Yields on Italy's 10-year bonds jumped back up to 6.7 per cent after Bundesbank chief Jens Weidmann dashed hopes for muscular intervention by the European Central Bank to stabilise bond markets and buy time for the new government of Mario Monti. Hours later, Germany's Chancellor Angela Merkel called for a "breakthrough to a new Europe, and political union" but ruled out Eurobonds, debt-pooling or any form of fiscal transfers to weaker EMU states in a speech to the Christian Democrat (CDU) party conference in Leipzig.

"What investors want to know is whether the ECB is ready to stand behind the bond markets because it is not clear who else is going to buy 350 billion euros of Italian debt over the next year," said Hans Redeker from Morgan Stanley. "If we had seen a credible government in Italy six months ago it might have turned market sentiment, but it may be too late now. What is really dangerous is that the market is losing confidence in France even though Paris is delivering a 65 billion euros austerity package. We are nearing the point where French bond yields will force rating agencies to downgrade France," he said.

Mr Weidmann is unrelenting. He said that the ECB is prohibited by treaty law from acting as a lender-of-last resort for states, whether directly or covertly through the International Monetary Fund.

Yet the crisis is escalating by the day. Moody's said it is not clear whether Europe's EFSF bail-out machinery can "fund itself in the markets at low cost", raising doubts about its ability to contain the debt crisis. The rating agency said plans to leverage the EFSF to 1 trillion euros have come to little, leaving it with just 266 billion euros after funding Ireland, Portugal and Greece. "This limits the EFSF's role as an important pillar of the euro area crisis management strategy," it said.

There is nothing yet standing behind the system as Europe spins wildly into the eye of the storm.

It follows the damaging revolt over Britain's relationship with Europe, in which senior Conservative MPs, including former cabinet minister John Redwood, spoke out against official policy. However, in an apparent olive branch to the rebels, it was reported in The Times that Downing Street was considering scrapping the planned 3 pence rise due in January.

However the Prime Minister's official spokesman would only say that decisions on taxation were a matter for the Chancellor. "We recognise as a Government that motoring is an essential part of everyday life for many families and fuel is a significant cost for those families," the spokesman said.

Campaigners are most concerned about the increase in petrol duty, which they yesterday called "aslyum economics". Quentin Willson, the TV presenter and spokesman for FairFuelUK, said: "Only someone on mind-altering medication would suggest piling yet more financial pressure on an economy that's already crumbling to the touch. Fuel duty in the UK has become a trojan horse that's corroding the economy from within. We need a cut, not another rise."

Virtually nothing is more sacred to Germans than their constitution, which is known as the Basic Law. It was originally planned as a stopgap measure, but it has seen the Federal Republic of Germany through the past 62 years. During the Cold War, political parties may have squabbled over conservative Chancellor Konrad Adenauer's political commitment to Western Europe and the United States - and they had their differences over left-leaning Chancellor Willy Brandt's Ostpolitik policy of normalizing relations with communist Eastern Europe, particularly with East Germany - but they immediately and unanimously praised the Basic Law. "We have one of the best constitutions in the world," German Chancellor Angela Merkel once said.

Now, it looks as if Merkel herself may order an overhaul of the German constitution. At the party conference of the chancellor's conservative Christian Democratic Union (CDU) which commenced on Monday morning, November 14, it is expected to approve a plan that could change the face of Europe - and perhaps make it necessary for the Germans to rewrite their constitution.

This operation to amend the constitution has already become one of the government's most delicate political initiatives. If it succeeds, it would remove one of the euro's biggest problems: The 17 euro-zone countries have a common currency but do not have a common finance policy, a fact which partly explains why the euro is teetering at the edge of an abyss. This is tackled in the key sentence of the new paper. "We need more Europe in key policy areas," it says.

But China can contain these dangers by freeing up financial markets to give investors, commercial banks and the central bank greater autonomy from government control, the fund said in its first-ever review of the Chinese financial system. While not predicting an imminent disaster, the IMF made clear China needed to act quickly because it is vulnerable to destabilizing asset price booms.

"The existing configuration of financial policies fosters high savings, structurally high levels of liquidity, and a high risk of capital misallocation and asset bubbles, particularly in real estate," the IMF said. The report, which was completed in June but published only on Tuesday, contains 29 key recommendations. The fund said it ran a stress test on 17 banks that account for 83 percent of China's commercial banking system.

The discovery of a murder pistol in the home of a suspected neo-Nazi sparked fears of the existence of a Brown Shirt faction, symbolic of Hitler's Brown Shirt police who stalked the streets after his ascension to power. The pistol was found in a house rented by "Beate K," a 36-year-old woman who blew up her rented apartment to destroy evidence before turning herself in to authorities.

Police determined that the pistol was used in the previously unsolved murders of a policewoman and nine foreigner businessmen, eight from Turkey and one from Greece, over a period of six years. The case is not being treated as a one-time affair, and investigators suspect an extreme right terror network may exist in Germany.

A second suspect, a 37-year-old German, suspected of having supported the National Socialist Underground, which also may have masterminded several bank robberies. Two other suspects committed suicide last week. "For the first time since reunification, Germany faces large-scale extreme-right extremism," wrote Berlin's Tagesspiegel.

The liberal Tageszeitung newspaper told its readers, "Observers are already talking about a possible 'Brown Army Faction' that could be secretly at work. Some legislators have urged a ban on the radical National Democratic Party, which parliament member Ralf Stergner called "a political arm of the Nazi scene and enemy of the constitution."

In two images, available on Google Earth, reflective rectangles up to a mile long can be seen, a tangle of bright white intersecting lines that are clearly visible from space. Other pictures show enormous concentric circles radiating on the ground, with three jets parked at their centre.

In one picture from 2007, a mass of orange blocks have been carefully arranged in a circle. In a more recent image, however, the blocks, each one the size of a shipping container, appear to have been scattered as far as three miles from the original site.

Another image shows an array of metallic squares littered with what appears to be the debris of exploded vehicles while another shows an intricate grid that is some 18 miles long. All of the sites are on the borders of Gansu province and Xinjiang, some less than 100 miles from Jiuquan, the headquarters of China's space programme and the location of its launch pads.

The purpose of the structures is unknown, but some experts suggested that they might be optical test ranges for Chinese missiles, to simulate the street grids of cities. Tim Ripley, a defence expert from Jane's Defence Weekly, compared the structures to similar grids in Area 51, the secret United States military test base in Nevada. "The picture of the circle looks very like a missile test range, with target and instrumentation set out to record weapon effects. The Americans have lots of these in Nevada - Area 51!" he said.

The yield on Italian 10-year bonds rallied early on Monday afternoon to 6.7 per cent, while equivalent Spanish bond yields hit 6.03 per cent, up from 5 per cent five weeks ago. It is the first time Spanish bonds have breached the 6 per cent line since the European Central Bank resumed debt purchases on August 8. It leaves Spain with borrowing costs closer to those of Italy as the ECB's purchases fail to cap yields, and reveals investors' scepticism as to whether eurozone leaders will be able to push through reforms to end the debt crisis.

Italian bond yields fell from a record high of 7.48 per cent last week as Silvio Berlusconi made his way for the exit, but jumped again today before Mario Monti, the new technocrat leader, had even named his ministers or laid out a timetable to form a government. "There's a high probability of Spain following Italy," said Phyllis Reed, head of fixed-income research at Kleinwort Benson Bank in London. "In the very short term, the trigger is just the fact that we're getting close to the edge of the abyss with the euro."

The front-runner People's Party has pledged to slash "superfluous spending" and not deviate from the budget target "under any circumstances". Spain is struggling with a 23 per cent unemployment rate, a budget deficit equal to 6.6 per cent of GDP and a two-year growth forecast of 0.7 per cent.

A rally on financial markets sparked by the appointment of respected European technocrats in Rome and Athens soon stalled. Analysts warned that daunting obstacles could hinder decisive action needed to breathe new life into their ailing economies. Italy had to pay a euro-lifetime record yield of 6.3 percent to sell five-year bonds with investors wary of buying its debt until prime minister-designate Mario Monti can undertake profound economic reforms.

In a first sign of trouble for new Greek Prime Minister Lucas Papademos, the leader of the main conservative party rejected any toughening of austerity and refused to sign a letter sought by European authorities pledging support for a new 130 billion euro bailout. Merkel dramatized the situation facing the euro zone in an attempt to rally her conservative party behind the government at a congress in Leipzig.

"Europe is in one of its toughest, perhaps the toughest hour since World War Two," she told her Christian Democrats (CDU), saying she feared Europe would fail if the euro failed and vowing to do anything to stop this from happening.

The US has raised repeated concerns about security at the London Olympics and is preparing to send up to 1,000 of its agents, including 500 from the FBI, to provide protection for America's contestants and diplomats, the Guardian has learned. American officials have expressed deep unease that the UK has had to restrict the scope of anti-terrorism "stop and search" powers, and have sought a breakdown of the number of British police and other security personnel that will be available next summer.

The prime minister and other senior members of the cabinet, including home secretary Theresa May and culture and sport secretary Jeremy Hunt, are taking turns to chair security meetings about the Olympics, which are often dominated by the latest questions from the US, sources said. But Washington's need for reassurance is exasperating British officials and anti-terrorism officials, who have privately raised concerns about the meddling, as well as the size of the US "footprint" in the UK during the games next year. "We are not equal partners in this," said one security official. "They are being very demanding."

The friction is adding to the pressures on the London Organising Committee of the Olympic and Paralympic Games (Locog), which is responsible for preparing and staging the event. The Guardian has learned the committee is attempting to resolve a potential crisis over venue security, after conceding it had underestimated the number of security guards needed at the 32 sites across the country. Originally it had thought 10,000 guards would be enough, but after a review over the summer it now believes it will need up to 21,000.

Italy's president asked former European Commissioner Mario Monti on Sunday to form a government to restore market confidence in an economy whose debt burden is too big for the euro bloc to bail out. Investors will pass initial judgement on his leadership when Italy's Treasury asks investors on Monday to bid for up to 3 billion euros (2.5 billion pounds) in five-year government bonds. At an auction last week, the government's borrowing costs surged above 6 percent and kept rising to levels well beyond what the country could afford to pay over the longer term.

While Italy's problems and the long-drawn-out departure of the flamboyant Berlusconi have pushed the collapse of the much smaller Greek economy backstage, the IMF and European leaders will keep Greece's new prime minister, Lucas Papademos, under pressure to implement radical reform aimed at staving off bankruptcy.

Papademos succeeds George Papandreou, whose proposal to hold a referendum on the country's bailout terms prompted EU leaders to raise the threat of a Greek exit from the currency bloc. The new Greek leader - a former central banker who oversaw his country's entry to the euro zone in 2002 - must win a Wednesday confidence vote in his cabinet before meeting euro zone finance ministers in Brussels on Thursday, state television reported, where he will be expected to outline next year's draft budget before putting it to parliament.

He urged President Assad to launch dialogue with the opposition to effect an orderly transition. Arab leaders have increasingly criticised the crackdown in Syria after months of violence. Both the Saudi and Qatari ambassadors left Damascus in protest at the repression. The Arab League voted on Saturday to suspend Syria's membership. However King Abdullah went further than other Arab leaders in his exclusive interview with BBC World News television.

King Abdullah's remarks, coupled with the Arab League's decision to suspend Damascus, mark a turning point in the Arab world's approach to Syria. But Jordan's monarch was emphatic that President Assad stepping down was not enough. His call to the Syrian leader was about changing a "system". He admitted that no-one was clear how to do that, and the Syrian regime still believed it was "in a fairly comfortable position".

King Abdullah, like many others, also emphasised there was great concern about "life after Bashar". He warned that any outside intervention in Syria would open "Pandora's box".

The US leader was rebuffed last month when he demanded private guarantees that no strike would go ahead without White House notification, suggesting Israel no longer plans to "seek Washington's permission", sources said. The disclosure, made by insiders briefed on a top-secret meeting between America's most senior defence chief and Benjamin Netanyahu, Israel's hawkish prime minister, comes amid concerns that Iran's continuing progress towards nuclear weapons capability means the Jewish state has all but lost hope for a diplomatic solution.

On Tuesday, UN weapons inspectors released their most damning report to date into Iran's nuclear activities, saying for the first time that the Islamic republic appeared to be building a nuclear weapon. It was with that grave possiblity in mind that Leon Panetta, the US defence secretary, flew into Israel last month on what was ostensibly a routine trip.

Officially, his brief was restricted to the Middle East peace process, but the most important part of his mission was a private meeting with Mr Netanyahu and the defence minister, Ehud Barak. Once all but a handful of trusted staff had left the room, Mr Panetta conveyed an urgent message from Barack Obama. The president, Mr Panetta said, wanted an unshakable guarantee that Israel would not carry out a unilateral military strike against Iran's nuclear installations without first seeking Washington's clearance.

The two Israelis were notably evasive in their response, according to sources both in Israel and the United States. "They did not suggest that military action was being planned or was imminent, but neither did they give any assurances that Israel would first seek Washington's permission, or even inform the White House in advance that a mission was underway," one said. Speculation about an imminent Israeli military action has been a regular occurrence over the years, but rarely as fevered as now. Last week, a British official even suggested that an attack could come before Christmas.

In Mr Netanyahu's eyes, Iran's president, Mahmoud Ahmadinejad, is another "Hitler" whose aim is to complete what the Holocaust failed to do by wiping out the Jewish race. "People outside Israel don't understand how profound memories of the Holocaust are, and how they affect future policy making," said Mr Bergman, the military analyst. "At the end of the day, this policy of 'never again' would dictate Israel's behaviour when intelligence comes through that Iran has come close to a bomb."

EU sources told Reuters that officials of France and Germany, since the 1950s the driving forces of European integration, had held discussions on a two-speed Europe with a smaller, more tightly integrated euro zone and a looser outer circle.

Estimates of how likely the currency bloc is to break up, how damaging it might be and what might remain afterwards vary wildly. But with European leaders still struggling to find a credible response to the crisis, the prospect of one or more countries leaving - and effectively defaulting on their sovereign debt as they do so - is seen rising by the day.

Suddenly, pundits, policymakers and other observers find themselves questioning one of their most fundamental assumptions - that an increasingly united Europe would be a key player in a newly multipolar world. "You already have one of the great pillars of globalization, the United States, entering a period of difficulty and looking inward," said Thomas Barnett, US-based chief strategist of political risk consultancy Wikistrat - which is being asked by several private clients to urgently model scenarios. "Now one of the other pillars, Europe, looks about to implode."

That, he said, could leave the continent's powers - who only a handful of years ago made up much of the G7 group of largest economies - increasingly sidelined as China, India, Brazil and others rose. At the very least, analysts say, the world may have to get used to a Europe that has lost much of its confidence and has much less appetite for international engagement.

For some, any unraveling of the euro zone - whether or not it brings with it a collapse of the wider EU - would be seen as yet another sign of much faster than expected western decline. "For India, China and many of the other new powers, they don't see simply a crisis of the euro zone," said Kleine-Brokhoff at the George Marshall Foundation of the United States. "They see a crisis of the rich world and it makes them even more confident that their time has come."

But that interpretation, some analysts say, could prove an illusion. "No one would be laughing - I don't think there would be any winners at all," said Michael Denison, a former senior adviser to ex-British Foreign Secretary David Miliband and now research director for consultancy Control Risks. "You'd have a banking and sovereign debt crisis that would hurt everyone."

The glut of homes on the market would then see supply outstrip demand, causing prices to crash. Brussels bureaucrats want to bring the UK's crucial buy-to-let sector into line with Continental practice. That would mean landlords could no longer get a buy-to-let mortgage based on rental income.

Instead they would have to rely solely on their personal income. There are about 1.5 million buy-to-let mortgages in the UK. Many landlords use second properties to back up their pension. A Ukip spokesman said last night: "It is outrageous that the EU should try to dictate to lenders and borrowers the basis on which loans should be enacted. This unwarranted assault on the buy-to-let market will inevitably result in less affordable rental housing. It will put the lives of 1.5 million British investors and their tenants into turmoil."

Some argued that "that was then and this is now," and that the Commission's influence had waned with the passing of the older generation. Nonsense! It was Trilateral Commissioner Vallery d'Estaing who authored the EU's Constitution in 2002-2003 when he was President of the Convention on the Future of Europe. On November 10, 2011, Robert Wenzel, Editor & Publisher of the Economic Policy Journal, wrote the following short report:

"Here's what you need to know about the current crisis in the Eurozone. The big time banksters are getting direct hands on control:

"Mario Drgahi has become president of the European Central Bank as of November 1. He was vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee. He was the Italian Executive Director at the World Bank. He has been a Fellow of the Institute of Politics at the John F Kennedy School of Government, Harvard University.

"Lucas Papademos takes over today as Prime Minister of Greece. He was an economist at the Federal Reserve Bank of Boston. He was a visiting professor of public policy at the Kennedy School of Government at Harvard University. And, he was previously a vice president of the European Central Bank. He has been a member of the Trilateral Commission since 1998.

"Indications are that Mario Monti will succeed Silvio Berlusconi as prime minister of Italy, within days. Monti completed graduate studies at Yale University, where he studied under James Tobin (see the Tobin Tax). He is a member of the European Commission. He is European Chairman of the Trilateral Commission and member of the Bilderberg Group.

"If you get the sense that the elitist banksters are going to take this financial crisis and push it in whatever direction they want, you are probably very right."