Germany sold just 60 percent of the 6 billion euros in 10-year bunds it brought to auction, about the weakest demand seen for the country's debt in the currency's 16-year history, economists said. The rejection of debt from Europe's safe harbor marks a new stage for the crisis. "No bunds wanted equals no Euros wanted equals the Euro death watch," wrote Mark Steele, an analyst with BMO Capital Markets. "We have seen many poor German auctions. This is not the issue. The issue is how badly the euro is doing after the weak auction."

Recent reports have hinted at different workarounds of the euro treaty being discussed to effectively replicate quantitative easing in Europe. One option discussed was for the ECB to lend money to the IMF, which in turn would buy the toxic debt before it could spread to yet another country.

"It's too late for a bazooka," said Mitchell Goldberg, president of ClientFirst Strategy. "Now we need inter-continental ballistic missiles. This is getting worse very quickly."

"We are seeing the end of the euro currency as we know it," said Brian Stutland of Stutland Volatility Group. "I don't see a single thing that causes the euro to rally other than the Fed announcing a 'QE3' in which they buy euro foreign debt."

The Turkish president urged Syria's opposition to reach out and embrace the country's minorities, warning of a divide that could pitch the Muslim world back into the "darkness of the Middle Ages."

The Ankara government warned its citizens returning from the Hajj pilgrimage in Saudi Arabia not to travel overland as they usually do, through Syria, but rather to travel by air. In cases where travel by road is unavoidable, said the government, "journeys through Syria should be done during daylight hours."

Assad's violence, said Gul, could easily "drag the whole region into turmoil and bloodshed." A second Egyptian revolution was brewing in Cairo's Tahrir Square even as Gul told British policymakers, "Violence breeds violence. Now, unfortunately, Syria has come to a point of no return."

Josef Ackermann is a busy man this autumn. Hardly a day goes by that the Deutsche Bank chief, despite his impending departure from the bank, doesn't hold a speech on the current financial crisis that has gripped Europe. And more often than not, his talk centers on the immense problems faced by the sovereign bond market. Nobody, it would seem, wants state bonds anymore.

Germany's top banker is not alone with his concern about the problem. The entire financial world is in turmoil this autumn. Once seen as iron-clad investments, state bonds are no longer seen as secure - particularly since the European Union agreed to a 50 percent debt haircut for Greece in October. It can, warned Andreas Schmidt, president of the Association of German Banks, earlier this week, no longer be taken for granted that countries can turn to the capital markets to finance their budgets.

The truth of Schmidt's statement became readily apparent this week. On Tuesday, Spain auctioned off three-month and six-month bonds, a sale that in normal times would be quick and easy. Interest rates of 3 to 4 percent on such sales are normal. But this week, Madrid had to pay 5.11 percent and 5.23 percent respectively, the highest it has had to pay on such bonds in 14 years - and up significantly from the 3.30 percent it paid on six-month paper as recently as October 25. Even Greece didn't have to pay as much on a similar offering recently.

And the problem isn't just limited to indebted euro-zone countries. Banks too have run into difficulties as a result of the sudden aversion to sovereign bonds. Most of them, after all, have significant amounts of sovereign bonds on their balance sheets - making other banks extremely wary of lending to them. Indeed, the European Central Bank said on Tuesday that 178 banks borrowed 247 billion euros in one-week loans from the ECB - the most since early 2009 when the last financial crisis was at its peak.

The key to preventing that spiral from gaining momentum lies in the hands of the German government. Germany is, at the moment, the only euro-zone country that investors continue to trust unreservedly - which can be seen in the low interest rates that Berlin must pay on its sovereign bonds. It is a trust that Merkel's government is hesitant to loan out, as would be the case were so-called "euro bonds" - essentially a pooling of euro-zone debt - to be introduced. Experts, though, think that the chancellor will soon be forced to buckle. "I think that it is only a question of weeks before we have to say: all for one, one for all," says Keller.

The implication is clear. Either Germany will have to guarantee the debts of other euro-zone countries in the form of euro bonds. Or the ECB will have to jump in and buy massive quantities of bonds from highly indebted currency zone members. A third alternative doesn't exist.

Investors were also unnerved by reports that Belgium is leaning on France to pay more into emergency support for failed lender Dexia under a 90 billion euros ($120 billion) rescue deal that had appeared done and dusted. A special report by Fitch Ratings suggested France had limited room left to absorb shocks to its finances like a new downturn in growth or support for banks without endangering its cherished AAA credit status.

After one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the euro fell to 1.336 to the dollar and European shares sank to 7 week lows. "The debt crisis is burrowing ever deeper, like a worm, and is now reaching Germany," one of the more eurosceptic backbenchers in Angela Merkel's center-right government, Frank Schaeffler of the Free Democrats (FDP) who are the junior coalition partners, told Reuters.

The German debt agency was forced to retain almost half of a sale of 6 billion euros due to a shortage of bids by investors. The result pushed the cost of borrowing over 10 years for the bloc's paymaster above those for the United States for the first time since October. "It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London.

Yields on three-month Spanish notes jumped to 5.11 per cent at a sale on Tuesday, higher than rates paid by Greece last week. Mr Rajoy's team is scrambling to find ways to shorten the paralysing hiatus until mid-December when the new government is finally able to take charge under Spanish law. "We have to go beyond strictly legal requirements because the markets are not going to wait," said Miguel Arias Canete head of the Partido Popular's top body.

Close advisers to Mr Rajoy said the party will have to flesh out exactly how it plans to pull the country out of its downward spiral, and perhaps reach an accord with the outgoing socialists to start implementing emergency measures. The country may need 30 billion euros (26 billion pounds) in fresh cuts to reach its 4.4 per cent deficit target next year. HSBC said the country is in a race against time to avoid becoming the fourth EMU country to need a bail-out. "The question now is whether the new government is able to reassure markets that it can deliver quickly enough to beat back the market bears and avoid turning to the (EU-IMF) troika," said the bank's strategist Madhur Jha.

The move could see billions of pounds being poured into Italian coffers with very few strings attached - with Britain required to pay 4.5 per cent of the costs. The IMF decision will pile pressure on David Cameron to do more to protect British national interests from the Eurozone crisis. In a separate move yesterday, both German Chancellor Angela Merkel and French President Nicolas Sarkozy said they are working on plans to introduce changes to EU treaties to impose central controls over fiscal policy in countries in the single currency.

'We are soon going to make proposals on modifying the treaties to avoid countries diverging in budgetary, economic and fiscal matters,' Mr Sarkozy said. Mrs Merkel again rejected Mr Cameron's demands for the European Central Bank to act as lender of last resort.

And she made clear that countries which spend too much and 'break the rules' of Euro membership should have policies dictated to them - meaning by Berlin.

The timing is awkward for the Prime Minister, who last night faced demands that he call a referendum to let Britain have its say on the plans for a Eurozone fiscal union. Tory MP Mark Pritchard said Mr Cameron's plans to demand control of employment laws in return for signing off on a treaty would not be enough. 'Concessions to Britain cannot be a substitute for a referendum. The proposed treaty changes are significant, not minor, and concessions are no longer satisfactory. The British people need to be empowered and British national interests defended.'

Mr Cameron and Chancellor George Osborne have repeatedly said that money from the IMF should not be used as a substitute for the Eurozone sorting out its own problems.

Michael Mann, Phil Jones, Ben Santer, Tom Wigley, Kevin Trenberth, Keith Briffa - all your favourite Climategate characters are here, once again caught red-handed in a series of emails exaggerating the extent of Anthropogenic Global Warming, while privately admitting to one another that the evidence is nowhere near as a strong as they'd like it to be.

In other words, what these emails confirm is that the great man-made global warming scare is not about science but about political activism. This, it seems, is what motivated the whistleblower 'FOIA 2011' (or "thief", as the usual suspects at RealClimate will no doubt prefer to tar him or her) to go public.

As FOIA 2011 puts it when introducing the selected highlights, culled from a file of 220,000 emails:

"Over 2.5 billion people live on less than $2 a day."

"Every day nearly 16,000 children die from hunger and related causes."

"One dollar can save a life" - the opposite must also be true.

"Poverty is a death sentence."

"Nations must invest $37 trillion in energy technologies by 2030 to stabilize greenhouse gas emissions at sustainable levels."

Today's decisions should be based on all the information we can get, not on hiding the decline.

FOIA 2011 is right, of course. If you're going to bomb the global economy back to the dark ages with environmental tax and regulation, if you're going to favour costly, landscape-blighting, inefficient renewables over real, abundant, relatively cheap energy that works like shale gas and oil, if you're going to cause food riots and starvation in the developing world by giving over farmland (and rainforests) to biofuel production, then at the very least you it owe to the world to base your policies on sound, transparent, evidence-based science rather than on the politicised, disingenuous junk churned out by the charlatans at the Intergovernmental Panel on Climate Change (IPCC).

Full article - http://blogs.telegraph.co.uk/news/jamesdelingpole/100119087/uh-oh-global-warming-loons-here-comes-climategate-ii/

The former deputy prime minister, a long-time supporter of the single currency, said the public had "no idea" about the potential impact its collapse would have on the UK. But he believes Franco-German determination will secure the euro's future and pave the way for Britain to sign up. Both the Coalition and the Labour Party have ruled out adopting the euro in the foreseeable future.

Last month Prime Minister David Cameron suffered the biggest ever Conservative revolt over Europe as more than 80 Conservative MPs defied his orders and backed a referendum on Britain's membership of the European Union. Lord Heseltine, the peer in charge of the Government's 1.4 billion pounds regional growth fund, acknowledged that the Eurozone was in crisis, but said he was confident they would pull through to create a stronger economy.

"I think the chances are the euro will survive because the determination, particularly of the French and the Germans, is to maintain the coherence that they have created in Europe. Now they have got a hell of a problem, let's be frank about it, but my guess is that they will find a way through. I hope they will because the downside for the British economy of the euro going under is catastrophic. People have no idea of the scale of money British banks are owed by European banks. If the European banks start going it will be our banks that are on the line, our government on the line."

Thus, Germany would attain a predominating position in the most important European monetary institution - not only temporarily, but most likely on a long-term basis. The current principle of equality among sovereign countries would be cancelled. The demand, which has not yet been officially formulated by the German government, is a continuation of the reorganization of the Eurozone along the lines of German interests.

Berlin's leading politicians have commented on this reorganization, which has been taking place for quite some time saying Europe is facing "a new era." Volker Kauder, chair of the CDU/CSU parliamentary group and a confidant of the German Chancellor, succinctly summarized this development saying, "now Europe will speak German."

The economic crisis is growing worse as central European bank lending to such countries as Italy, Greece and Spain now has dwindled to a trickle because investors are backing away from funding the region's lenders. There isn't enough capital on hand to finance debt which is due to mature next year. Analysts believe there need to be dramatic changes in the structure of the EU if it is to survive.

They add that the EU is at the stage now where it needs to change to a more centralized parliament representing the respective members, who will have to give up some national sovereignty to create what amounts to a United States of Europe. "The old EU is finished," said one informed regional observer. "The 27-member bloc has never been as unpopular as it is today."

As is customary, the Pope sent his best wishes to the leaders of the countries the papal plane passed over as he headed for his three-day trip to Benin, his second apostolic journey to Africa. The flight, stretching more than 4,000 kilometers (2,500 miles) gave the Pontiff an opportunity to express his wishes for peace and stability in Tunisia.

He sent his best wishes to Algeria and invoked upon the whole country "the benefits of the Almighty. May the Most High bless Mali and grant to all its inhabitants prosperity and happiness," stated the telegram for this country. To Niger, the Holy Father expressed the hope that it will "live in prosperity and progress unceasingly in concord and peace."

For Burkina Faso the Pope voiced his hope that it would "live always in peace and fraternity" and that God would grant it prosperity and happiness. For Ghana he prayed for "God's blessings of peace and social harmony."

By imposing rule by unelected technocrats, it has suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic. This is the most remarkable thing of all: a giant leap forward for, or perhaps even the successful culmination of, the Goldman Sachs Project.

It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign debt drama, is under ex-Goldman management, and the investment bank's alumni hold sway in the corridors of power in almost every European nation, as they have done in the US throughout the financial crisis. Until Wednesday, the International Monetary Fund's European division was also run by a Goldman man, Antonio Borges, who just resigned for personal reasons.

Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname as "the Vampire Squid", and now that its tentacles reach to the top of the eurozone, sceptical voices are raising questions over its influence. The political decisions taken in the coming weeks will determine if the eurozone can and will pay its debts - and Goldman's interests are intricately tied up with the answer to that question.

Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers, argued that Goldman Sachs and the other large banks had become so close to government in the run-up to the financial crisis that the US was effectively an oligarchy. At least European politicians aren't "bought and paid for" by corporations, as in the US, he says. "Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions."

This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

The grave danger is that, if Italy stops paying its debts, creditor banks could be made insolvent. Goldman Sachs, which has written over $2 trillion of insurance, including an undisclosed amount on eurozone countries' debt, would not escape unharmed, especially if some of the $2 trillion of insurance it has purchased on that insurance turns out to be with a bank that has gone under. No bank - and especially not the Vampire Squid - can easily untangle its tentacles from the tentacles of its peers. This is the rationale for the bailouts and the austerity, the reason we are getting more Goldman, not less. The alternative is a second financial crisis, a second economic collapse. Shared illusions, perhaps? Who would dare test it?

One sailor, who served aboard Westminster but did not want to be named, said: "It is a joke. We were sent out there completely unprepared for attack. If we had come under attack I'm not sure what we would have done. We were pretty much sitting ducks." HMS Westminster was sent to Libya earlier this year to help evacuate civilians from Benghazi while civil war there was raging. Sea Wolf missiles can be fired singly. But they are often used in pairs which meant Westminster could effectively have had just two shots as self-defence.

Tory MP and Naval reservist Penny Mordaunt said this showed the latest round of defence cuts had "hollowed out the capability to a dangerous level". She added: "I am convinced, and so are other warfare officers I've spoken to, that Westminster would have been in danger." Retired Rear Admiral Chris Parry said: "This is yet another example of the incoherence of last year's Strategic Defence and Security Review.

"What if the Government's bluff had been called? What would the Ministry of Defence be saying if Westminster had been hit? They took a big risk." The Navy is set to be reduced to its smallest size in 400 years. It has lost its aircraft carriers and the Harriers which flew from them and is losing 5,000 personnel in the next four years.

When it comes to fiscal stability, frugality and responsible economic management, German Chancellor Angela Merkel and Finance Minister Wolfgang Schauble have only one role model: themselves. The chancellor praises herself and her team for having "a clear compass for reducing debt," and insists: "Getting our finances in order is good for our country." Her finance minister, a member of Merkel's conservative Christian Democrats, is no less effusive. Germany, says Schauble, is a "safe haven" for capital from around the world, because "the entire world has great confidence in both the performance and soundness of the fiscal policies of the Federal Republic of Germany."

Developments in the financial markets seem to bear him out. Last week, the suspicions of international investors reached the stable core of the euro zone. Investors embarked on a massive selloff of securities issued by supposedly model countries like Finland and Austria and sought refuge in German government bonds.

But it is debatable how much longer Germany can be seen as a refuge of stability and security. In reality, German government finances are not nearly in as good shape as the chancellor and the finance minister would have us believe. The way that certain important indices are developing suggests that Germany may not retain its position as a role model in the long term. Government debt as a percentage of GDP is already at more than 80 percent, which compared to other European Union countries is by no means exemplary, but in fact average at best.

When it comes to their debt-to-GDP ratios, even ailing countries like Spain are in better shape, with values significantly lower than 80 percent. Critics, irritated by Merkel's and Schauble's overly confident rhetoric, are beginning to find fault with Europe's self-proclaimed model country. "I think that the level of German debt is troubling," says Luxembourg Prime Minister Jean-Claude Juncker, whose country has a debt-to-GDP ratio of just 20 percent

The United States, the source of billions of dollars of aid vital for Pakistan's military and feeble economy, is unlikely to look kindly on peace talks with the Tehrik-e-Taliban Pakistan (TTP), which it has labeled a terrorist group. Past peace pacts with the TTP have failed to bring stability, and merely gave the umbrella group time and space to consolidate, launch fresh attacks and impose their austere version of Islam on segments of the population.

The discussions are focused on the South Waziristan region on the Afghan border and could be expanded to try to reach a comprehensive deal if progress is made. The Taliban, who are close to al Qaeda, made several demands, including the release of prisoners and the withdrawal of Pakistani forces from South Waziristan, said the commander.

An ethnic Pashtun tribal mediator described the talks as "very difficult." Pakistani military and government officials were not immediately available for comment.