A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011. BBC economics editor Stephanie Flanders says it "adds to the picture that the economy is bumping along the bottom". She said economic output was slightly smaller now than it was in the autumn of 2010.

Wednesday's figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions. The UK economy was last in recession in 2009.

In a rare concession, the German Chancellor admitted that austerity alone would not solve the crisis but she insisted that the wave of political opposition to fiscal discipline was wrong. "We're not saying that saving solves all problems," Ms Merkel said at a conference in Berlin. "But you can't spend more than you take in. You can't live your whole life this way. Everybody knows this."

Mark Rutte, the deposed Dutch prime minister, made a passionate plea to politicians to stick to his proposed budget cuts. "The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford," he said. "Those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters."

Mr Rutte said the Netherlands had to confirm its budget intentions in a letter to the European Commission by April 30. The Dutch far-right leader Geert Wilders said the cuts were unnecessary and would be bad for the Netherlands. The message was repeated in Spain. Treasury minister Cristobal Montoro told parliament: "We are in an extremely delicate moment as a country, an extremely fragile moment as a country. This is the most austere budget since democracy, and it is aimed at being the most realistic that Spain needs to overcome this crisis situation."

In 2011, 53 percent of all Americans with a bachelor's degree under the age of 25 were either unemployed or underemployed. Millions upon millions of young college graduates feel like the system has totally failed them. They worked hard in school all their lives, they went into huge amounts of debt in order to get the college education that they were told they "must have" in order to get a good job, but after graduation they found that there were only a handful of good jobs for the huge waves of college graduates that were entering the "real world".

All over America, college graduates can be found waiting tables, flipping burgers and working behind the register at retail stores. Unfortunately, the employment picture in America is not going to get significantly better any time soon. "Middle class jobs" are being replaced by "low income jobs" and young college graduates are being hurt by this transition more than almost anyone else. Massive numbers of young college graduates are now working jobs that do not even require a high school degree.

Speaking on BBC's Newsnight, he said: "Let's think of a Europe of democratic nation states not being dominated by German economic policy or unelected bureaucrats in Brussels. People do not want to live under German-dominated austerity and we're seeing a democratic rebellion across the whole of Europe." The comments come after French President Nicolas Sarkozy was beaten in the first round by socialist Francois Hollande.

It is thought that if Hollande does come to power in France, then he will act along an anti-austerity path leaving Germany isolated in Europe. George Magnus, senior economist for UBS bank commented: "Many of those in Greece and Spain have been pushing for an Hollande victory so that France will ease on the austerity measures, It will leave the German government at risk especially with the fall of the Dutch government. Many countries are frightened about what austerity will actually lead to for governments."

The change in policy comes amid concerns that the struggling country may not be able to remain in the single currency for much longer. The EIB will also include a revised currency measure in new loans with Ireland and Portugal. And it is planning to extend it gradually to all eurozone countries.

MEP Godfrey Bloom, UK Independence Party’s economics spokesman, warned: “This act by the EIB shows that at least one institution of the European Union has raised its eyes above the parapet and seen what is going on in the real world. Of course, the EIB has to work in the markets. Not to factor in Greek withdrawal would make their balance book look decidedly dodgy.”

“That they are using English law to draw up the contracts also shows the EU, despite its bluster and transparent desire to rip chunks out of the City, recognises that London is still the place to do business.” But the EIB denied that the move indicated the bank was preparing for a Greek exit from the euro.

“Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences,” Bernanke told the Senate Budget Committee Tuesday. “Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

Bernanke said that while nobody knows when a fiscal crisis will come, it is surely “ever closer.” “Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the US public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.”

Economists say the Government will have a tougher task meeting forecasts to reduce borrowing to £120 billion in the current financial year as the economy struggles and unemployment rises, which will hurt its tax revenues and increase benefits payments. Samuel Tombs, an economist at Capital Economics, said: "March's public finance figures suggest that the trend in the UK's fiscal position is continuing to worsen."

The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (Republican for Wisconsin) made the case for corporate tax reform at a recent townhall meeting. "GE was able to utilize all of these various loopholes, all of these various deductions - it's legal," Ryan said.

Nine billion dollars of GE's profits came overseas, outside the jurisdiction of US tax law. GE wasn't taxed on $5 billion in US profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.

"I asked the GE tax officer, 'How long was your tax form?'" Ryan said. "He said, 'Well, we file electronically, we don't measure in pages.'" Ryan asked for an estimate, which came back at a stunning 57,000 pages. When Ryan relayed the story at the townhall meeting in Janesville, there were audible gasps from the crowd. Ken Kies, a tax lawyer who represents GE, confirmed to The Weekly Standard the tax return would have been 57,000 pages had it been filed on paper. The size of GE's tax return has more than doubled in the last five years.

The isolated and impoverished state sacrificed the chance of closer ties with the United States when it launched the long-range rocket on April 13 and was censured by the UN Security Council, which includes the North's sole major ally, China. Critics say the rocket launch was aimed at honing the North's ability to develop an intercontinental ballistic missile capable of hitting the United States, a move that would dramatically increase its military and diplomatic heft.

Now the North appears to be about to carry out a third nuclear test after two in 2006 and 2009. "Soon. Preparations are almost complete," the source told Reuters when asked whether North Korea was planning to conduct a nuclear test. This is the first time a senior official has confirmed the planned test and the source has correctly predicted events in the past, telling Reuters about the 2006 test days before it happened.

The rocket launch and nuclear test come as Kim Jong-un, the third of his line to rule North Korea, seeks to cement his grip on power.

Pakistan's Shaheen-1A is an intermediate range ballistic missile, capable of reaching targets in India. Military officials declined to specify the range of the missile. The missile's impact point was in the Indian Ocean. India and Pakistan have fought three full-scale wars since they were carved out of British India in 1947. They conduct missile tests regularly and inform each other in advance.

The protests against the Obama administration’s policies could be “the game-changer” in the presidential election, one leading lay churchman told Newsmax on Tuesday. The protests, dubbed “A Fortnight for Freedom” will be an “unprecedented, aggressive attack” against policies that church leaders see as an assault on religious freedom, said Catholic Advocate chairman Deal Hudson. “The bishops are seeing – rightly – a pattern of emerging of hostility towards the Catholic faith for upholding protection of the life of the unborn and because of its position on contraception,” said Hudson.

And Bill Donohue, the president of the Catholic League pointed out to Newsmax that the protests will come around the time the Supreme Court issues its judgment on the constitutionality of the Affordable Care Act, also known as Obamacare. Unless the justices throw the act out completely, the protests could not be timed better, he said. “If the individual mandate falls and the rest stands it will be more important than ever for Catholics to step forward and get involved,” said Donohue. “We will have to make the point that we are not going anywhere.”

Donohue said the mandate to make insurance companies cover not only contraceptives but abortion-inducing drugs is the key, he said. “It was done on purpose as a wedge to open the door. If we don’t fight it the next step is to force Catholic hospitals to provide abortion facilities,” he said. “The idea that I as a Catholic should have to pay for some woman’s abortion makes me want to reach for the vomit bag.”

German Chancellor Angela Merkel is running out of allies in her drive to solve the euro debt crisis through strict austerity programs. French Socialist François Hollande looks on course to oust President Nicolas Sarkozy, who has been Merkel's most important partner in the fight to overcome the debt crisis, in a run-off vote on May 6 after beating him into second place in the first round on Sunday.

And Dutch Prime Minister Mark Rutte, whose minority government has been lecturing Greece and other high-debt countries about the need for strict spending cuts, resigned on Monday after the far-right Freedom Party of populist Geert Wilders refused to back budget cuts for the Netherlands, regarded as one of the most stable economies in Europe. Across Europe, right-wing populists are on the rise, winning votes from ordinary people disenchanted with cuts that have been making their lives harder. In France, the National Front of Marine Le Pen won 17.9 percent on Sunday, the highest result a far-right candidate has ever managed in France.

German media commentators say the popular backlash against austerity threatens to bring the euro crisis back with a vengeance after leaders had managed to put a lid on it in recent months. Matters were made worse by economic data this week pointing to a further slowdown in the European economy as the purchasing managers' indices for the euro zone fell sharply this month.

However, Commission officials are expected to argue the budget increase is needed to meet prior EU commitments. The BBC's Nigel Cassidy says the Commission has to pay for a string of long-term projects, such as infrastructure and research programmes, that it is legally obliged to cover.

The Commission will risk accusations of double standards as it has been leading calls for budget discipline throughout Europe, our correspondent adds. The British government is thought to be among those who would oppose any increase.

"The UK has been consistent that at a time when member states are tightening their belts, the EU must show budgetary restraint," a British government spokesman in Brussels told Reuters news agency. Poorer member states are meanwhile expected to lobby to keep the regional spending they say is essential for growth and creating jobs.

Quite simply, in most of the countries that make up the euro zone, there is no longer a substantial majority willing to make the sacrifices needed to keep the euro currency system together. This has always been true to some extent. Commentators have long talked about the euro zone’s “democratic deficit,” meaning Europe’s economic system is largely the creation of powerful political and business interests and lacks transparency, accountability and a broad popular mandate. But up until now, support by the elites has been more than sufficient to keep the system intact.

Over the next few weeks, however, the elites are likely to start losing their grip. A number of key European countries are facing elections, and the political parties that support the euro are expected to fare badly. In the most financially troubled European countries, popular resistance to austerity policies is mounting. At the same time, in those countries that are still financially stable, the electorate is growing increasingly unwilling to keep doling out money to keep the weaker countries from insolvency.

The real problem is that as popular support for the euro diminishes across the political spectrum, governments will be less willing to take the aggressive and sometimes painful measures needed to keep the euro zone together. When leaders know that the majority — or at least a large minority — of their constituents oppose a policy and are unwilling to accept its costs, they will be tempted to stand aside and let nature take its course. And in this case, the path of least resistance is simply to deplore the failure of the euro while doing little to prevent it.

The Spanish treasury said it raised €1.933 billion but the timing could hardly have been worse, with financial markets slumping on concern that Europeans are wavering in their commitment to austerity. The sale of three-month and six-month bills came a day after Spain's central bank declared the country had plunged back into recession in the first quarter of 2012.

Markets were shaken after a first round of French presidential elections on Sunday put Socialist Francois Hollande, who wants the euro zone to focus on growth rather than austerity, ahead of incumbent Nicolas Sarkozy. The two contenders face off in a final vote May 6. Further undermining stability, the Netherlands' government collapsed yesterday after failing to reach agreement over austerity measures, placing its AAA credit rating at risk.