"We wish to protect the French against the grave problems facing other European countries. Bankruptcy is not an abstract word," said premier Francois Fillon. The belt-tightening plan - the second package since August, taking total cuts to 112 billion euros - include a 5 per cent super-tax on big firms, a rise in VAT on restaurants and construction, and cuts in pensions, schools, health, and welfare. It is the latest squeeze in a relentless campaign of fiscal tightening across the eurozone.

"It is like the 1930s: imposing austerity on countries already in recession is the way into a death spiral," said Danny Blanchflower, a former UK rate-setter. Left-wing critics have evoked grim parallels with the "deflation decrees" of Pierre Laval in 1935 when France had to take ever harsher measures to preserve the country's viability on the Gold Standard, a gamble that ultimately set off violent street protests. France's move came amid a further blizzard of grim data from Europe, confirming that most of the region is already on the cusp of recession. Growth has reached a "virtual standstill", said EU commissioner Olli Rehn.

Mr Fillon said the country must accept sacrifice to "avoid the day where policies are imposed upon us by others," insisting that France would meet its "untouchable" deficit target of 4.5 per cent of GDP next year - down from 5.7 per cent this year. The austerity plan seems aimed at insulating France from the unfolding disaster in Italy, where a deepening slump and the final agonies of Silvio Berlusconi's government sent debt markets into a tail-spin on Monday.

Goldman Sachs warned that Italy might start to take "unilateral decisions" such as seizing banks or clamping down on the bond market (effectively holding investors captive) if the political climate deteriorates further and authorities feel boxed in. It said the crisis has set off a "self-fulfilling dynamic" that may ultimately make it impossible for Italy to roll over debt.

Joachim Fels from Morgan Stanley said Europe's leaders may themselves have invited disaster by suggesting for the first time that a country - Greece - may be pushed out of EMU. This shatters the stated orthodoxy until now that the euro is inviolable and eternal. "They may have set in motion a sequence of events which could potentially lead to runs on sovereigns and banks in peripheral countries that make everything we have seen so far in this crisis look benign," he said.

Now, the Credit Union National Association (CUNA) reports that a whopping 650,000 Americans have joined credit unions since September 29 - the date that Bank of America announced it would start charging a $5 monthly debit fee, a move it backed down on this week. To put that in perspective, there were only 600,000 new members for credit unions in all of 2010. "These results indicate that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings," said CUNA President Bill Cheney.

The big problem: Berlusconi doesn't seem like he's in an urgent mood to make reforms, the ECB isn't doing much, and China and Brazil have dropped out of the picture. Hence we could get a big bustup! For us there is no obvious near-term solution other than a stress event which prompts action. Maybe the EU authorities will use the experience learnt from the Greece situation last week that a hard-line response is the only way to force countries to act in the way they want. It is a big risk but at the moment the weaker countries seem to still want the Euro enough that the ECB and Germans could play hard ball and get what they want if they are prepared to take the risk. Indeed ECB Governing Council member Yves Mersch fired a warning over the weekend saying that the ECB often discusses the possibility of ending the purchase of Italian government bonds and could if it concludes Italy is not adopting promised reforms. Such talk will not encourage private capital into Italy meaning that the ECB may need to intervene more to have the required impact.

What we are witnessing is the economic colonisation of Europe by stealth by the Germans. Once, it would have taken an invading military force to topple the leadership of a European nation. Today, it can be done through sheer economic pressure: it might be that within a few days the Germans - along with their French allies - will have secured regime change in the two most tiresome countries in the eurozone.

They have already achieved it in another, Ireland, where the new post-bailout prime minister, Enda Kenny, has followed the euro-script to the letter and therefore looks safe in office. Mr Kenny is a former vice-president of the federalist European People's Party (EPP), so he understands the role Brussels expects him to play. When these coups in the leadership of major countries occur, the markets swoon with relief: but they change only the political fundamentals and not the economic ones. The EU can change regimes as much as it likes, but unless the regimes stop spending and start repaying debts, the problem with the currency will continue, bailouts or no bailouts.

This is especially true in Italy's case, for only the strictest austerity - far beyond anything attempted by Mr Berlusconi, and possibly even beyond what Mr Monti would receive in his orders from Brussels - can repair the damage. It suits the Franco-German axis to put its people in charge in such countries: not just because they will do what they are told now, but because they will do what they are told so long as they are in office.

What has happened in Greece, and what may be about to happen in Italy, should terrify all true democrats. That it does not terrify those who lead the EU shows, yet again, what a profoundly sovietised institution it is. And when the people realise what is being done to their democratic rights in the name of the future of Europe, one dreads to think what their reaction will be.

Despite publishing a more detailed mandate following a summit in Brussels, the Eurogroup delayed agreeing specifics on how to leverage the 440 billion euros European Financial Stability Facility (EFSF), risking further market turmoil ahead of votes on Tuesday that could topple Silvio Berlusconi's government.

The EFSF also pushed ahead with a 10-year bond auction which it had put off from last week because of lack of demand. The fund, which is supposed to be the eurozone's key weapon against the debt crisis, managed to raise 3 billion euros but only after having to pay record returns to entice investors. Joachim Fels of Morgan Stanley said: "The leveraged EFSF may still turn into a bazooka but so far it looks more like a water pistol."

The fund is hampered by uncertainty over Greece's bail-out and eurozone membership. The country is expected to announce the new head of its interim Government on Tuesday. Italian government bond yields hit 14-year highs, crossing the threshold economists say is unsustainable for the country's 1.9 trillion euros debt pile. The yield on 10-year bonds soared to 6.68 per cent at one point, leading to frantic speculation that Italy will require an international bail-out.

"When extreme weather hits, we hear about the property damage and insurance costs," said Kim Knowlton, a senior scientist at Natural Resources Defense Council and a co-author of the study. "The healthcare costs never end up on the tab." The study in the journal Health Affairs looked at the cost of human suffering and loss of life due to six disasters from 2000-2009.

"This in no way is going to capture all of the climate-related events that happened in the US over that time period," Knowlton said. "At $14 billion, these numbers are big already." To put this in context, 14 weather disasters in the United States so far this year have cost at least $14 billion, according to Jeff Masters of the Weather Underground website. Masters said by email that health costs and deaths are considered in some of the data used to reach this figure.

According to the US Geological Survey, the epicenter of Monday evening's earthquake was five miles northwest of Prague, six miles southeast of Sparks, nine miles east, northeast of Meeker, and 44 miles east of Oklahoma City. The earthquake was only three miles deep. News 9 felt it here in our studio in Oklahoma City, and several viewers have posted on our Facebook page saying they felt it too, including folks from Norman, Chickasha, Tulsa, Enid, Wakita, Alva, Guthrie and more.

These are troubling times for Britain's manufacturing sector, once a relative bright spot in the country's lacklustre recovery, which contracted at its fastest pace in more than two years in October, as new orders plummeted. But there is unlikely to be a clamour for consumers to start buying British. In the US, people are used to hearing the phrase "buy American". It is seen as one of the ways of putting Americans back to work.

Adverts proudly proclaim how the product was born and bred in America, and closer to home, many French people would not dream of drinking anything other than French wine or driving a French car. But despite daily doomsday reports about high unemployment and low growth, the politicians have not been ordering us to go and buy British. Why?

Political pundit Kevin Maguire says it would be a bit like shooting yourself in the foot."It would be very hard for Cameron to stand up and say Buy British, when half of our exports go to the EU. If they did the same half our exports would no longer go there."

Mr Berlusconi's majority has crumbled ahead of the vote, with several MPs defecting or saying they will rebel. Until now he has insisted he has enough support to be able to continue to govern and has denied he will resign. "We asked the prime minister to stand aside," Mr Bossi told reporters on the margins of parliament. However, when asked about the expected outcome of a normally routine vote on approving state finances, Mr Bossi told reporters: "Nothing will happen today."

Last month, the same measure was defeated in parliament by a single vote. Mr Berlusconi is reported to be short of the 316 votes needed to prove that he still has a majority. But analysts say Mr Berlusconi may still win as the centre-left may abstain, allowing the essential measure to pass.

The exchange at the G20 summit was quoted by a French website, Arret sur Images, and confirmed by other media. The remarks - during a private conversation - were overheard by a few journalists last week but were not initially reported, the BBC's Christian Fraser in Paris says. Journalists at the bilateral press conference had been handed translation boxes but had been told not to plug in their headphones until the backroom conversation had finished. But those who did heard the revealing comments.

For several days there was media silence in France about the exchange - a decision had been taken not to embarrass the French president, our correspondent says. A correspondent for Le Monde newspaper referred to the conversation without the quotes. But Israeli newspapers have reported it in full.

It is said Mr Obama was taking Mr Sarkozy to task for voting in favour of the Palestinian bid for full membership of the UN cultural organisation, Unesco, a bid that was approved despite American opposition. The remarks indicate a breakdown of trust with the Israeli leader which could have wider implications for the Middle East peace process, our correspondent says.

His comments come after Israeli President Shimon Peres said an attack on Iran was becoming more likely. The UN's atomic watchdog is expected to say this week that Iran is secretly developing a nuclear arms capability. Diplomats say the International Atomic Energy Agency (IAEA) report, due for release on Tuesday or Wednesday, will produce compelling evidence that Iran will find hard to dispute.

Iran has always insisted that its nuclear programme is exclusively to generate power for civilian purposes. Iranian Foreign Minister Ali Akbar Salehi has said the alleged evidence is a fabrication and part of a multi-pronged US smear campaign against his country. Mr Lavrov said it was "far from the first time" Israel had threatened strikes against Iran, when asked for his view on Mr Peres' recent comments. "Our position on this issue is well-known: this would be a very serious mistake fraught with unpredictable consequences," he told reporters.

The IAEA has reported for some years that there are unresolved questions about its programme and has sought clarification of Iran's secretive nuclear activities. Of this week's report, one Western diplomat told Reuters news agency: "There are bits of it which clearly can only be for clandestine nuclear purposes. It is a compelling case." Hardline Iranian cleric Ayatollah Ahmad Khatami warned the IAEA on Monday not to become "an instrument without will in the hands of the United States".

"When a company like Aardman is considering offshoring stop-frame animation, which we are at the moment, something's got to be wrong," he said. The main problem, he said, was that while films made in the UK can receive government help in the shape of a 15-20% tax credit, UK TV animation receives nothing. As a result, many British companies were either sending their shows abroad to be made or were being bought out altogether, he said.

"There is genuinely a crisis. HIT, a beacon of excellence in children's animation in the UK and maker of Bob the Builder and Pingu, has just been bought by US company Mattel. Do we want to see Bob the Builder driving on the right-hand side of the road? That is what will happen if we don't watch out," he said. "And do you want our children thinking that the emergency services number is 911? If we let cheap American products come into the country we are selling our children short."

Companies in Canada, Ireland and France also receive government support for producing TV animation at home and in some countries there is protection against imported products. If the situation was the same in the UK it would be "a tremendous boost to our industry", said Mr Bullough.

"Governments in the UK, US and Europe are working to reduce spending, with varying degrees of success and varying degrees of public acceptance," Mr Diamond said. "We've seen violent protests in Greece, public sector strikes across Europe, anti-capitalist demonstrations that started on Wall Street have spread to other places around the world, including St Paul's Cathedral here in London. Young people have been especially hard hit by high levels of unemployment. The threat of further social unrest remains if we don't work together to generate stronger economic growth and more jobs," Mr Diamond warned.

Banks must re-connect with customers and re-build trust, he said. He told BBC interviewer John Humphrys that banks could once again be seen as "cuddly" and "friendly". But a lot of the demonisation of banks had been wrong, he said, citing criticism of financial risk-taking. Risk-taking had an important social purpose, he said. When banks put capital at risk, they were providing a market for buyers and sellers in all sections of society. "Providing this kind of support to clients requires banks to take risk, but this is not speculative trading, so it bothers me when these activities are caricatured as gambling," he said.

Mr Diamond, whose total pay packet last year was worth 9 million pounds , also said banks should never again have to be bailed out by the taxpayer. "No taxpayer money should ever again be put at risk to rescue a failed or failing bank," Mr Diamond said. And he acknowledged in his radio interview that many people in society feel angry that no one has been held to account for the banking crisis. "I understand why many people wonder if anything has really changed," he said.

With Greece due to run out of money in a few weeks, the European Union told bickering political parties to explain by Monday evening how they would form a unity government to get the 130-billion-euro ($180-billion) emergency funding. Papandreou, who sealed his fate last week with a disastrous attempt to call a referendum on the bailout, will stand down when the new government takes over, the office of the Greek president said.

But otherwise Papandreou and conservative leader Antonis Samaras came up with the bare minimum to satisfy Brussels, and they must still agree on Monday who will become the next prime minister to lead a nation that is destabilizing the entire euro zone. A former deputy president of the European Central Bank, Lucas Papademos, is the front runner to become the new prime minister, Greek media said on Monday.

Papandreou's side trumpeted the agreement, reached late on Sunday at talks led by President Karolos Papoulias. "Today was a historic day for Greece," government spokesman Ilias Mossialos said, adding that the new coalition would be sworn in and hold a confidence vote within a week, if all went to plan. "Finally!" the center-left daily Ta Nea said on its front page on Monday. "The first, big step has been taken to save the country." Conservative daily Kathimerini wrote: "A first win." Others were less charitable. "I'm afraid the new government will very soon turn out to be problematic," said Stefanos Manos, a conservative former finance minister.

As of late Friday, the yield spread on Italian 10-year bonds over German Bunds was a post-EMU record of 458 basis points. This is dangerously close to the point where cascade-selling begins and matters spiral out of control. The European Central Bank has so far bought time by holding a series of retreating lines but either it has reached its intervention limits after accumulating nearly 80 billion euros of Italian debt, or it is holding fire to force Silvio Berlusconi to resign - if so, a foolish game.

The ECB's hands are tied. A German veto and EU treaty constraints stop it intervening with overwhelming force as a genuine lender of last resort. The bank is itself at risk of massive over-extension without an EU treasury and single sovereign entity to back it up. This lack of a back-stop guarantor is an unforgivable failing in the institutional structure of monetary union. As Berkeley professor Brad DeLong argues in a new paper, such "utter disregard for financial stability - much less for the welfare of the workers and businesses that make up the economy - is a radical departure from the central-banking tradition."

Yet Europe's fiscal rescue machinery remains a fiction, a fund designed for Greece, Ireland, and Portugal that is now being stretched by every disreputable artifice of structured credit to shore up the whole EMU edifice on the cheap. The market has already cast its verdict on plans to leverage the EFSF (version III) to 1 trillion euros as a "first loss" insurer of Italian and Spanish bonds, seeing at once that the scheme concentrates risks in lethal fashion for creditor states, dooms France's AAA rating, and is likely to contaminate the core very fast.

We can argue over details, but the necessary formula - if they wish to save EMU - undoubtedly entails some form of eurobonds, debt-pooling, fiscal transfers, and of course the constitutional revolution that goes with all of this. That would at least buy them time, though I doubt that even fiscal union can ever bridge the North-South gap.