The lack of concrete progress in Greek debt talks, which officials have said are on the verge of a deal, kept markets on edge and for the single currency there was an element of profit-taking after its strongest week in more than three months.

The Greek deal is needed before agreement can be reached on a second bailout package which Greece needs to meet a 14.5 billion euros repayment on its debt due in mid-March. Otherwise Athens faces a messy default that could reverberate through European and world markets. "It is all pretty negative, Greece is still trying to get a deal and there are worries about contagion," said Joe Rundle, head of trading at ETX Capital.

The summit - the 17th in two years as the EU battles to resolve its sovereign debt problems - is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity. The summit is expected to announce that up to 20 billion euros ($26.4 billion) of unused funds from the EU's 2007-2013 budget will be redirected toward job creation, especially among the young, and will commit to freeing up bank lending to small and medium sized companies.

But discussions over the permanent rescue fund, a new 'fiscal treaty' and Greece will dominate the talks. Negotiations between the Greek government and private bondholders over the restructuring of 200 billion euros of Greek debt made progress over the weekend, but are not expected to conclude before the summit begins at 9:00 am EST.

Until there is a deal between Greece and its private bondholders, EU leaders cannot move forward with a second, 130 billion euro rescue program for Athens, which they originally agreed to at a summit last October. Instead, they will sign a treaty creating the European Stability Mechanism (ESM), a 500 billion euros permanent bailout fund that is due to become operational in July, a year earlier than first planned. And they are likely to agree the terms of a 'fiscal treaty' tightening budget rules for those that sign up.

The meeting is being held in the brand new AU headquarters which was a gift from China. At a cost of $200 million (£127 million), the building dominates the city's skyline. This comes at a time when China is seeking to strengthen its ties with Africa.

The mood at the end of the five-day meeting in Davos was somber, and more than 2,500 VIPs headed home Sunday concerned about what lies ahead in 2012. Plenty of champagne flowed in this alpine ski resort — but the atmosphere was flat and the bubbling enthusiasm of some past World Economic Forums was noticeably absent.

Despite some guarded optimism about Europe's latest attempts to stem the eurozone crisis, fears remain that turmoil could return and spill over to the rest of the world. And there were no answers to the widening inequality gap, but a mounting realization that economic growth must include the poor, that job creation is critical, and that affordable food, housing, health care and education need to be part of any solution.

Just before the forum began, the International Monetary Fund reduced its forecast for global growth in 2012 to 3.3 percent from the 4 percent pace it projected in September. Many other economic forecasters also predict a slowing economy, including New York University's Nouriel Roubini, who is widely acknowledged to have predicted the crash of 2008 and who said he might be "even slightly more bearish" on the new IMF forecast.

IMF Managing Director Christine Lagarde warned that the eurozone crisis is not the region's problem alone. "It's a crisis that could have collateral effects, spillover effects, around the world," she said. "What I have seen, and what the IMF has seen in numbers and forecasts, is that no country is immune and everybody has an interest in making sure that this crisis is resolved adequately."

The demonstrators had attempted to take over vacant buildings to use as their headquarters, they also broke into City Hall and tried to occupy a YMCA. Police spokesman Jeff Thomason told media most of the arrests came around 8 pm local time. Police took many protesters into custody as they marched through the city's downtown area, with some entering a YMCA building.

Officials say, at one point protesters began tearing down perimeter fences around the Henry J Kaiser Convention Center, as some attacked police officers, throwing rocks, bottles and other objects. Police declared an unlawful assembly and used force, according to the Oakland Tribune newspaper. While police were taking people into custody near the YMCA, about 100 officers surrounded City Hall, while others swept the inside of the building for protesters who had broken in. Inside the building, protesters burned flags, broke into an electrical box and damaged several art structures, according to Oakland Mayor Jean Quan.

Up and down West Coast, protesters have begun a massive blockade on the Pacific Ocean ports as part of a day of action under the umbrella of the Occupy Wall Street movement. In cities such as Oakland, Long Beach, Los Angeles, Seattle and Anchorage, demonstrators awoke early Monday morning to storm shipping facilities in America’s ports, in what organizers say is an attempt to “disrupt the economic machine that benefits the wealthiest individuals and corporations."

The ongoing anti-greed Occupy protests have seen too many instances of police using brutal tactics against demonstrators. Some says the US is militarizing its police force and squashing the very freedoms it is so keen to preach internationally. In recent months, US police officers have made an enemy out of those citizens using their freedom of speech to protest against corporate greed and corrupt politics, reports RT’s Marina Portnaya.

Today’s breed of law enforcers are dressed in riot gear and armed with heavy weaponry, body armor, flash bangs, tear gas, and potentially lethal projectiles. As tens of thousands of Americans assemble, cops have been accused of creating confrontation, not defusing it. Some veterans of the force can’t help but resent the situation. “It’s a travesty of democracy, the way the police are totally suppressing the people’s right to assemble and to protest. I joined the force to protect people’s rights to assemble and protest, not to squash them,” said Ray Lewis, retired Philadelphia police captain.

He told the prime minister that he will face a rebellion if he pushes ahead with plans to allow fully-fledged gay marriages. Marriage is set in history and the government cannot change it overnight, the second most senior cleric in the Church of England added. The Archbishop believes marriage must remain a union between a man and a woman.

Dr Sentamu said: ‘I don’t think it is the role of the state to define what marriage is. It is set in tradition and history and you can’t just change it overnight, no matter how powerful you are. We’ve seen dictators do it in different contexts and I don’t want to redefine very clear social structures that have been in existence for a long time and then overnight the state believes it could go in a particular way.’

The Government will open a consultation on its marriage reform bill in March, but the Church of England has already warned that same-sex couples will be able to have church weddings if David Cameron goes ahead with the plans. The Church’s lawyers last month said that weddings will have to be offered to same-sex couples under any scheme to open the full privileges and title of marriage to gays and lesbians.

The “Austere Challenge 12” drill, which is designed to improve defense systems and cooperation between the US and Israeli forces, was postponed on January 15 for what Israel said was “technical” reasons.

Ma’ariv reported that the postponement was initiated by Israel and was agreed upon by the Americans. After the drill was postponed, the report said, security officials denied that the postponement was linked to economic reasons and suggested that “at this time of year we should not attract attention and prepare for complex challenges” which lay ahead.

Ma’ariv also noted that in preparation for the drill, US military officers will arrive in Israel next week. About 3,000 US soldiers are expected to arrive in Israel to take part in the large-scale exercise, the report said, and they will be joined by about 2,000 IDF soldiers.

“The eurozone is a slow-motion train wreck,” Mr Roubini said. “Countries – and not just Greece – are insolvent. I think Greece will leave the eurozone in the next 12 months, and Portugal after.” The New York University professor of economics was speaking at one of the final sessions of the World Economic Forum annual meeting in Davos.

“There is a 50 per cent chance that the eurozone will break up in the next three to five years. This doesn’t look like a G20 world it looks like a G-Zero world because there is no agreement on global imbalances, how to change the international monetary system, international trade, banking regulation, on all the fundamental issues.”

The economist also warned that if the US and Iran went to war, oil prices would spike 50 per cent and there’ll be a global recession. “In the UK there is recession, even the US is not doing great, in India there’s a slowdown and they’re worried about that. In China, exports, infrastructure investment, real estate is slowing down, so there’ll be a significant slowdown in China this year,” he concluded.

The move will mean Greece losing control over its own budget, after Germany and the International Monetary Fund laid down increasingly harsh conditions for the indebted nation to receive its second £100 billion eurozone bail-out. With the country on the brink of default, Christine Lagarde, the managing director of the IMF, yesterday revealed that a “fiscal compact” was set to be signed by European Union leaders at their summit tomorrow.

The move to closer integration between the eurozone economies comes just days before Tory Euro-sceptics launch a campaign to repatriate powers over policing and justice already handed to the European Union. Conservative MPs will put pressure on the Prime Minister to harness a “block opt-out” that will allow Britain simultaneously to withdraw from European Arrest Warrants, compulsory sharing of data with other police forces, and more than 100 other laws handed to Brussels.

They will be angered by the EU’s new powers over eurozone countries, which will see institutions paid for by all of Europe’s taxpayers concentrating more of their staff and resources on members within the zone. Euro-sceptics also strongly oppose harmonisation of taxes. But global leaders see closer integration of the eurozone economies as the only answer to the ongoing debt crisis.

Mrs Lagarde, speaking at the World Economic Forum in Davos, said: “In addition to having a monetary zone, the eurozone needs to develop this fiscal consolidation compact that is currently under work and that we hope will be validated on Monday at the leaders' summit.”

The 30,000-pound "bunker-buster" bomb, known as the Massive Ordnance Penetrator, was specifically designed to take out the hardened fortifications built by Iran and North Korea to cloak their nuclear programs. But initial tests indicated that the bomb, as currently configured, wouldn't be capable of destroying some of Iran's facilities, either because of their depth or because Tehran has added new fortifications to protect them.

Doubts about the MOP's effectiveness prompted the Pentagon this month to secretly submit a request to Congress for funding to enhance the bomb's ability to penetrate deeper into rock, concrete and steel before exploding, the officials said. The push to boost the power of the MOP is part of stepped-up contingency planning for a possible strike against Iran's nuclear program, say US officials.

The Defense Department has spent about $330 million so far to develop about 20 of the bombs, which are built by Boeing Co. The Pentagon is seeking about $82 million more to make the bomb more effective, according to government officials briefed on the plan. Some experts question if any kind of conventional explosives are capable of reaching facilities such as those built deep underground in Iran. But US defense officials say they believe the MOP could already do damage sufficient to set back the program.

US Trade Representative Ron Kirk told Reuters that the team, announced by Obama last week, will include intelligence officials as well as representatives of other agencies in order to beef up US resources and crack open markets. "We want to make sure we aren't resource-constrained. Other countries know our budget and our resources... and so they'll game the system because they know that we're very discriminating on which cases we make," Kirk said in an interview.

"We don't want them to make... that bet that we don't have the resources to come after them if they're intentionally and unfairly discriminating against American exporters," Kirk said, speaking on the sidelines of the World Economic Forum in Davos, Switzerland.

He did not identify countries that could attract the attention of the unit, but Obama is under pressure to show business and voters he is taking a tough stance against China. Republican presidential candidates have slammed Obama's handling of Beijing ahead of November's elections. The US trade deficit with China is expected to have hit a record of about $300 billion in 2011.

Greek Education Minister Anna Diamantopoulou called the German plan "the product of a sick imagination". The European Commission said the budget "must remain the full responsibility of the Greek government". A German official told the Associated Press eurozone finance ministers were discussing the plan.

Stephen Evans BBC News, Berlin, comments: "The leaked document is a draft and the European Commission has already voiced its unease. But it clearly reveals the direction of German thinking: much tighter control of Greek policy-making. To control big economic decisions is to control much else.

But questions arise: what if a decision by a democratically elected government in Athens were vetoed by an unelected budget commissioner in Brussels, perhaps seen as the voice of Berlin? How might a decision be enforced?

The German government believes the nub of the Greek situation is that the government in Athens has over-spent, so must cut its spending. But politics may be less black and white. Democratic legitimacy plus the feeling of ordinary people are also factors - in a potent political mixture."

The European Commission says it wants to reinforce its monitoring of Greek finances, but Greece should retain sovereign control. Meanwhile, Greece and its private investors are close to a deal which will pave the way for a second bailout. Negotiators say a tentative agreement could be finalised next week.

Greece must reach agreement in the next few days in order to receive the next tranche of funds from its first bailout. It needs the money to pay off a significant number of bondholders whose bonds mature in March. Without the bailout funds, Greece could be forced into an uncontrolled default from the euro.

Mark Lowen BBC News, Athens, comments: "In reality, Greece's finances are already to a large extent controlled by foreign forces. The debt-stricken country has received enormous bailouts from the EU and IMF conditional on deep cuts and fiscal reforms drawn up largely by officials in Brussels. This new German proposal is clearly prompted by the widespread concerns that Greece is not succeeding in bringing its budget into order. Reforms have been slow and the budget deficit remains above target.

But ceding more control to Brussels would be deeply unpopular here. Most Greeks are against the austerity programme demanded by the EU and IMF. And much popular anger is directed at Germany as Europe's paymaster general. The fact that Berlin has raised this latest plan won't soften sentiments here."

Reviving Western concerns that his government is still contemplating unilateral military action against Iran, Ehud Barak gave one of the clearest signs yet that Israel's support for new US and EU sanctions remains strictly limited.

"We are determined to prevent Iran from turning nuclear," he told the World Economic Forum in Davos. "And even the American president and opinion leaders have said that no option should be removed from the table. "It seems to us to be urgent, because the Iranians are deliberately drifting into what we call an immunity zone where practically no surgical operation could block them."

Although Israeli intelligence and military officials have privately spoken of Iran's nuclear programme entering a "framework of immunity", it is the first time that a senior figure in Benjamin Netanyahu's government has done so in public. Israel's fears that it might soon be too late to launch military action were bolstered earlier this month when Iran announced that it had begun to enrich uranium at its Fordow plant, which is buried so deep within a mountain it may be impossible for Israeli warplanes or missiles to destroy.

“The United States says it will not allow Iran to be nuclear, but it is so blind that it hasn’t noticed that Iran has already become a nuclear state,” Khatami was quoted by Channel 10 News as having said. He added that the US has become isolated in the region, after its four “slaves” were removed from power. He was referring to former Egyptian President Hosni Mubarak, former Libyan strongman Muammar Qaddafi, former Tunisian President Zine al-Abidine Ben Ali and former Yemeni President Ali Abdullah Saleh.

Khatami also addressed the EU’s embargo on Iranian oil imports, which was announced this week, and said that the Europeans decided to wait with the implementation of the sanctions until July because their economic situation is no better than Iran’s. “Why did the Europeans decide to wait half a year before implementing the sanctions? The answer is simple - the Europeans have their own serious trouble - they were hit by the financial crisis,” he said.

Khatami added the embargo will hurt Europe more than it will hurt Iran, because Saudi Arabia will not be able to provide the required amount of oil to Europe, while the sanctions will only hurt 18 percent of Iran’s oil exports.