The stark assessment comes ahead of a gathering of European leaders in Brussels that has been billed as a summit that cannot afford to fail. A crisis that began in Greece almost two years ago, has since ensnared Ireland, Portugal, Spain and Italy, and now threatens France and Germany. Rising bond yields across the continent will only alarm, rather than tempt investors until there's agreement on the future structure of the euro. "Yes, yields are higher but you have existential problems and risk that's hard to quantify," said Mr Balls, brother of Shadow Chancellor Ed Balls MP. "We're very cautious and we're underweight versus our indices."

A series of bail-outs for individual countries, accompanied by promises of austerity, have failed to convince global investors that monetary union can survive its first major hurdle since it was created more than a decade ago. China has, so far, baulked about committing cash to the European Financial Stability Facility and no sovereign wealth fund has stepped forward as a buyer of the bonds of the most indebted members of the euro. Mr Balls said that while it was not too late for European leaders to decide on their future, each carries "enormous execution risk and co-ordination risk. If you don't need to be invested in the eurozone, then go for better global alternatives".

The escalation in the crisis was underlined by last week's move by the world's major central banks, led by the Bank of England, to make dollars cheaper and more available to European banks needing to refinance loans.

Wolfgang Schauble outlined his plans under which states would effectively siphon off a chunk of their debt to a special national fund and pay it off over about 20 years while committing to reforms to keep debt levels on target. Schauble believes his proposal, which has won qualified support from Chancellor Angela Merkel, would boost confidence as states would be sending a signal they were serious about limiting debt levels to 60 percent of gross domestic product.

Investors are desperate for a sign from EU leaders next week that they can find a solution to the more than two year-old debt crisis which is having a knock-on effect on the global economy. Merkel is pushing for binding EU rules on budget discipline. "We need a redemption fund in every single country of the euro zone," Schauble told the Passauer Neue Presse.

"Each of these countries should put into a special fund that part of its debt which exceed 60 percent of its GDP, and should pay that off with tax revenues. Over a period of 20 years, the debt should be reduced to 60 percent," he said. In Germany's case, the fund - covering federal, state and municipal debts - would amount to about 500 billion euros (430 billion pounds) as German debt is around 80 percent of its gross domestic product, said Schauble.

Just eight of the UK's 48 Typhoon fighter pilots have enough training to take part in attacks on Colonel Gaddafi's troops, the influential Commons Public Accounts Committee reveals in a damning report out today. It comes just two days after Typhoons over Libya carried out their first attack. Defence sources said it was "no coincidence" they dropped the two Paveway II bombs on tanks just 48 hours before the MPs' highly-critical report was released.

The report found that the RAF is having to take spares from other aircraft just to keep the required number of Typhoons in the air. The committee said the MoD had warned the problems were likely to continue until 2015 until supplies reach a "steady state". The scathing report found: "The department relies on a small group of key suppliers who have the technical and design capability to build, upgrade and support the Typhoon."

"Problems with the availability of spare parts have meant they're not flying as many hours as the department requires. The department admitted it had not been managed well enough." The problem is the latest in a long line of bungles over the 20.2 billion pounds fleet of Typhoons, which will cost 3.5 billion pounds more than originally planned.

It has backed a wave of national strikes in member states from Britain to Hungary and raised the spectre of co-ordinated days of action across Europe next year. General secretary Bernadette Segol said: "Enough is enough. The future of Europe cannot be based on austerity, insecurity and social regression." The confederation has backed strikes in Ireland, Bulgaria, Hungary, Lithuania and France as well as a Europe-wide day of action by metal workers.

It plans to mount a legal challenge in the European Court of Justice to "demand the right to strike on trans-national issues". With 83 affiliated organisations across Europe, it could wreak economic havoc, dragging the eurozone and Britain with it back into recession. Jonathan Isaby, political director of the TaxPayers' Alliance, said: "The last thing we need here is trade union bosses in Brussels promoting strikes which would make it more difficult for the British economy to return to sustainable growth. British taxpayers will be alarmed that anyone is suggesting Europe-wide industrial action. If transnational strikes are the answer, what on earth was the question?"

Wednesday's walkout by more than two million public sector workers cost the British economy an estimated 500 million pounds. On the same day the Dublin Council of Trade Unions staged a March Against Austerity and there was a Bulgarian rally against reform of labour rights. This was followed by a day of action by Greek unions and on Friday Belgian unions staged an anti-austerity protest. Further walkouts are planned in Hungary and Lithuania this month along with a major demonstration by five French unions.

Nigel Farage, leader of the UK Independence Party, said it was clear that co-ordination of marches, strikes and rallies was already taking place without the need for a legal challenge in Strasbourg. "These people are fighting against an abstraction," he added. "The plain fact is that Europe is bust and they want to make it worse."

Saudi Arabia is already equipped with this EU jet fighter. The Persian Gulf dictatorships are considered the West's most important allies in a possible war with Iran, which western establishment circles envisage for next year. This is why, for years the countries on the Arabian Peninsula were supplied the most modern combat equipment and integrated in joint combat maneuvers. The Emirate Qatar, with which Berlin is intensifying its cooperation, has, since some time, been playing a major role. During the war on Libya, it was not only engaged with combat planes, it also had sent ground troops to support the West's allied rebels. German President, Christian Wulff will soon visit Qatar to intensify Berlin's relations to that dictatorship, which is offering more often to help Europe and the USA - in the meantime, possibly even in Syria.

There can be no doubt that the GCC dictatorships are disposed to support a war against Iran. The al Saud clan, as the "guardian of the Holy Sites of Islam," lays claim to playing a prominent role in the Arab world. Iran, with its great political and economic potentials, could develop into a predominating power at the Persian Gulf. From the beginning, their rivalry has always been wrapped around religion, with the Saudi Sunnites being in confrontation with the Iranian Shiites. The tension between Riyadh and Teheran intensified when, in 1979, Iran developed into a religious state. The founding of the GCC, May 25, 1981, constituted the Saudi effort to prepare itself for the impending conflict.

According to a recent article in the Lebanese press, since Iran's 1979 "Islamic Revolution," a sort of "cold war" has reigned between the two countries, and the Saudi media leave no doubt that a transition to a hot war is not to be ruled out. For example, recently when an alleged Iranian assassination plot was uncovered in the USA, a Riyadh journal wrote, Saudi Arabia has the right "to mobilize against this sort of terrorism." Another al Saud owned journal wrote that it is now clear that Iran "is the true enemy" of the country.

Concerning Saudi-Iranian relations, a commentator of a non-Saudi Arab language daily drew the conclusion that "war can be scented."

In an interview with The Daily Telegraph, Jacques Delors, the former president of the European Commission, claims that errors made when the euro was created had effectively doomed the single currency to the current debt crisis. He also accuses today's leaders of doing "too little, too late," to support the single currency.

The 86-year-old Frenchman's intervention comes the day after France and Germany took another step towards the creation of a full "fiscal union" within the European Union and David Cameron insisted that Britain must remain a major player in Europe. Mr Delors, who led the commission from 1985 to 1995, played a central role in the process that led to the creation of the euro in 1999. In his first British newspaper interview for almost a decade, he says that the debt crisis reflects a threat to Europe's global role and even basic Western democratic values.

Mr Delors claims that the current crisis stems from "a fault in execution" by the political leaders who oversaw the euro in its early days. Leaders chose to turn a blind eye to the fundamental weaknesses and imbalances of member states' economies, he says. "The finance ministers did not want to see anything disagreeable which they would be forced to deal with," he says.

The euro came into existence without strong central powers to stop members running up unsustainable debts, an omission that led to the current crisis. Now that the excessive borrowing of countries such as Greece and Italy has brought the eurozone to the brink of disaster, Mr Delors insists that all European countries must share the blame for the crisis. "Everyone must examine their consciences," he says.

When "Anglo-Saxons" said that a single central bank and currency without a single state would be inherently unstable, "they had a point", he admits.

And if European leaders make a mistake, it will not just be the eurozone countries that face upheaval and devastation. All of Europe, including Britain, will be plunged into a banking crisis which can only lead to financial catastrophe. Already the contagion is spreading across the globe. Credit markets are even tightening in China, which has so far been immune from any jitters. And this week the United States was panicked into leading a huge intervention into international money markets to rescue the tottering global banking system, amidst rumours that a major European bank was on the edge of insolvency.

This is why David Cameron chose not to delay meeting French President Nicolas Sarkozy until their formal encounter next week. The leaders met yesterday, and the Prime Minister has been told by officials that he can leave nothing to chance. Furthermore, I can reveal that Mr Cameron is facing overwhelming behind the scenes pressure from President Obama (who is panicking that a world economic collapse will ruin his re-election chances) and his Treasury Secretary Timothy Geithner to throw Britain's weight behind the rescue package being hammered together by France and Germany to pull Europe back from the abyss.

At home, Sir Mervyn King, the Bank of England's governor, is reinforcing this presidential edict. Sir Mervyn has warned that the euro collapse could plunge Britain (and much of the world) into a bigger depression than we suffered in the 1930s. The Bank's governor always chooses his words carefully, which is why his warning carries so much weight. It is nothing short of terrifying, as anyone with even the slightest knowledge of 20th-century history will realise.

The 1930s saw mass unemployment and financial calamity, with stock markets losing 90 per cent of their value. More ominously still, 1930-39 was the decade when mainstream politicians lost control of events, when the Nazis rose to power and the far Right took charge in Europe. By the end of the decade the world was at war, and the Holocaust - the greatest crime in human history - was about to begin in earnest.

"There have been more than 500 tremors in and around the caldera of Katla just in the last month, which suggests the motion of magma. And that certainly suggests an eruption may be imminent," Ford Cochran, National Geographic's volcano exert on Iceland, told the BBC. The volcano is also due a major eruption, having last blown its top in 1918.

A powerful eruption could have serious consequences for both Iceland and the world. In 1783 an eruption on the volcanic system to which Katla belongs to killed one fifth of the Icelandic population and half the island's livestock. It also managed to change the world's climate. "Folks talk about a nuclear winter this eruption generated enough sulphuric acid droplets that it made the atmosphere reflective, cooled the planet for an entire year or more and caused widespread famine in many places around the globe," said Mr Cochran.

An eruption could also trigger significant flooding in Iceland as it would melt the huge glacier that now covers the volcano. But scientists also said that despite its increased activity Katla may remain dormant as predicting an eruption remains an inexact art. Straddling two tectonic plates Iceland lies in one of the world's most active volcanic areas.

Mortgage rates are set to soar as the Governor of the Bank of England warned the 'extraordinarily serious and threatening' crisis in the eurozone is damaging Britain. The Bank's financial policy committee said banks were facing higher borrowing rates and may try to pass this on within months - resulting in a 'significant increase' in lending rates. The sobering report came as governor Sir Mervyn King issued a dire warning about the threat posed to Britain by the euro crisis - because our banks have more than 500 billion pounds tied up in European institutions.

Sir Mervyn said the situation was spiralling out of control and deteriorating conditions in the markets were 'characteristic of a systemic crisis'. 'Faced with a crisis of the euro area system, we are seeing at first hand the costs of financial instability,' he said. The Financial Stability Report raised the spectre of a rerun of the last credit crunch that crippled the banking system and plunged the global economy into recession. The Bank gave no estimate of the likely rise in mortgage rates - effectively to pass on increases in the inter-bank lending rates. But even a one per cent increase would add almost 1,000 pounds a year to the cost of a typical 140,000 pounds mortgage.

One economist said the report 'read like an obituary' and suggested the unusually stark language showed that 'alarm bells are ringing' at the Bank. Deputy Governor Paul Tucker described the situation as 'exceptionally perilous' and warned that 'anything could happen'. The warnings came just a day after central banks around the world joined forces to pump 'unlimited' amounts of cheap money into the financial system in a desperate bid to prevent another crash.

Regrettably, he's only telling it as it is. We stand on the brink, apparently incapable of pulling back. Events on the Continent have come to feel much like the drift into war. There is a feeling of powerless inevitability about it. Crisis summits come and go with no resolution in sight, but there's always the next one to set the world to rights, though we all know that in truth it won't.

Markets and politicians cling to the belief that in the end, the single currency won't be allowed to fail. The economic and financial consequences are thought too awful to allow for such an outcome. Yet as long as the eurozone's creditor nations continue to adopt their "can pay, but won't pay" approach to the crisis, it is hard to see how it can end in any other way.

Europe is already back in the midst of a credit crunch, with its banks largely frozen out of wholesale funding; eurozone banks have become so risk averse that they prefer to lodge their excess liquidity with the European Central Bank than lend to each other. Across the Continent, banks are shrinking their credit. How close are UK banks to being similarly engulfed? Sir Mervyn trod a fine line at his press conference on Thursday between warning banks to prepare for the worst on the one hand, and on the other trying to play down fears of a renewed funding crisis.

When someone borrows far more than they can ever repay, ultimately the creditor always takes a haircut. Essentially, that's what the eurozone crisis is about. The debtors are already insolvent, and the creditors find their own solvency threatened by the insolvency of their debtors. If Germany cannot find an orderly way of burden sharing with its fellow eurozone members, then it will be done in a disorderly way. Whichever it is, Germany will end up paying through the nose. It's only a question of degree.

The oddest thing about it is that Germans have not yet intellectually grasped this simple choice.

Mario Draghi's remarks have added to the picture. But goodness knows, we have been here before: there's still plenty of details to fill in, and plenty of time for disappointments. Also, even the most optimistic versions of the deal say nothing about the re-balancing of the European economy, which is not happening and will be crucial for any long-term success. The rosy scenario is a story of three acts, and as ever, the fiscal comes first. Chancellor Merkel will not budge on anything until she gets agreement on a new fiscal pact for the eurozone.

As Mario Draghi repeated today, the ECB needs this too: governments have do their part to make this a viable union, both right now and into the future. In the end, they need to change the treaties to legally bind countries into accepting collective control of budgets. But in the short term, Draghi seems confident a stop gap is possible which would help "frame expectations" in the markets. Some ECB watchers think it will encourage the ECB to do more as well. Here's part of what he said on the fiscal pact. Later I'll get to what he said about the ECB: "On the precise legal process that brings about a move towards a genuine economic union, we should keep our options open. Far-reaching Treaty changes should not be discarded, but faster processes are also conceivable."

If you assume this kind of fiscal pact is now within the leaders' grasp, plus some revamped policy commitments from countries like Italy, we would then move to the second act in this feel-good tale, in which Germany agrees to some form of collective underwriting of eurozone debt. Even on the optimistic view, this is presumably not going to be eurobonds, which the German Chancellor has trashed so often, and so recently. But, short-term, her agreement to stand by a more ambitious version of the European Financial Stability Facility (EFSF) could do the same job.

So, we are back to the main issue: will we see the ECB play a bigger role in "saving" the euro? I think it's inevitable. And I think Draghi is very carefully preparing the way. But governments will need to do a lot, too. And even then, don't expect him to ride in on a white charger labelled "lender of last resort to governments". It is much more likely to come as part of a monetary policy response to the dramatic deterioration of the economic situation, which will be exacerbated in the periphery by barely suppressed panic in sovereign bond markets.

In other words, the ECB's "rescue" it is likely to look more and more like quantitative easing.

He warned that economic convergence would be long and difficult. But he promised that France would not give up its sovereignty. He said the euro could not continue to exist unless eurozone economies pulled together. Europe had to be "refounded" he said, with France and Germany at its heart to ensure "a zone of stability".

"We must confront those who doubt the stability of the euro and speculate on its break-up with total solidarity. France is fighting so that Europe can still make its voice heard in the world of tomorrow," he said. Stricter financial discipline was needed, he added, with more severe sanctions for countries which did not meet their responsibilities.

Such a fiscal union would be "the most important element" in a chain of events, he said. "Sequencing matters." The ECB is under political pressure to step up its bond-buying programme. He said: "A new fiscal compact would be the most important signal from euro area governments for embarking on a path of comprehensive deepening of economic integration."

"It would also present a clear trajectory for the future evolution of the euro area, thus framing expectations." Mr Draghi, in the ECB job for only a month, said a "fundamental restatement" of the region's fiscal rules was essential. "What I believe our economic and monetary union needs is a new fiscal compact - a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made."

Stephanie Flanders, Economics editor, BBC News comments: "So, we are back to the main issue: will we see the ECB play a bigger role in 'saving' the euro? I think it's inevitable."

Figures from the Bank showed that the British economy could face a colossal liability of almost 200 billion pounds if the eurozone collapses. Sir Mervyn made clear that Britain is in danger of being dragged deeper into the economic mess despite being outside the eurozone. And he warned that resolving the crisis was "beyond the control" of the Government or the Bank of England.

He said: "In the UK, we must try to bolster the resilience of our financial system to better withstand the storms that may come in our direction." His extraordinarily candid assessment came just a day after Downing Street officials revealed that contingency plans for the break up of the eurozone had been "stepped up", while confirming a second credit crunch was underway.

Moscow has spoken out against further sanctions imposed by Western and Arab League states, and it has defended its right to sell Syria weapons - tens of millions of dollars worth last year. "The contract was completely fulfilled, almost ahead of time," Interfax cited the source as saying of the deal, estimated at $300 million. The source did not say when the deliveries had taken place. Russian Defense Minister Anatoly Serdyukov said in February that Moscow was pressing ahead with the deal despite Israeli concerns, indicating the missiles might have been delivered earlier this year.

"This weapon allows coverage of the entire coastline of Syria from possible attack from the sea," Interfax quoted the source as saying. Russia teamed up with China in October to veto a Western-backed UN Security Council resolution condemning Assad's government. Russia said the resolution could have opened the door to Western military intervention like in Libya, where it says NATO overstepped its Security Council mandate.