The financial losses for the year ended September 30 came despite deep cuts of more than 130,000 jobs in recent years and the closing of some smaller local post offices. Losses will only accelerate in the coming year, Postmaster General Patrick Donahoe warned, citing faster-than-expected declines in first-class mail. He implored Congress to take swift, wide-ranging action to stabilize the ailing agency's finances as it nears a legal deadline Friday to pay $5.5 billion into the US Treasury for future retiree health benefits.

Congress is expected to grant a reprieve, but that will only delay the day of reckoning for an agency struggling for relevance in an electronic age. Based on current losses, the Postal Service says it will run out of money - or come dangerously close - next September, forcing it to halt service. "We are at a point where we require urgent action," Donahoe said.

In the event of a shutdown, private companies such as FedEx and UPS could handle a small portion of the material the post office moves, but they do not go everywhere. No business has shown interest in delivering letters everywhere in the country for a set rate of 44 cents for a first-class letter. "The Postal Service is in a tailspin," said Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, which represents the private-sector mailing industry. "Without congressional action, there is a strong likelihood the Postal Service will have to shut down sometime next summer, dealing another critical blow to the economy and the 8 million private sector jobs that still depend on the mail."

Global stocks and the euro fell as Italian bond yields climbed back to unsustainable levels on doubts that Italy's Mario Monti and new Greek leader Lucas Papademos, unelected technocrats without a domestic political base, can impose tough austerity measures and economic reform.

European Central Bank President Mario Draghi has predicted the 17-nation currency bloc will be in a mild recession by the end of the year, a view underlined by data showing the economy barely grew in the third quarter and faces a sharp downturn. "The risks of a technical recession have increased and we expect the economy in Germany to shrink at least in one quarter," said Michael Schroeder of the German economic research institute ZEW.

On the markets, Italy's 10-year bond yield rocketed back above 7 percent, pushing its borrowing costs to a level that helped to trigger the fall of Silvio Berlusconi's government last week and is widely seen as unsustainable in the long term. Spain's Treasury paid yields not seen since 1997 to sell 12- and 18-month treasury bills. French banks are among the biggest holders of Italy's 1.8 trillion euro public debt pile.

The common currency fell as far as $1.3497 overnight as French bond yield spread over benchmark German bunds hit euro-era highs, and Italian yields shot back above the critical 7 percent level. It last stood at $1.3525, versus $1.3546 late in New York, below the ichimoku cloud base at $1.3568. A break and close below $1.3480 will pave the way for a move back to the October 4 trend low at $1.3145, traders said.

A turnaround on Wall Street, which closed in positive territory on the back of stronger-than-expected US data helped halt the euro's slide. But overall sentiment remained bearish. "While it is clear that the data in the US is improving, European concerns far outweigh at present," said David Scutt, a trader at Arab Bank Australia in Sydney.

"Markets are clearly expecting a circuit breaker to alleviate pressure on periphery bond yields. If no announcement is forthcoming in the days ahead, one suspects that situation could unravel fairly quickly."

- 'Only going after their [Britain's] own benefit, and refusing to contribute, is not the message we're letting the British get away with'

- Tory MP: 'British people will be horrified by what is going on in Europe'

- Gap between French and German government bond yields reaches record levels - revealing fears about Paris's exposure debt

The UK has a duty to help the eurozone despite being outside the single currency, according to one of Angela Merkel's closest allies. Even more provocatively, Volker Kauder warned Britain could not block a financial tax that would cost the City billions.

He insisted it was wrong for London to defend its own interests, adding: 'Only going after their own benefit, and refusing to contribute, is not the message we're letting the British get away with.' He said European nations were speaking German in that they were backing Chancellor Merkel's diktats. The comments will cause fury among senior Conservatives, who say Germany's refusal to prop up the euro threatens to drag the UK economy down as well.

British people will be horrified by what is going on in Europe,' said Philip Hollobone, a Eurosceptic Tory MP. 'Foreign policy going back to the time of Henry VIII has been to try to prevent conglomeration of power on the continent of Europe which would be against British national interests. Here we are in the 21st century with a German attempt to create a single economic and political bloc. This is Britain's golden chance to get out of the European quagmire and set ourselves free.'

Mr Kauder, parliamentary leader of Mrs Merkel's Christian Democratic Union party, insisted EU governments were backing Germany's push for closer integration of their economies in response to the turmoil. He said there was now widespread support for strict limits on debt levels in eurozone economies, with sanctions applied to any that step out of line. 'Now, all of a sudden, Europe is speaking German,' declared Mr Kauder. 'Not as a language, but in its acceptance of the instruments for which Angela Merkel has fought so hard.' He said Britain must be less self-centred in its relationship with Europe.

The Prime Minister used his annual foreign policy speech at the Lord Mayor of London's banquet on Monday night to insist that the crisis in the eurozone provided an opportunity for the EU be refashioned as a looser union.

The United States, European Union and their allies suspect Iran is trying to develop nuclear weapons and, along with the UN Security Council, have imposed sanctions to try to stop it from enriching uranium. But Tehran says its nuclear program is to generate electric power and refuses to halt it. "Iran developed a very sophisticated nuclear science and technological capability, which we are quite ready to share with... neighboring countries and friendly countries in the region," the adviser, Mohammad Javad Larijani, said.

"Turkey is for years trying to have a nuclear power plant but no country in the West is willing to build that for them," Larijani told reporters. "This is true for our Arab (neighbors) in the region. We are ready to cooperate with them in this regard, while within the NPT." He was referring to the 1968 nuclear Non-Proliferation Treaty, which aims to prevent the spread of atomic weapons technology.

"We can produce (nuclear power plants) together, share the electricity," he told Reuters in an interview. "This is also a source of income for us. It is not (just) Westinghouse that can build a nuclear facility, or Canada. Islamic Republic of Iran also is ready to build (a) nuclear facility. Also we can produce fuel," he said. "We think about this commercial value in the future."

Such attacks would present the Obama administration with the option of undertaking a limited war against Iran by striking its warships and shore-based anti-ship missiles to keep the Gulf open for business. Former CIA analyst Larry C Johnson said Iran has enough firepower to effectively close the Gulf and Strait of Hormuz, through which 40 percent of all the world's oil moves.

"One of the things that Iran has exercised, has the capability to do, is shut down the Persian Gulf," Mr. Johnson said. "The best-case scenario is they shut it down for a week. The worst case is they shut it down for three to four months." He said Iran could unleash small boats laden with explosives "that we don't have adequate covers for. Add to that the ability to fire multiple missiles. Our naval force will try to stop it, and that's the hope."

Iran this year launched an aggressive public relations campaign to convince the West that it has assembled a powerful arsenal of guided anti-ship missiles that can be launched from hard-to-find mobile batteries on shore. In addition, Tehran said in February that it had begun mass production of a ballistic missile with a range of nearly 200 miles. In August, Iranian President Mahmoud Ahmadinejad personally unveiled another anti-ship missile, the Ghader. "The best deterrent is not allowing the enemy to dare to attack the country," he said.

"Such an act I think would be foolish and to undertake it I think would be tragic," Prince Turki al-Faisal said at a Washington DC, appearance. "If anything it will only make the Iranians more determined to produce an atomic bomb. It will rally support for the government among the population, and it will not end the program. It will merely delay it if anything."

Tensions over Iran's nuclear ambitions have increased this month since the International Atomic Energy Agency (IAEA) reported that Tehran appeared to have worked on designing a bomb and may still be conducting secret research to that end.

The United States has advocated increasing pressure on Tehran through additional sanctions. But there has been speculation in the Israeli media that Israel might strike Iran's nuclear sites, and US Republican presidential candidate Mitt Romney declared in a debate on Saturday that he would be willing to go to war to stop Tehran from getting nuclear weapons.

The 12-page report to Congress, mandated by the 2011 Defense Authorization Act, was one of the clearest statements to date of US cybersecurity policy and the role of the military in the event of a computer-borne attack. "When warranted, we will respond to hostile attacks in cyberspace as we would to any other threat to our country," the report said. "We reserve the right to use all necessary means - diplomatic, informational, military and economic - to defend our nation, our allies, our partners and our interests."

Hostile acts, it said, could include "significant cyber attacks directed against the US economy, government or military" and the response could use electronic means or more conventional military options. Cyberspace is a particularly challenging domain for the Pentagon. Defense Department employees operate more than 15,000 computer networks with 7 million computers at hundreds of locations around the world. Their networks are probed millions of times a day and penetrations have caused the loss of thousands of files.

"There is a massive amount of frustration on the part of the private sector," Dmitri Alperovitch, the former vice president of threat research at McAfee, told an event hosted by the George C Marshall Institute. US companies are losing billions of dollars to cyber theft each year, he said.

Pope Benedict said: "In our troubled times, dialogue between different religions is becoming ever more important in the generation of an atmosphere of mutual understanding and respect that can lead to friendship and solid trust in each other. This is pressing for the religious leaders of the Holy Land who, while living in a place full of memories sacred to our traditions, are tested daily by the difficulties of living together in harmony".

"When I visited Jerusalem in May 2009, I stood in front of the Western Wall and, in my written prayer placed between the stones of the Wall, I asked God for peace in the Holy Land. I wrote: 'God of all ages, on my visit to Jerusalem, the City of Peace, spiritual home to Jews, Christians and Muslims alike, I bring before You the joys, the hopes and the inspirations, the trials, the suffering and the pain of all Your people throughout the world. God of Abraham, Isaac and Jacob, hear the cry of the afflicted, the fearful, the bereft; send Your peace upon this Holy Land, upon the Middle East, upon the entire human family; stir the hearts of all who call upon Your name to walk humbly in the path of justice and compassion. The Lord is good to those who wait for Him, to the soul that seeks Him!'

"May the Lord hear my prayer for Jerusalem today and fill your hearts with joy during your visit to Rome. May He hear the prayer of all men and women who ask him for the peace of Jerusalem. Indeed, let us never cease praying for the peace of the Holy Land, with confidence in God Who Himself is our peace and consolation".

According to a brief statement released by the Vatican press office, the Pope and Herman Van Rompuy spoke about THE CONTRIBUTIONS THAT THE CHURCH WANTS TO MAKE TO THE EUROPEAN UNION.

"In the course of the meeting, attention also turned to the promotion of human rights and, in particular, of religious freedom," the communique added. Van Rompuy went on to meet with the Holy Father's secretary of state, Cardinal Tarcisio Bertone, and the secretary for relations with states, Archbishop Dominique Mamberti.

From Wikipedia: Mario Monti holds a degree in economics and management from Bocconi University, Milan. He completed graduate studies at Yale University, where he studied under James Tobin, the Nobel prize-winning economist. He taught economics at the University of Turin (1970-85) before moving to the Bocconi University, of which he has been rector (1989-1994) and then president (since 1994). His research has helped to create the Klein-Monti model, aimed at describing the behaviour of banks operating under monopoly circumstances.

Monti is the first chairman of Bruegel, a European think tank founded in 2005, and he is European Chairman of the Trilateral Commission, a think tank founded in 1973 by David Rockefeller. He is also a leading member of the Bilderberg Group. Monti is an international adviser to Goldman Sachs and The Coca-Cola Company.

Reuters reports - "Mario Monti, the economist who will head an emergency Italian government following the departure of Silvio Berlusconi, brings credentials earned in a decade of battles as a European Commissioner from the 1990s. He is chairman of the European branch of the Trilateral Commission, a body that brings together the power elites of the United States, Europe and Japan and is also a member of the secretive Bilderberg Group of business leaders and other "leading citizens".

- Comes as US prepares to send 1,000 agents including 500 from FBI to protect its contestants

- Organising committee admits it needs to double the number of guards

Security chiefs are determined to put in place contingencies in case terrorists attempt to carry out an atrocity by flying an aircraft into a venue packed with fans. British troops would operate surface-to-air missile stations or shoulder-mounted man-portable air defence systems - or 'Manpads' - close to venues such as the Olympic Park in Stratford, East London.

The park, which will contain the 80,000-seat Olympic Stadium and the Aquatic Centre where swimming events will be held, would be a prized target for extremists. The former minister, who would have been aware of security plans for the event, said: 'Since the Atlanta Games there has been an internationally accepted minimal level of protection for the Olympics.' He urged ministers to ensure there would be 'a full range of multi-layered defence and deterrence for the London Games, including ground-to-air based missiles in London'.

The Defence Secretary replied: 'I can assure you that all necessary measures to ensure the security and safety of the London Olympic Games will be taken including, if the advice of the military is that it is required, appropriate ground-to-air defences.' It would be the first time surface-to-air missiles have been deployed in Britain since the end of the Second World War, according to an MoD spokesman.

The Army has a stockpile of around 340 surface-to-air missiles which can bring down a plane or a helicopter from long-range. The Starstreak high velocity missile and the Rapier towed missile system are laser-guided and can destroy incoming targets at a distance of nearly six miles. Another option for providing surface-to-air defence could include stationing one of Royal Navy's new missile-equipped Type 45 destroyers in the Thames.

The new Greek prime minister, Lucas Papademos, was the man who, as head of Greece's central bank, fiddled the figures to enable Greece to get into the euro (against the rules) in the first place - before being rewarded with a senior post in the European Central Bank. He is no more democratically elected than Mario Monti, who will most likely be Italy's new prime minister and had hurriedly to be made a "senator for life" to qualify him for the job. Monti's main qualification is that, as a former senior EU Commissioner, he has long been a member of the Brussels elite himself.

One of the few pleasures of watching this self-inflicted shambles unfolding day by day has been to see the panjandrums of the Today programme, James Naughtie and John Humphrys, at last beginning to ask whether the EU is a democratic institution. Had they studied the history of the object of their admiration, they might long ago have realised that the "European project" was never intended to be a democratic institution.

The idea first conceived back in the 1920s by two senior officials of the League of Nations - Jean Monnet and Arthur Salter, a British civil servant - was a United States of Europe, ruled by a government of unelected technocrats like themselves. Two things were anathema to them: nation states with the power of veto (which they had seen destroy the League of Nations) and any need to consult the wishes of the people in elections.

As Richard North and I showed in our book The Great Deception, this was the idea that Monnet put at the heart of the "project" from 1950 onwards, modelling his "government of Europe" on precisely the same four institutions that made up the League of Nations - a commission, a council of ministers, a parliament and a court. Thus, step by step over decades, Monnet's technocratic dream has come to pass.

The events of last week were by no means the first time that an elected prime minister has been toppled by the Euro-elite. The most dramatic example, as we also showed in our book, was in 1990, when Mrs Thatcher had emerged as the biggest obstacle to the next great leap forward in their slow-motion coup d'etat, the Maastricht Treaty, creating the European Union and the single currency. Following her ambushing at a European Council in October 1990, when she was outnumbered 11 to one, the trap was sprung. An alliance between the European elite, led by Jacques Delors, and our own Tory Europhiles, led by Geoffrey Howe and Michael Heseltine, brought her down within weeks.

They had disposed of the greatest political obstacle to the onward march of their project just as ruthlessly as they were later to brush aside all those referendums expressing the objections of the French, the Dutch and the Irish to their Constitution. The one thing for which there has never been any place in their grand design is democracy.

Yields on Italy's 10-year bonds jumped back up to 6.7 per cent after Bundesbank chief Jens Weidmann dashed hopes for muscular intervention by the European Central Bank to stabilise bond markets and buy time for the new government of Mario Monti. Hours later, Germany's Chancellor Angela Merkel called for a "breakthrough to a new Europe, and political union" but ruled out Eurobonds, debt-pooling or any form of fiscal transfers to weaker EMU states in a speech to the Christian Democrat (CDU) party conference in Leipzig.

"What investors want to know is whether the ECB is ready to stand behind the bond markets because it is not clear who else is going to buy 350 billion euros of Italian debt over the next year," said Hans Redeker from Morgan Stanley. "If we had seen a credible government in Italy six months ago it might have turned market sentiment, but it may be too late now. What is really dangerous is that the market is losing confidence in France even though Paris is delivering a 65 billion euros austerity package. We are nearing the point where French bond yields will force rating agencies to downgrade France," he said.

Mr Weidmann is unrelenting. He said that the ECB is prohibited by treaty law from acting as a lender-of-last resort for states, whether directly or covertly through the International Monetary Fund.

Yet the crisis is escalating by the day. Moody's said it is not clear whether Europe's EFSF bail-out machinery can "fund itself in the markets at low cost", raising doubts about its ability to contain the debt crisis. The rating agency said plans to leverage the EFSF to 1 trillion euros have come to little, leaving it with just 266 billion euros after funding Ireland, Portugal and Greece. "This limits the EFSF's role as an important pillar of the euro area crisis management strategy," it said.

There is nothing yet standing behind the system as Europe spins wildly into the eye of the storm.

It follows the damaging revolt over Britain's relationship with Europe, in which senior Conservative MPs, including former cabinet minister John Redwood, spoke out against official policy. However, in an apparent olive branch to the rebels, it was reported in The Times that Downing Street was considering scrapping the planned 3 pence rise due in January.

However the Prime Minister's official spokesman would only say that decisions on taxation were a matter for the Chancellor. "We recognise as a Government that motoring is an essential part of everyday life for many families and fuel is a significant cost for those families," the spokesman said.

Campaigners are most concerned about the increase in petrol duty, which they yesterday called "aslyum economics". Quentin Willson, the TV presenter and spokesman for FairFuelUK, said: "Only someone on mind-altering medication would suggest piling yet more financial pressure on an economy that's already crumbling to the touch. Fuel duty in the UK has become a trojan horse that's corroding the economy from within. We need a cut, not another rise."