"Bond yields are at an all-time low. Even in the global financial crisis we didn't see bond yields at the levels that they have reached now ... THIS IS A FLIGHT FROM RISK ASSETS THAT IS UNPRECEDENTED," Burge said.

"The jobs number from the US was shocking and Spain is now becoming a big worry. On top of that everyone who thought Q1 would be the bottom for the Chinese economy has realized that this is a real slowdown that could go on," said Larry Jiang, Hong Kong-based chief investment strategist at Guotai Junan Securities. Analysts said the flight to bonds would continue until clarity emerged on issues such as the outcome of Greek elections due on June 17 and the recapitalization of European banks, now in the shadow of a Spanish banking crisis.

"It's not an issue of risk-on or risk-off anymore, IT'S NERVOUSNESS ALL OVER until a clear direction emerges on a long-term trend," said Hisamitsu Hara, chief foreign exchange manager at Bank of Tokyo-Mitsubishi UFJ. US jobs growth braked sharply for a third straight month in May and the jobless rate rose for the first time in nearly a year, with 69,000 jobs added to payrolls last month, the least since May last year. The weak data followed poor Chinese manufacturing and dismal European data on factory activity, rattling markets that had already been on edge over the deepening eurozone crisis.

The numbers fuelled speculation that the US Federal Reserve would have to launch FURTHER MONETARY STIMULUS to shore up growth. "If the European situation worsens, then the global interest rate and policy solutions would require coordinated actions by the Bank of Japan and the Federal Reserve to assure access to US dollar money markets, otherwise risk a contraction in global trade," said Richard Hastings, macro and consumer strategist at Global Hunter Securities.

The European Union is “like a bubble” – not a financial bubble but a political bubble – that could pop as a result of the eurozone crisis, Soros said. “In the boom phase, the EU was what the psychoanalyst David Tuckett calls a ‘fantastic object’ – unreal but immensely attractive,” he said. “In retrospect, it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank (ECB) their rights to create fiat money. They did not realize what that entails – and neither did the European authorities,” he said.

The eurozone needs a European deposit insurance scheme for banks, Soros said, as well as direct financing by the European Stability Mechanism (ESM) for banks, which “must go hand-in-hand with eurozone-wide supervision and regulation.” The “blockage” at the moment is coming from the Bundesbank and the German government, he said. German Chancellor Angela Merkel has been cautious about increasing Germany’s support for the rest of the euro zone.

Soros believes Germany will eventually do what it takes to keep the eurozone going because of the large losses German banks would suffer if it broke up and the damage to exports which could be caused by a return to the Deutschmark, which would likely be substantially stronger than the euro.

Soros said that too much blame had been placed on peripheral eurozone countries such as heavily indebted Greece and Spain, and that creditors like Germany had to share responsibility. “THE “CENTER” IS RESPONSIBLE FOR DESIGNING A FLAWED SYSTEM, ENACTING FLAWED TREATIES, PURSUING FLAWED POLICIES AND ALWAYS DOING TOO LITTLE TOO LATE. In the 1980s, Latin America suffered a lost decade – a similar fate now awaits Europe,” he said. “That is the responsibility that Germany and the other creditor countries need to acknowledge.”

Denmark’s central bank said it was battening down the hatches for a "splintering" of EMU. It has cut interest rates twice in a matter or days and pledged to do whatever it takes to stop euros flooding into the country. Contingency plans are on the lips of officials in every capital in Europe, and beyond.

On a single day, the European Commission said monetary union was in danger of "disintegration" and the European Central Bank said it was "unsustainable" as constructed. Their plaintive cries may have fallen on deaf ears in Berlin, but they were heard all too clearly by investors across the world.

Joschka Fischer, Germany’s former vice-Chancellor, said EU leaders have two weeks left to save the project. "Europe continues to try to quench the fire with gasoline – German-enforced austerity. In a mere three years, the eurozone’s financial crisis has become an existential crisis for Europe. Let’s not delude ourselves: IF THE EURO FALLS APART, SO WILL THE EUROPEAN UNION, TRIGGERING A GLOBAL ECONOMIC CRISIS ON A SCALE THAT MOST PEOPLE ALIVE TODAY HAVE NEVER EXPERIENCED," he said.

But former high-ranking officials of the German defence ministry told Der Spiegel that the government always assumed Israel was putting nuclear warheads on the Dolphin-class vessels. The article, based on a months-long probe, cited files from the foreign ministry in Berlin indicating the West German state was aware of the practice as early as 1961. In Israel, foreign ministry spokesman Yigal Palmor said only: "I can confirm that we have German submarines. It's no secret. As for the rest, I am not in a position to talk about their capacity," he told AFP.

Israel is the Middle East's sole if undeclared nuclear-armed power. Germany has already supplied Israel with three of the submarines in question, footing most of the bill, and another three are to be delivered by 2017 under a recently signed contract.

Benedict, 85, ended a weekend trip to Italy's industrial and financial capital Milan with a closing mass for an international gathering in which he praised traditional Catholic family values and re-stated his opposition to gay marriage. But in its Sunday edition, the Rome newspaper La Repubblica published documents it said it had received anonymously after the arrest of the pope's butler on May 23.

A note received by the newspaper said there were "hundreds more" documents and that the butler, Paolo Gabriele, was just a scapegoat. The furore over the leaked correspondence, which shows power-hungry cardinals and scheming within the walls of the city state, has gripped the Vatican just as it was recovering from a long-running scandal over sexual abuse by Roman Catholic priests in the United States, Ireland and other countries.

One letter, dated January 16, was sent by Cardinal Raymond Burke, an American who heads a Vatican department, to the pope's secretary of state, Cardinal Tarcisio Bertone. Burke complains that a decision regarding a liturgical matter was taken without consulting his office, which is responsible for such matters.

The person who sent Repubblica the documents also provided two letters signed by the pope's private secretary, Monsignor Georg Ganswein. The newspaper said those letters had everything but the letterhead and the signature whited out. The newspaper said that in the note accompanying the documents, the person who sent them said the contents had been whited out "so as not to offend the pope" but threatened to reveal the contents.

Short-term investments in goods and services like software are doing well, but long-term assets like "structures and buildings" reflect concern over the fate of the economy. "If you want to learn what the degree of uncertainty is — and the level I've been using for quite a long period of time is to watch what corporate executives do, what proportion of their cash flow they choose to invest in long-term assets. That number in the early part of 2010 was at the lowest ratio since 1935," Greenspan tells CNBC.

"There were equivalent things in the noncorporate area, there's a significant type of contraction, very much for the same reasons in residential buildings. In short, there is a fear of the future." Massive debts continue to stoke fears, and corporate executives know that markets can punish countries facing fiscal imbalances. Unfortunately for the US, policymakers aren't facing long-term deficits with enough urgency.

Most of the inhabitants of Chaulkhowa Nagaon village had been to a Bihu function. When the programme drew to a close, swarms of spiders suddenly descended from nowhere and started biting the people. The festive mood soon turned into one of panic with people bumping into each other and tripping over empty benches in their frantic bid to egress. Then on May 22, a team of life scientists from Dibrugarh University and Gauhati University arrived in Sadiya. Led by Dr L R Saikia, head of the Department of Life Sciences, Dibrugarh University, the team camped in the trouble spot for two days and nights and collected specimens. "As of now, we cannot give a specific name. It's similar to the tarantula, but it could be a whole new species. There aren't any arachnologists in the northeast, so it will take us a while to identify it. But whatever the species, it is a highly aggressive spider. It leaps at anything that comes close. Some of the victims claimed the spider latched onto them after biting. If that is so, it needs to be dealt with carefully. The chelicerae and fangs of this critter are quite powerful; but it's too early to declare it a killer spider. In fact, we are yet to test its venom and find out the toxicity," says Dr Saikia.

"We cannot say for sure that the fatalities were due to the venom; it could have been because of allergic reaction to the venom, which triggered cardiac arrest in both the victims. But all the bite patients first went to witch doctors, who cut open their wounds with razors, drained out blood and burnt it. That could have also made them sick. Also, we didn't administer any antivenin dose, as we were not sure if the spider was venomous," says Dr Anil Phatowali, superintendent, Sadiya Civil Hospital.

The head of the World Bank yesterday warned that financial markets face a rerun of the Great Panic of 2008. On THE BLEAKEST DAY FOR THE GLOBAL ECONOMY THIS YEAR, Robert Zoellick said crisis-torn Europe was heading for the ‘danger zone’. Mr Zoellick, who stands down at the end of the month after five years in charge of the watchdog, said it was ‘far from clear that eurozone leaders have steeled themselves’ for the looming catastrophe amid fears of a Greek exit from the single currency and meltdown in Spain.

The flow of money into so-called ‘safe havens’ such as UK, German and US government debt turned into a stampede yesterday. In Berlin the two-year government bond yield fell below zero for the first time, with the bizarre result that jittery international investors are now paying – rather than being paid – for lending to Germany.

There was a raft of dismal economic news from around the world, with manufacturing output falling in Britain and Europe, unemployment jumping in the eurozone and America, and fast-emerging economies such as Brazil and China showing signs of running out of steam. Mr Zoellick warned that the coming months could be as bad as the collapse of US investment bank Lehman Brothers in 2008.

Friday’s employment report showed that just 69,000 jobs were created last month, less than half of what Wall Street expected. The unemployment rate crept up to 8.2 percent from 8.1. On top of that, revisions made for March and April erased 49,000 jobs from those two months. “This alone doesn’t bring the Fed back in — but this combined with Europe brings the Fed back in,” said Mesirow Financial chief economist Diane Swonk.

“The Fed needs to keep its powder dry for a potential financial crisis (from Europe), and that possibility just went up. This underscores that we’re not an island.” Fed officials, including the more dovish, had been signaling that they are not ready to carry out another round of quantitative easing, or asset purchases. Those comments had lowered the market’s expectations for any action at the June 19 meeting.

It also was believed that the Fed would let its ‘Operation Twist’ expire on schedule at the end of June. Now, however, there are growing expectations that the Fed may move sooner than later. With inflation not a threat, some economists expect the Fed either to extend Operation Twist or go further with a new program.

The Fed’s Operation Twist involves its purchases of longer-dated Treasury securities, as it sells the same amount of shorter term securities, in an effort to bring down long-term rates. But those rates have fallen to new lows as fears of a euro crisis have risen. The 10-year Treasury Friday touched a record low of 1.439, and the 30-year was as low as 2.51 percent. As a result, ANOTHER ROUND OF FED EASING WOULD DO VERY LITTLE, Pierpont Securities chief economist Stephen Stanley said.

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?