroso said in a speech. In France, where the presidential campaign continues, both conservative incumbent Sarkozy and his Socialist challenger Hollande saw affirmation of their own positions on the issue. Hollande said it went in the same direction as his earlier policy suggestions, while Sarkozy said that a policy based on austerity alone would be a mistake.

It's clear to analysts, however, that Draghi has something different in mind with his "growth pact" idea. "For the ECB, a growth compact does not mean more fiscal stimulus," said analyst Carsten Brzeski at Dutch bank ING. Rather, the central bank sees it as "structural reforms with a vision," he said. Hollande's suggestions, on the other hand, are "good old-fashioned Keynesian stimulus of the economy" in the tradition of British economist John Maynard Keynes, he said.

In a country that has had one of the lowest suicide rates in the world, a surge in the number of suicides in the wake of an economic crisis has shocked and gripped the Mediterranean nation - and its media - before a May 6 election. The especially grisly death of pharmacist Dimitris Christoulas, who shot himself in the head on a central Athens square because of poverty brought on by the crisis that has put millions out of work, was by far the most dramatic.

Before shooting himself during morning rush hour on April 4 on Syntagma Square across from the Greek parliament building, the 77-year-old pensioner took a moment to jot down a note. "I see no other solution than this dignified end to my life so I don't find myself fishing through garbage cans for sustenance," wrote Christoulas, who has since become a national symbol of the austerity-induced pain that is squeezing millions.

Greek media have since reported similar suicides almost daily, worsening a sense of gloom going into next week's election, called after Prime Minister Lucas Papademos's interim government completed its mandate to secure a new rescue deal from foreign creditors by cutting spending further. Some medical experts say this form of political suicide is a reflection of the growing despair and sense of helplessness many feel.

Those companies, which include Wal-Mart Stores Inc, International Paper Co, Honeywell International Inc and United Parcel Service Inc, boosted their employment at home by 3.1%, or 113,000 jobs, between 2009 and 2011, the same rate of increase as the nation's other employers. But they also added more than 333,000 jobs in their far-flung — and faster-growing — foreign operations.

A provision of The Department of State, Foreign Operations and Related Programs Appropriations Act of 2012 said none of the funds “may be obligated or expended with respect to providing funds to the Palestinian Authority.” In signing the waiver, Obama instructed Clinton to inform Congress of the move, on the grounds that “waiving such prohibition is important to the national security interests of the United States.”

A $192 million aid package was frozen by Congress after the PA submitted its unilateral bid for United Nations membership last September. Members of Congress later released $40 million in economic and humanitarian funding for the PA, saying it is “vital to establishing and strengthening the foundations necessary for a future Palestinian state.”

After the funds were released, the State Department expressed concern about being able to provide the necessary funding to address the dire economic and humanitarian hardship facing the PA, and called for more funds to be freed.

Like other governments in the European Union, ousted Prime Minister Mihai Razvan Ungureanu's two-month-old cabinet has faced a wave of public anger against plans for spending cuts and tax hikes. Violent protests toppled his predecessor, Emil Boc. "Today justice was done," said Victor Ponta, head of the left-leaning opposition Social Liberal Union (USL). President Traian Basescu, a political opponent, nominated Ponta to try to form a new government as prime minister.

The defeat came hours before a confidence vote for another budget-cutting EU government, in the Czech Republic. Although Prime Minister Petr Necas survived, his unpopular cabinet may now be hamstrung by a thin majority, infighting among its scandal-plagued parties and public outrage over its policies.

Nicolas Sarkozy is on course in nine days to become France's first president to be voted out of office in 30 years, and a centre-right cabinet in Holland resigned this week over disagreement about budget tightening measures. "The end result seems to ... echo what we have been seeing in other countries in terms of a popular move away from the parties that are pushing for austerity," said Koon Chow, a strategist at Barclay's Capital, of the Romanian vote. "France, Holland, the Czechs - it's all connected."

Official figures due out on Monday are expected to confirm that Spain has fallen back into recession. Earlier this week, the Bank of Spain said the economy contracted by 0.4% in first three months of this year, after shrinking by 0.3% in the final quarter of last year. Other figures released on Friday showed that Spanish retail sales were down 3.7% in March from the same point a year ago, the 21st month in row sales have fallen.

In the first three months of the year, 365,900 people in Spain lost their jobs. The country has the highest unemployment rate in the European Union and it is expected to rise further this year. The rate has risen sharply since April 2007, when it stood at 7.9%."The figures are terrible for everyone and terrible for the government... Spain is in a crisis of huge proportions," Foreign Minister Jose Manuel Garcia-Margallo said.