The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies. Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad.

Capital flight from weak euro nations to countries such as the UK would drive up sterling, dealing a devastating blow to the Government's plans to rebalance the economy towards exports. Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe. The plans emerged as Spain's new finance minister Luis de Guindos warned the country's economy was set for negative growth in the last quarter.

Speaking yesterday he warned the next two months "are not going to be easy". Britain's response to the possible break up of the euro would reflect measures taken by Argentina when it dropped the dollar peg in 2002, according to sources. In addition to the risk of an appreciating currency, dealing with potential UK corporate exposures to the euro poses a considerable challenge for the Treasury.

The Ministry of Defence has been consulted about organising a mass evacuation if Britons are trapped in countries which close their borders, prevent bank withdrawals and ground flights. Treasury officials would not comment on the specifics of any plans but said the Government always had contingency plans that cover a full range of eventualities.

The stench of death pervaded the region, a sign that many corpses still remained unrecovered on land, Ana Caneda, the regional civil defence chief said. Tropical storm Washi brought heavy rains, overflowing rivers and flash floods to the southern Philippines from December 16 to 18, sweeping away whole villages built on sandbars and riverbanks.

"There are still a lot of areas we have examined that are stinking of dead bodies. We don't know how many people are buried under that mud," Ms Caneda told AFP, adding the toll could reach 2,000. "There are so many bodies being found, floating in the bays. If not for the small islands in the bays, they would be in the Pacific already," she said.

More than 376,000 people were displaced by the storm and almost 55,000 are still huddled in crowded makeshift evacuation centres, the disaster council said.

The coordinated attacks struck a dozen mostly Shiite neighborhoods on Thursday in the first major bloodshed since US troops completed a full withdrawal this month after nearly nine years of war. They also coincided with a government crisis that has again strained ties between Iraq's Sunnis and Shiites to the breaking point, tearing at the same fault line that nearly pushed Iraq into all-out civil war several years ago.

The claim of responsibility made no mention of the US withdrawal. Instead, it focused its rage on the country's Shiite-dominated leadership, which Sunni insurgents have battled since it came to power as a result of the US led invasion that toppled Saddam Hussein in 2003. "The series of special invasions (was) launched... to support the weak Sunnis in the prisons of the apostates and to retaliate for the captives who were executed," said the statement in the name of the Islamic State of Iraq.

According to the SITE Intelligence Group, a US based organization that monitors jihadist Web traffic, the claim of responsibility was posted late Monday on militant websites. The group said the attacks were proof that they "know where and when to strike and the mujahedeen will never stand with their hands tied while the pernicious Iranian project shows its ugly face." The remark was in reference to accusations by Sunni militants that Iraq's Shiite-dominated government has allied itself too closely with neighboring Shiite power Iran, a bitter enemy of Iraq under the regime of Saddam Hussein.

The Baghdad military spokesman, Major General Qassim al-Moussawi, said Al Qaeda in Iraq - no longer focused on fighting US forces - is hoping to take advantage of the current political tension to re-ignite sectarian warfare. "It has become a clear scheme to draw Iraq into a sectarian war again," al-Moussawi said. "Al Qaeda in Iraq played a major role in 2005 and 2006 in pushing the county into a civil war and they succeeded."

A senior Iranian lawmaker says the ongoing Velayat 90 naval drill aims to send a warning to the West that the Strait of Hormuz will be closed if Iran is threatened. The lawmaker stated that military drills also aim to increase Iran's deterrence power and prove its regional dominance. "The exercises send an important message to the whole world, especially the colonialist powers... and also show the power of [Iran's] armed forces, particularly [the country's] Navy," she noted.

Elahian added foreign media have admitted that Iran and its Navy are so powerful that if threatened, the country can take control of the Strait of Hormuz as the global economic and energy conduit. On Saturday, December 24, Iran's Navy launched a massive 10-day Velayat 90 naval exercise, covering an area stretching from the east of the Strait of Hormuz in the Persian Gulf to the Gulf of Aden.

Different classes of submarines, including Tareq and Qadir, the newest ground-to-sea missile systems and torpedoes have been employed in the maneuvers. Over the past years, Iran has made important breakthroughs in its defense sector and attained self-sufficiency in producing important military equipment and systems. The country has repeatedly clarified that its military might is merely based on the nation's defense doctrine of deterrence and poses no threat to other countries.

Opposition politicians characterized Asif Zardari, the president, on Sunday as bowing to US policy to roll back Pakistan's nuclear weapons program. They dredged up his offer in November 2009 to abandon Pakistan's "first strike" nuclear weapons posture against India in return for a comprehensive peace agreement.

India and Pakistan have waged three wars against each other since gaining independence from British colonial rule in 1947. They conducted tit-for-tat nuclear weapons tests in May 1998. "Our nuclear weapons are in safe hands, but they are under threat from the policymakers," Shah Qureshi, who until February was Pakistan's foreign minister, told an estimated 100,000 people at an opposition rally in Karachi.

Zardari's offer to abandon the first-strike policy was rendered irrelevant within days by the November 2009 terrorist attacks on Mumbai, India's biggest city, carried out by the Pakistan-based terorrist group Lashkar-i-Taiba. Considered India's 9/11, the attacks over three days claimed the lives of 164 people. Subsequent tensions with India prompted Pakistan to rescind the offer. Pakistan adopted a "first-strike" posture in 2000, citing the overwhelming superiority of India's conventional forces.

Pakistan has built a 10,000-man military force to guard its nuclear arsenal, partly in response to US concerns that a nuclear warhead could be seized by al Qaida or associated Pakistani militant groups. The Stockholm International Peace Research Institute, a leading global watchdog on arms proliferation, estimates Pakistan's nuclear arsenal at some 100 warheads - about 20 more than India.

The rising political rhetoric over Pakistan's nuclear weapons program coincided with the start on Monday of two days of confidence-building talks between India and Pakistan - the first in four years - aimed at reducing the risk of accidental war. The talks also coincided with India's preparations for the test in February of Agni-V, a 5,500km-range missile dubbed the "China-killer" by Indian defense analysts.

Pakistan has, to date, not tested any missile capable of travelling more than 2,100kilometers - the maximum distance to any Indian territory when various payloads are factored in, Pakistani strategic experts said. Pakistan was unlikely to respond to India's forthcoming missile test, because its own program is technically more advanced than India's, they said.

The UK government has pledged 20 million pounds to the fund - in addition to 40 million pounds already promised - but an estimated 45 million pounds shortfall is still expected next year. The international community must "wake up" to the challenge, he said. The CERF was set up in the wake of the Indian Ocean tsunami on Boxing Day 2004. It includes a grant element based on voluntary contributions from governments and private sector organisations and individuals.

BBC News correspondent Jonathan Beale says the fund was designed by the United Nations to speed up relief in crisis zones with one central fund, though many countries still choose to give bilaterally. ActionAid spokeswoman Jane Moyo told BBC Breakfast: "The importance of this fund is that it pre-positions money where it is most needed and it is important that people - other governments - pull their weight because then we can help people who are most in need, in their time of most need."

The fund has been hit hard by a series of natural disasters this year - the tsunami in Japan; an earthquake in New Zealand; famine in the Horn of Africa; and floods in Pakistan and the Philippines. Mr Mitchell said the increasing numbers of people living in low-lying or famine-prone areas meant the scale of future tragedies would be greater.

He said many countries wait for events to happen before offering money but he said this could affect critical emergency response work. He said in the first few hours of a disaster, when survivors are trapped in the rubble of an earthquake, delays and lack of resources could mean the difference between life and death. "This year the world has been rocked by devastating disasters and the evidence suggests this trend is likely to continue."

DONORS TO CERF IN 2011

UK - 94 million pounds

Sweden - 74 million pounds

Norway - 67 million pounds

Netherlands - 54 million pounds

Canada - 41 million pounds

Spain - 20 million pounds

Germany - 16 million pounds

Australia - 13 million pounds

US - 6 million pounds

Japan - 3 million pounds

France - 720,000 pounds

China - 500,000 pounds

Source: UN CERF website

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen-yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

China is Japan's biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world's second and third largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.

"Given the huge size of the trade volume between Asia's two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd. China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.

Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the US and Europe.

Japan has repeatedly expressed its willingness to help Europe contain its debt crisis, but has also stressed it wanted to see a convincing action plan before making any firm commitments. "Japan like other non-euro countries is prepared to do something, but unless European countries take decisive action it is hard to make those steps effective," a senior Japanese government official said. Lifting the combined size of the current bailout fund (EFSF) and the new permanent European Stability Mechanism (ESM) beyond the current 500 billion euros (419 billion pounds) would be a major step and an encouraging signal.

"We expect European countries will review the combined ceiling of 500 billion euro of EFSF (European Financial Stability Fund) and ESM in a very positive manner," the official told Reuters. European leaders agreed in Brussels earlier this month to accelerate the launch of the ESM by a year to mid-2012 with an effective lending capacity of 500 billion euros ($650 billion), but questions have arisen about the size and timing of contributions. Japanese officials said that while bringing forward the launch of the fund was positive, a more ambitious ceiling might be needed given that Europe had little success in bringing in outside investors to boost the firepower of the EFSF fund.

Japan, the United States, Canada and others have voiced their frustration with Europe's piecemeal progress and repeatedly called for bold steps that would create effective "firewalls" around the euro zone's weaker, heavily indebted economies.

PLO Executive Committee member Hanan Ashrawi said in an interview on Voice of Palestine radio that taking a Palestinian decision to withdraw recognition of Israel "will be the last option in case all other possible means fail." Ashrawi added that the PLO's decision to withdraw recognition of Israel has not been discussed, however.

"Prosecuting Israel is the first step in response to the Israeli racist projects, including announcing Jerusalem as a capital of the Jewish people and escalating settlement activities," she said, according to the WAFA news agency. She added that first grievances must be filed against Israel with international bodies over "settlement expansion" - Jewish construction in Judea, Samaria and Jerusalem.

He had actually witnessed a prisoner receive drugs from his visiting girlfriend as they kissed, while officers simply looked on. Mr Hardwick said: "I looked at the guys on the desk and they had it all on CCTV. I said, 'Did you see that? What are you going to do?' They said, 'Oh no, we can't stop them doing that, they're allowed'."

This incident indicated how prison officers had developed a "fatalistic" attitude about not being able to control drugs in jail, he said, adding: "Your starting point has to be that it is absolutely not acceptable. Your aim should be about getting people off drugs, not maintaining them."

The latest figures show a record 87,393 people spent Christmas behind bars this year. About half of all prisoners are thought to reoffend within a year of their release. Last year research found three in four criminals did not give up their life of crime. Mr Hardwick said: "There is obviously a revolving door for too many people."

Police in Madalla, Jos and Damaturu - the three cities targeted in Sunday's bombings - ramped up their investigations on Monday. Marilyn Ogar, a spokesman for the State Security Services would not confirm the number of arrests made in connection with the incidents, citing the sensitivity of the ongoing investigations. But she told the Daily Telegraph that police are "arresting as many people as possible" for questioning.

The Islamist group Boko Haram, which has ties to al-Qaeda and aims to impose sharia law across Africa's most populous country, claimed responsibility for the attacks. Nigeria's population is 167 million, with just over 50 per cent Muslim, and 48 per cent Christian. It is the second Christmas in a row that it has targeted churches with deadly results, leading to fears that it could set off a new round of sectarian clashes.

Meanwhile, Nigeria's National Emergency Management Agency, or NEMA, focused on ensuring that the victims in Madalla, were receiving attention. "Some of the dead bodies were just lying on the ground yesterday, because agencies were overstretched and there weren't enough vehicles," Yushau Shuaib, a NEMA spokesman said.

Mr Shuaib declined to comment on the emergency response to the bombings in Yobe state, of which Damaturu is the capital, where several police officers were reportedly killed, saying the situation in Boko Haram's home base was "too political." Meanwhile the government faced accusations that it was too slow to respond to the bombings and had shown indifference.

Every UK adult will have been given up to two presents they did not want this Christmas, each worth 48.41 pounds on average, research for online classifieds website Gumtree.com found. A third of unwanted gifts end up gathering dust in the loft or the back of a cupboard, 15% are given away to someone else, and 2% are binned. But half of Britons are too polite to express their true feelings about undesired presents and will thank the giver enthusiastically, according to the survey. Just 10% of people will admit they do not want the gift and ask for a receipt, and only 4% will be completely honest about what they think of the offering.

Hamish Stone, from Gumtree.com, said: "From our research it's clear that despite many people's best efforts, homes across the UK are going to be cluttered with lots of unwanted Christmas presents this year. Rather than letting them take up valuable space in cupboards and garages, we'd encourage people to sell the unwanted presents online and convert the bloopers to cash."

Homosexuality is illegal in many African countries, with some nations enforcing stiff penalties, including imprisonment, for people who engage in homosexual relationships and practices. US Secretary of State Hillary Clinton announced in early December that the United States would use the supply of aid as well as diplomacy as tools to improve gay and lesbian rights around the world.

Clinton said that a country's cultural or religious traditions were no excuse for discrimination and directed US government agencies to use foreign assistance to protect human rights and advance non-discrimination while working with international organizations to promote gay and lesbian rights.

Her statement came barely a month after British Prime Minister David Cameron also threatened to reduce aid to nations that did not respect the rights of homosexuals. Father Paul Samasumo, Zambian bishops' conference spokesman, said it would be wrong for Zambia to accept gays and lesbians simply because of donor aid. "Donor aid should not be tied to promoting immorality," Father Samasumo said in Lusaka December 20. But the government's information minister, Given Lubinda, assured that the country's leaders would not bow to outside pressure to respect and tolerate homosexuality in the nation.

The Palestine News Network (PNN) reported that head of the Islamic Waqf Department, Sheikh Azzam Al-Khatib, told its reporter that approximately 120 settlers entered the mosque under the guise of an Israeli "foreign tourism program". The settlers and the soldiers entered the mosque through the Al Mughrabi Gate and exited the mosque through the Al Silsila (Chain) Gate.

Al-Khatib stated that no clashes were reported between the Muslim worshipers at the mosque and the settlers. PNN stated that Al-Khatib said that he is "sorry that the settlers chose to mark their feast in such a manner". He added that the Waqf department rejects such programs conducted by the Israeli Tourism Ministry as they lead to provocation.

A Sunni-Shiite rift seems to be taking hold in Iraq, given the current political turmoil that broke out after the final departure of the US military from Iraq on Monday, when Iraq's Sunni Vice President Tariq al-Hashemi was charged with organizing assassinations and bombings. Prime Minister Nouri al-Maliki, a Shiite, called for Hashemi's arrest. The sectarian rift appeared to deepen on Thursday when a series of bombings hit Baghdad, killing at least 69 people in the Shiite districts of Iraq's capital.

Political experts speaking with Sunday's Zaman say a changing balance of power in favor of Shiites in the country would mean an inevitable rise in Iranian power across the Middle East, limiting Turkish regional influence politically and economically. Turkey sees Iraq as a doorway to the rest of the Middle East and has so far enjoyed warm ties with the Iraqi government that came to power following the US invasion in 2003. The Turkish government also announced plans recently that it could bypass Syria and use Iraqi routes for trade in the Middle East, after Syrian President Bashar al-Assad ignored Turkish calls for political reform in response to anti-regime protests, prompting Ankara to impose political and economic sanctions on Damascus.

Losing Iraq as a main trading partner as well as a passage to the rest of the Middle East would deal a major blow to Turkey's economic aspirations in the Middle East. Politically, experts say that despite expanding cooperation between Turkey and Iran over the past several years, the two countries pursue conflicting interests in the Middle East.