Insiders say Mr Cameron will be isolated and walk away with "nothing".

EU leaders will refuse even to discuss British objections to a proposed financial tax that would hammer the City of London and cost hundreds of thousands of British jobs. News of the plot came as a blow to Mr Cameron, who is already facing a backlash from some Tory MPs after ruling out a referendum on the EU shake-up.

He insists a referendum is not necessary because the proposed changes to the EU's constitutional treaty will only affect the 17 nations in the euro zone, yet Brussels sources said the treaty change will apply to all 27 members of the EU, including Britain.

"By 2am on Friday there will be a limited treaty change on a very precise aspect of European monetary union," said a European Commission source. It also emerged yesterday that bailed-out euro zone nations such as Greece, Ireland and Portugal could be stripped of their voting rights in the EU.

Extraordinary proposals circulated by EU Council president Herman Van Rompuy include sweeping powers for Brussels to impose austerity measures on debt-hit members of the euro zone. His document, to be debated at tomorrow's summit, included calls for "more intrusive control of national budgetary policies by the EU." In a further development that is spreading alarm among Euro sceptics, Mr Van Rompuy indicated that treaty changes giving the EU these new controls could be rushed through without votes in the parliaments of member states - or any referendums. His document, Towards A Stronger Economic Union, said: "This decision does not require ratification at national level. THIS PROCEDURE COULD THEREFORE LEAD TO RAPID AND SIGNIFICANT CHANGES."

"If the euro zone were to collapse IT COULD QUICKLY LEAD TO a political renationalization in Europe," Steinbrueck said in a speech to delegates at a party congress of the center-left Social Democrats (SPD). Steinbrueck, one of three SPD contenders to carry the party banner into an election due in two years, attacked Chancellor Angela Merkel for stirring anti-European sentiments in Germany by using terms like "transfer union" to refer to the euro zone.

"European integration is the answer for 1945 and it is the answer for the 21st century," Steinbrueck said in a speech broadcast live on several national television networks. His speech followed a warning from Standard & Poor's that it may carry out an unprecedented mass downgrade of euro zone countries if EU leaders fail to deliver a convincing agreement on how to solve the region's debt crisis in a summit on Friday.

Georgios Provopoulos, the governor of the central bank of Greece, is a man of statistics, and they speak a clear language. "In September and October, savings and time deposits fell by a further 13 to 14 billion euros. In the first 10 days of November the decline continued on a large scale," he recently told the economic affairs committee of the Greek parliament. With disarming honesty, the central banker explained to the lawmakers why the Greek economy isn't managing to recover from a recession that has gone on for three years now: "Our banking system lacks the scope to finance growth."

He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled 237.7 billion euros - by the end of 2011, they had fallen by 49 billion euros. Since then, the decline has been gaining momentum. Savings fell by a further 5.4 billion euros in September and by an estimated 8.5 billion euros in October - the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

The raid on bank accounts stems from deep uncertainty in Greek households which culminated in early November during the political turmoil that followed the announcement by then-Prime Minister Georgios Papandreou of a referendum on the second Greek bailout package. Papandreou withdrew the plan and stepped down following an outcry among other European leaders against the referendum, and a new government was formed on November 11 under former central banker Loukas Papademos. That appears to have slowed the drop in bank savings, at least for the time being. Nevertheless, the Greeks today only have 170 billion euros in savings - almost 30 percent less than at the start of 2010.

A French tricolor fluttering on a video screen provides the grand backdrop for Nicolas Sarkozy, who is about to take to the stage to talk sabout the euro crisis. The flag is huge, almost as if the organizers were attempting to allay any doubts that the speaker really is the French president rather than a mere emissary of German Chancellor Angela Merkel. When Sarkozy appeared in front of his supporters in Toulon last Thursday, he spoke of the "fear that France could lose control of its own destiny." His dramatic words were an appeal to French national pride, but his response to those fears was anything other than nationalist: "France and Germany have decided to unite their fate," he announced.

So-called "convergence" - greater alignment of the two countries - was the only way out of the crisis. There is no doubt which country wants to align itself with which. Later that day, one of his advisers said Sarkozy wanted "supply-oriented economic policies and debt reduction modeled on those of Gerhard Schroder," Merkel's predecessor. In his speech, the president even announced a "jobs summit" between employers and unions just like the one initiated by then Chancellor Schroder six years ago. The very next day the French daily newspaper Liberation ran an article under the headline "A President Modeled on the Germans," which claimed "If you closed your eyes, you could hear Merkel speaking" during Sarkozy's speech.

During a televised interview back in early November, Sarkozy uttered almost unimaginable words for a French president: "All my efforts are directed towards adapting France to a system that works. The German system." Speaking in Toulon, Sarkozy condemned the long-established French policy of buying economic growth by simply borrowing more. He said France could only overcome the current crisis through "work, effort, and controlled spending," objectives that sounded eerily German. Fortunately the tricolor was still fluttering, and the event closed with a rendition of the Marseillaise. In these days of crisis in Europe, the "German model" has become something of a magic formula. Like it or not, the dusty, dry Germans now seem to hold the key to European salvation.

Addressing the powerful Central Military Commission, Hu said: "Our work must closely encircle the main theme of national defence and military building." His comments, which were posted in a statement on a government website, come as the United States and Beijing's neighbours have expressed concerns over its naval ambitions, particularly in the South China Sea.

Several Asian nations have competing claims over parts of the South China Sea, believed to encompass huge oil and gas reserves, while China claims it all. One-third of global seaborne trade passes through the region. Vietnam and the Philippines have accused Chinese forces of increasing aggression there. In a translation of Hu's comments, the official Xinhua news agency quoted the president as saying China's navy should "make extended preparations for warfare."

The intelligence was revealed in a classified Capitol Hill briefing last month. Its existence was made public in a letter to Defense Secretary Leon E Panetta from five House Republicans. "As members of the House Armed Services subcommittee on strategic forces, we write out of concerns about new intelligence concerning foreign developments in long-range ballistic missile development, specifically ballistic missiles capable of attacking the United States," the November 17 letter said.

"We believe this new intelligence reiterates the need for the administration to correct its priorities regarding missile defenses, which should have, first and foremost, the missile defense of the homeland." Officials familiar with the intelligence said government analysts believe the missile could be a variant of North Korea's new Musudan intermediate-range missile, first disclosed publicly in October 2010. Other intelligence indicates that the new ICBM may be under development at a huge missile testing facility on North Korea's western coast. Prior to its mobile ICBM, North Korea's long-range missiles were the pad-launched Taepodong-1 prototype, and the Taepodong-2 (TD-2) dual-use ICBM and space launcher. The TD-2 was test-launched in April 2009.

Mobile missiles are difficult for tracking radar to locate, making them easier to hide. They also can be set up and launched much more quickly than missiles fired from silos or launchpads. China's military recently deployed two new mobile ICBMs, the DF-31 and DF-31A. It is not known whether North Korea's new mobile missile is based on Chinese technology. China in the past has provided missile technology to North Korea, a fraternal communist ally.

They claimed some were wounded, and were ferried away from the battle by Turkish military vehicles to Turkish army aid stations. "The border guards forces suffered no injuries or losses," the state news agency said. "They warned they would stop anyone who even thinks of touching Syria's security or its citizens." Turkey has provided a base and diplomatic cover to the Free Syrian Army, a growing band of defectors, and it is unlikely that an open attack with such a large group of men could have been planned without their awareness.

That alone is enough to draw the two former allies closer to open war, though both are likely to try to avoid it. Ahmet Davutoglu, Turkey's foreign minister, has already admitted he considers that a buffer zone inside Syria for refugees from the fighting might have to be considered, with outside military intervention if necessary. A widening and increasingly dangerous rift is forming between the main strategic alliances in the region. Iran and its allied militia in Lebanon, Hizbollah, are remaining loyal to Mr Assad but Hamas, another Damascus-based militant group, is making its unease clear.

Hassan Nasrallah, Hizbollah's leader, made his first public appearance in three years, at a rally to mark the Shia Muslim festival of Ashura in Beirut. He said he stood by Mr Assad as a fellow struggler in the "resistance" and said that America, the Satan, was trying to overthrow him to make up for defeat in Iraq. "A message to all those who are conspiring against the resistance and banking on change: we will never let go of our arms," he said. "We are tens of thousands of trained fighters, who are all ready to die."

"There were huge net capital outflows," said Eric Dor from the IESEG School of Management in Lille. The effects of this capital flight are surfacing on the Bank of France's books under the European Central Bank's so-called "Target2" scheme, an ECB payment network that lets funds move automatically where needed. Liabilities jumped suddenly in late July, rising from 10 billion euros to 98 billion euros by September. Ireland's central bank owes 118 billion euros, Spain's 108 billion euros and Italy's 89 billion euros.

The triple-trigger appears to have been a sudden drop in Club Med manufacturing orders, an ECB rate rise, and the EU's July summit - which led to haircuts on Greek bondholders and battered faith in EMU sovereign debt. Mr Dor said there had been an exodus from distressed states into German, Dutch and Luxembourg banks. This shows up in the Target2 data.

While the liabilities can in theory keep rising for ever within EMU, they signal grave imbalances, such as the North-South trade gap so long ignored until it proved fatal. They ultimately leave debtor central banks deep under water if the eurozone breaks up. "We are in unknown territory in terms of monetary theory," said Mr Dor. On the creditor side, the Bundesbank is left holding 465 billion euros in IOUs, and the Dutch central bank 89 billion euros, stoking fears that these countries could suffer a big loss if EU leaders fail to contain the crisis. The national central banks are also on the hook for the ECB's other operations.

The EU treaty may be rewritten to achieve greater fiscal integration within the eurozone. But that would require the agreement of all 27 members, including the UK. Meanwhile, Deputy Prime Minister Nick Clegg has told BBC Radio 5 Live that the "hand on the clock is moving to the 59th minute" in the eurozone crisis. Germany and France are developing a plan for greater fiscal integration among the eurozone's 17 members ahead of a crucial meeting on Friday.

Mr Cameron said he would be there "to defend and promote British interests", but stressed that the most important thing for Britain right now was to resolve the eurozone crisis. "If they choose to use the European treaty to do that then obviously there will be British safeguards and British interests that I will want to insist on, and I won't sign a treaty that doesn't have those safeguards in it." He added: "As long as we get those then that treaty will go ahead. If we can't get those, it won't."

City police have stepped up an effort to quell the movement since they occupied the building on 18 November, with the document stating: "It is likely that activists aspire to identify other locations to occupy, especially those they identify with capitalism. Intelligence suggests that urban explorers are holding a discussion at the Sun Street squat. This may lead to an increase in urban exploration activity at abandoned or high profile sites in the capital." The Occupy movement is listed alongside threats posed by the Revolutionary Armed Forces of Columbia (FARC), Al Qaeda and Belarusian terrorists.

"Just the words themselves are enough to deceive the public opinion and this is what we see at the moment," Occupy spokesman Spyro Van Leemnen told Yahoo! News. "We are clearly nothing to do with extremists or terrorists, we are a peaceful group and we do use direct action to raise our point but definitely not terrorism." Commenting on the document, City of London Police said: "[We] work with the community to deter and detect terrorist activity and crime in the City in a way that has been identified nationally as good practice."

"We've seen crime linked to protests in recent weeks, notably around groups entering office buildings, and with that in mind we continue to brief key trusted partners on activity linked to protests."

European share prices and the euro fell on Tuesday after ratings agency Standard Poor's warned it may downgrade 15 of the 17 euro-zone nations, including triple 'A' nations like GERMANY, as a result of the euro crisis. European policymakers criticized the timing of the announcement, just three days ahead of a make-or-break EU summit on Thursday and Friday, and said the agency hadn't taken into account proposals for far-reaching reforms of the euro zone's debt rules agreed by the leaders of France and Germany on Monday.

Standard & Poor's had warned late on Monday that it may carry out an unprecedented mass downgrade of euro-zone countries if EU leaders fail to reach an agreement on how to solve the debt crisis at this week's summit. Luxembourg Prime Minister Jean-Claude Juncker said the S&P announcement was "like a knockout blow" to countries that were cutting their budget deficits. "I FIND WHAT STANDARD & POOR IS SAYING COMPLETELY EXAGGERATED," Juncker said in an interview on Deutschlandfunk radio early on Tuesday. "I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit; THIS CAN'T BE A COINCIDENCE."

Bank of France governor Christian Noyer, a member of the governing council of the European Central Bank, said on Tuesday that ratings agencies were in danger of themselves worsening the euro-zone debt crisis. "THE AGENCIES WERE ONE OF THE MOTORS OF THE CRISIS IN 2008. ARE THEY BECOMING A MOTOR IN THE CURRENT CRISIS? That's a real question we all need to think about," he told a conference on corporate finance in Paris.

Hans Michelbach, a member of parliament for the conservative Christian Social Union party, the Bavarian sister party to Merkel's Christian Democrats, called the S&P warning "an arbitrary decision with no relation to reality." The aim of the announcement, he said, had evidently been to create additional nervousness ahead of the EU summit. HE CALLED ON THE EU TO CRACK DOWN ON THE "UNCONTROLLED GAMES" BEING PLAYED BY THE RATINGS AGENCIES.

Only one in six people in Britain think they live as part of a traditional family, according to claims by a new think-tank yesterday. Apparently, only a small minority come from 'traditional nuclear families' with married parents and two or more children, the Centre for the Modern Family said. Its report said the traditional family is out of date and that the Government should consider ways to support alternative family forms that are adopted by the majority.

But the group's research and findings were criticised by analysts who said that according to official statistics, six out of ten of all families with children are led by two married parents. Family researcher and author Jill Kirby said: 'A large majority of couples are still married. By painting the traditional family as a tiny minority this report is giving a false picture of life in Britain. It makes one wonder what their agenda is. Their data is absurdly fixed. It is at odds with the official data on the family.'

And one of the panel of experts that drew up the report, financed by the Scottish Widows insurance group, acknowledged that the low figure thrown up by its research was connected to the way the questions were framed. The report comes at a key moment for Government policy on the family, with a gap appearing to widen between supporters of ministers such as Iain Duncan Smith who would like to see the tax and benefit system changed to support married couples, and those who believe state support for marriage should take a low priority.

The report said: 'The majority of people feel their family is unrepresented by politicians, the media and advertising, with 52 per cent claiming the Government does not take their family set-up into account. The findings indicate family structures are becoming increasingly diverse. A quarter of all couples are childless, and one in five lives alone. As a result of this, half of the population believe society is out of date in its view of the family.'

Not on the evidence of Monday's press conference by Nicolas Sarkozy and Angela Merkel, where any agreement that might have been reached was about as clear as mud. Nor was there anything in what they said to address the immediate crisis. To the contrary, they merely reaffirmed the old position - the European Central Bank must not act as lender of last resort to sovereigns and eurobonds are out of the question. The upswing in markets is being called a "relief rally", but relief about what?

There was no solution offered to the looming funding crisis faced by Italy and Spain - and perhaps others too - and there was no plan for growth. Still, no matter; markets are determined to believe that salvation is at hand. Now obviously, it is always a mistake to read too much into the short-term movement of stock markets, and particularly the relatively common phenomenon of the pre-Christmas rally.

The cynical view of such rallies is that they are largely driven by the upcoming bonus season. With the annual scramble for bonuses already well under way, fund managers tend to plunge in for fear of getting left behind and underperforming their benchmarks. Quantitative easing in the UK and the US is also helping; investors are being driven out of low-yielding government bonds into higher risk securities. Recession in Britain this quarter and next, already pretty much pre-cooked, may soon prompt the Bank of England to increase the present programme of QE still further to something approaching the 200 billion pounds spent in the last round a couple of years back.

So far, talks seem to have concentrated almost entirely on putting in place an effective framework for controlling the fiscally ill-disciplined. It's being called "fiscal union", but as my colleague, Ambrose Evans-Pritchard, has already pointed out, this is not fiscal union at all, but merely a toughened-up version of the old stability and growth pact. It offers no prospect of support for countries that get themselves into difficulty, only punishment.

Whether any of this is enough to justify the optimism of equity markets remains to be seen. Either way, it doesn't look like good news for Britain, whose primary interest is the immediate problem of preventing a recession, not getting bogged down in the politics of treaty change. A toxic mix of the two - recession in Europe and politically explosive treaty change - still looks all too possible.

The Brotherhood's Freedom and Justice Party, as expected, emerged with the largest share with 36.6 per cent of the vote. Defying expectations, the far more funadamentalist al-eNour - the "Party of Light" - emerged in second place with 24.4 per cent. It is backed by Egypt's growing community of Salafists, adherents of one of the most puritanical strains of Islam.

With the moderately Islamist al-Wesat winning 4.3 per cent of the vote, religious parties are just shy of a two-thirds majority that would give them the power to draft a new constitution without reference to secular rivals, which made a poor showing. The rise of al-Nour has caused particular alarm among liberals. Their leaders openly espouse the introduction of the harshest interpretation of Islamic law. They call for women to be segregated and veiled, the ban of alcohol, the stoning of adulterers and the amputation of the hands of thieves.

Eurozone states should face greater checks on their budgets and sanctions if they run up deficits, they said. Mr Sarkozy said talks on a new treaty should be completed by March, to ensure such a crisis never happened again. The Paris talks come ahead of an EU summit on Friday that is being seen as crucial for the future of the single currency.

The announcement, and austerity measures unveiled in Rome over the weekend, led to Italy's long-term borrowing rate falling below 6% on Monday afternoon - the lowest it has been since October. Mr Sarkozy said things in Europe "cannot continue as they are" and that the Franco-German wish was for "a forced march toward re-establishing confidence in the eurozone".

"We are conscious of the gravity of the situation and of the responsibility that rests on our shoulders," he said. Mrs Merkel said France and Germany were "absolutely determined" to maintain a stable euro and wanted to see "structural changes which go beyond agreements".