Europe's strategic importance for the US military looks to be dwindling. As part of President Barack Obama's recently announced 10-year defense plan to reduce military spending by $487 billion (325 billion euros), Washington plans to withdraw half of its brigades from the Continent.

The US still plans to maintain a strong presence in the region, but will do so through rotating units instead, Defense Secretary Leon Panetta told the American Forces Press Service on his way to Fort Bliss, Texas on Thursday. About 40,000 US soldiers and 100,000 dependents are currently stationed in Europe, with three brigade combat teams in Germany and one in Italy. Brigades typically have between 3,000 and 5,000 soldiers.

US military bases are found in the states of Bavaria and Rhineland-Palatinate, where surrounding communities are economically dependent on their presence. The new plan to use rotating units would eliminate the presence of dependents, reducing costs for the military. The details emerged after the Pentagon recently announced a new strategy for cutting defense spending over the next decade, as ordered by Congress and Mr Obama. Not only will the US military change its focus to the Asia-Pacific region, but it will also increase cyber warfare efforts and the use of unmanned aircraft.

President Barack Obama, Defense Secretary Leon Panetta and other top officials have delivered a string of private messages to Israeli leaders warning about the dire consequences of a strike. The US wants Israel to give more time for the effects of sanctions and other measures intended to force Iran to abandon its perceived efforts to build nuclear weapons.

Stepping up the pressure, Mr. Obama spoke by telephone on Thursday with Israeli Prime Minister Benjamin Netanyahu, and US General Martin Dempsey, chairman of the Joint Chiefs of Staff, will meet with Israeli military officials in Tel Aviv next week. The high-stakes planning and diplomacy comes as US officials warn Tehran, including through what administration officials described Friday as direct messages to Iran's leaders, against provocative actions.

But Israel has declined to rule out a strike, as has the US. "It is the policy of the Israeli government, and the Obama administration, that all options remain on the table. And it is crucial that the ayatollahs in Tehran take this policy seriously," said Michael Oren, Israel's ambassador to the US.

US officials briefed on the military's planning said concern has mounted over the past two years that Israel may strike Iran. But rising tensions with Iran and recent changes at Iranian nuclear sites have ratcheted up the level of US alarm. "Our concern is heightened," a senior US military official said of the probability of an Israeli strike over US objections. Tehran crossed at least one of Israel's "red lines" earlier this month when it announced it had begun enriching uranium at the Fordow underground nuclear facility near the holy city of Qom.

Two of the new voting members this year on the Federal Open Market Committee, which sets interest rate policy, have recently suggested they would support more assets purchases. San Francisco Fed President John Williams said that sustained high levels of unemployment, as forecast by many Fed members, "does make an argument that we should have more stimulus." Another new voter, Cleveland Fed President Sandra Pianalto, said in a recent speech that economic models indicate the Fed "should be even more accommodative than it is today."

Already some Wall Street banks are building QE3 into their forecasts. Morgan Stanley fixed income economist David Greenlaw said he expects more easing to be announced this spring. Greenlaw said it's "based on an expectation that the bar is pretty low for additional accommodation and we do expect some modest slowing in economic activity in early 2012."

He sees Fed purchases beginning in June, around the time that Operation Twist is ending. The new program will likely concentrate on mortgage-backed securities in an explicit attempt by the Fed to provide more help to the housing market. Economist Dean Maki from Barclays doesn't believe more easing is necessary but he still puts a 40% probability on it happening. Maki suggests an April announcement would be most likely since that would be the next news conference for Fed chairman Ben Bernanke following the one this month.

Marine Corps General James Mattis, who heads US Central Command, won White House approval for the deployments late last year after talks with the government in Baghdad broke down over keeping US troops in Iraq, but the extent of the Pentagon moves is only now becoming clear. Officials said the deployments are not meant to suggest a buildup to war, but rather are intended as a quick-reaction and contingency force in case a military crisis erupts in the standoff with Tehran over its suspected nuclear weapons program.

The Pentagon has stationed nearly 15,000 troops in Kuwait, adding to a small contingent already there. The new units include two Army infantry brigades and a helicopter unit - a substantial increase in combat power after nearly a decade in which Kuwait chiefly served as a staging area for supplies and personnel heading to Iraq. The Pentagon also has decided to keep two aircraft carriers and their strike groups in the region.

Earlier this week, the American carrier Carl Vinson joined the carrier Stennis in the Arabian Sea, giving commanders major naval and air assets in case Iran carries out its recent threats to close the Strait of Hormuz, a strategic chokepoint in the Persian Gulf, where one-fifth of the world's oil shipments passes.

"The Temple Mount Struggle paid off. Uniformed IDF soldiers proudly walk all over Jerusalem, and so Israel declares 'The Temple Mount is Ours'." Danon spearheaded the struggle to enable access to the Mount and after many demands from the government and security system and much promotion of the issue, he said, "The ascent of the soldiers is proof of the might of Israel, with its citizens able to proudly ascend to the Temple Mount."

"We do have to confront this problem, because Iran has embarked on a course which threatens the whole region of the Middle East with nuclear proliferation," Mr Hague said. "It is an intensifying problem that we have over their nuclear programme. And so there is a risk that this will become a greater crisis as 2012 goes on." Mr Hague's comments came as the European Union prepares to agree an embargo on Iranian oil in eight days' time, in response to Iran's decision to step up its efforts to produce the materials for a nuclear weapon.

They followed last week's assassination of a fourth Iranian nuclear scientist in two years, blamed by Iran on Mossad, the Israeli security service; recent missile tests by Iran; and continuing threats by its clerical regime to close the narrow marine artery through which more than a third of the West's seaborne oil reserves pass.

The EU Commission denies such initiatives amount to "propaganda'' but some fear the aim is to brainwash schoolchildren into backing the EU.

Andrew Allison, of the TaxPayers' Alliance, said: "Taxpayers will be shocked to read the cash they pay to Brussels is being spent in this way. If schools want children to know about the EU, there are plenty of unbiased resources. Teachers don't need to go to expensive conferences, and schools don't need to buy books from the EU bookshop.'' Ukip MEP Paul Nuttall said: "It is utterly wrong that so-called neutral information be provided to our children by an organisation which represents a highly controversial political position."

Anger over the government's decision has led to demonstrations across Africa's most populous nation, and related violence has left at least 10 people dead. A statement by the Petroleum and Natural Gas Senior Staff Association of Nigeria said that if the government does not restore the subsidies, the union will be "forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production".

Benchmark oil prices rose by 1.03 to 101.90 dollars per barrel in electronic trading on the New York Mercantile Exchange. Prices rose on concerns of global supplies. Nigeria is the fifth-largest oil exporter to the United States, and losing those supplies would force American refineries to replace 630,000 barrels of crude per day.

The impact of the Nigerian government's subsidy removal has been dramatic: Gas prices in Nigeria more than doubled overnight, causing transport and food costs to rise as well for a nation where most live on less than two dollars (1.30 pounds) a day. Nigeria produces about 2.4 million barrels a day from the swamps of its southern delta to massive offshore oil fields. Oil accounts for up to 80% of revenues in Nigeria, a nation of more than 160 million people.

Some of these points applied to other treaty-making rounds. But not all of them at once. The whole point of this treaty exercise - which is using an inconvenient intergovernmental track because of the UK - is political. Germany needs some sort of pact that makes it look like it will be almost impossible for member states to be big and careless spenders in the future. A fiscal straitjacket. The document could then be served up when Germans are feeling unenthusiastic about mutualising eurozone debt, or greater involvement of the European Central Bank, for example.

The problem is most of what is in the slim draft (now 16 articles) could simply be done using the normal EU law-making procedures. The six-pack of economic governance legislation - in place since mid-December - already represents a ground-breaking shift in Brussels' relations with member states when it comes to budget matters. New legislation, announced in November, consolidates these budgetary powers still further, giving the commission even greater discretionary powers over national spending.

So what is left? Not much but still two things to which Berlin remains very attached - a constitutional debt brake and automatic sanctions for excessive deficit countries. These cannot be done via the current treaties. But the "fiscal compact" is having difficulty delivering on just these two points. Language requiring a debt brake to be written into national constitutions has been softened when compared to earlier versions, to head off any referendums.

Meanwhile the very (German-esque) essence of the treaty - namely language getting fiscal miscreants to cut their deficits - has also been softened. Under the latest draft, member states may ignore the tough budget deficit limits in case of an "unusual event" or a "severe economic downturn." Echoes of the not very forceful Stability and Growth Pact. Language allowing the European Commission to take member states to court for not implementing the debt brake has also gone. Instead member states should take one another to court. An unlikely proposition.

Mario Draghi, head of the European Central Bank, and inventor of term fiscal compact had this to say of it on Thursday: "THE WORDING OF SUCH RULES NEEDS TO BE UNAMBIGUOUS AND EFFECTIVE." Hardly a ringing endorsement.

The European Commission will not accept any conflict with EU treaties or establishment of parallel structures. France, quite happy to have parallel structures, does not want the EU institutions having too many powers. Meanwhile, no one wants to set off a national referendum if at all possible. It is hard to imagine what will emerge by end of January when EU leaders are supposed to give the nod to the first draft.

But it appeared last night that one arm of the EU was having to take legal action against the other. Martin Callanan, leader of the Tories in the European Parliament, said: "It's clear the pantomime season is still in full swing. Now the EU is using our money to sue itself. The only certain winners will be lawyers and the only certain losers the taxpayers."

The latest costly European case came after Britain and other EU nations refused to approve the pay hike proposed by the Commission. PM David Cameron and other leaders insisted that pay should be frozen to reflect the climate of austerity across Europe. But the Commission yesterday insisted the bureaucrats were entitled to the money under EU regulations guaranteeing annual pay rises in line with the cost of living. It launched legal action against the EU Council, the body that represents the governments of Britain and other member states in Brussels.

According to Barclays Capital, the investment banking division of Barclays PLC, more British retailers are paying in yuan to achieve cost savings of up to 8 percent. With the yuan having appreciated at least 7 percent against the dollar since June 2010, Chinese suppliers commonly embed a "buffer" into dollar-denominated contracts to guard against further yuan appreciation.

"There was a growing number of companies switching to yuan for trade settlements in the third quarter of 2011, showing that businesses are now more comfortable with this payment method," Michael Vrontamitis, regional head of product management of Northeast Asia at Standard Chartered Bank PLC, noted. It makes more sense for businesses that have subsidiaries in China to carry out yuan-denominated cross-border trade transactions, particularly if they have two-way trade flows, so they can net off their transactions and significantly cut their foreign-exchange costs, Vrontamitis added.

This is especially so for the garment industry, which typically signs contracts six to eight months ahead of product delivery, during which time exchange rates can change dramatically. With currency risks eliminated for Chinese suppliers, they would be more willing to give UK customers better deals. Even marginal profit gains achieved in this way could prove life-saving for some UK clothing retailers. The industry experienced its largest year-on-year fall in sales last autumn since August 2009, according to a British Retail Consortium report.

Fashion retailer H&M is considering yuan payments. The company buys one-third of its products from China, its most important source. Nils Vinge, head of investor relations at the Sweden-based retailer H&M Hennes & Mauritz AB, said: "At present, H&M pays all its Asian suppliers in US dollars. The deregulation of the yuan creates opportunities for us to pay our Chinese suppliers directly in their local currency. We are now investigating this opportunity."

Naming Israel specifically, the Rajah News website said that Israel wasn't the only country that could undertake long-distance proxy wars. "We too can send our agents to kill people in their sleep," the site quoted the unnamed official as saying.

"None of those responsible will escape, none of them should feel safe," the official told the website. "We will take the war beyond the borders of Iran, and beyond the borders of the region." Israeli commentators said that the statement was an implied threat that Iran could target American Jews in response to what it perceives is a covert war by Israel to halt Iran's nuclear program. Several months ago, the FBI announced the arrest of a terror gang connected to Iran that had planned to attack synagogues in the US, and to blow up the Saudi embassy in Washington.

An Israeli official quoted in the New York Times, while not confirming that Israel was behind the recent string of assassinations of Iranian scientists - including Mostafa Ahmadi Roshan, killed Wednesday in Tehran - said that the assassinations were likely part of a "cold war" against Iran. "I think the cocktail of diplomacy, of sanctions, of covert activity might bring us something. I think it's the right policy while we still have time," the official said.

The US, meanwhile, successfully convinced Japan to cut its oil imports from Iran, as part of the mounting worldwide boycott of Iranian oil. After a meeting with visiting US Treasury Secretary Timothy Geithner, Japanese officials promised to cut imports of Iranian oil. Japan is one of Iran's biggest customers.

It's good news for financial markets. Despite the European debt crisis, new figures released on Wednesday show solid growth for Germany in 2011. The price-adjusted gross domestic product (GDP) increased by 3 percent year-on-year, the German Federal Statistical Office reported. For the second year in a row, the German economy showed steady recovery from the economic crisis in 2009, when the country had its worst recession since World War II and GDP shrunk by 5.1 percent. But the latest figures show Germany's GDP exceeding its pre-crisis level for the second year in a row, Destatis reported.

Consumers happy to part with their cash were the main driver of the growth last year, with private consumer spending up by 1.5 percent - an increase higher than any seen in the last five years. But by year's end, the worldwide economic downturn still negatively impacted the German economy. In the final quarter of 2011, GDP declined by approximately 0.25 percent compared to the previous quarter, Destatis estimated.

The German economy is expected to continue weakening this year due to the ongoing debt crisis in Europe, with economists predicting growth for the year to top out at just 0.5 percent. Some experts have even forecast a recession in Germany, Europe's largest economy, beginning in the final quarter of 2011 and lasting into the first half of 2012.

Though new statistics released on Wednesday showed strong economic growth in Germany for 2011, a slight contraction at the end of the year has prompted fears that Europe's largest economy could experience a recession this year. Averaged throughout the year, growth of gross domestic product (GDP) was a "very robust" 3 percent. But the Federal Statistical Office's preliminary estimate for the final quarter registered a foreboding 0.25 percent contraction. Economists have warned that the shrinkage was likely to continue into the first quarter of 2012, but many are still optimistic that Germany will recover in the second half of the year.

President of the Federal Statistical Office Roderich Egeler said that much of the growth in 2011 had been driven by domestic investment and private consumption, which rose by 1.5 percent, the highest jump in five years. Indeed, domestic consumption will continue to sustain the German economy for the rest of the year, Kai Carstensen of the Munich-based Ifo Institute told tabloid Bild on Thursday. "It will protect us from bigger problems," he said.

Other recent economic indicators suggest that 2012 will be rough for Europe as a whole, which will also prove challenging for Germany. On Thursday the Ifo Institute predicted that a short recession would hit the euro zone. GDP for the 17 member states shrank by an estimated 0.3 percent in the fourth quarter of 2011, and will likely contract again by 0.2 percent in the first quarter of 2012, it said.

The downturn is likely to cause problems for Germany's strong export industry, with some 40 percent of exports going to other EU countries. "Germany's strongly export-driven economy will not be able to elude the slowdown of the global economy," Junker said (Simon Junker is an expert with the German Institute for Economic Research).

The sanctions, broadly aimed at forcing Tehran to shift course on its nuclear program, targeted Iran's crucial oil sector and required foreign firms to make a choice between doing business with Iran or the United States. Foreign central banks that deal with the Iranian central bank on oil transactions could also face similar restrictions under the new law, which has sparked fears of damage to US ties with nations like Russia and China.

"If a correspondent bank of a US bank wants to do business with us and they're doing business with CBI or other designated Iranian banks... then they're going to get in trouble with us," the US official said. The measures were contained in a mammoth $662 billion defense bill, which President Barak Obama signed on December 31 at a time of rising tension with Tehran, which has threatened to block the Strait of Hormuz - through which more than a third of the world's tanker-borne oil passes.

The United States has warned it will "not tolerate" such an interruption.

There are fears that increased sanctions on Iran's central bank could force the global price of oil to suddenly soar, and actually give Tehran a financial windfall on its existing oil sales. Rising oil prices could also crimp the fragile economic recovery in the United States and inflict pain on American voters in gas stations - at a time when Obama is running for reelection next year.