"Due to financial trading relationships and off-balance sheet exposure to European banks, the US banking system will not go unscathed," said Michelle Meyer, a Bank of America Merrill Lynch economist, in a note to clients Friday. "If the crisis in Europe escalates, it could be the shock that pushes the US economy into recession."

While this is not the base case predicted by Bank of America, the firm does still prepare its clients for this possibility by laying out how the Greece crisis could quickly become a "Lehman event." After all, a 50 percent haircut on Greek sovereign debt would mean a very manageable $60 billion, or just two percent, of total bank foreign claims for US banks, according to the report. But that's just director exposure.

There are five major ways the US is connected: trading counterparty risk and derivative ownership with heavily-exposed European banks, overall market confidence, central bank funding, money-market funds and trade flows.

It cited fears over Italy's ability to cut state spending and bring its finances in order, particularly given the country's growth prospects. Italy said the move had been influenced by "political considerations". A government statement said the downgrade had also been dictated more by stories in the media than by economic reality.

Italy recently passed an unpopular austerity budget, but S&P suggested this did not go far enough."We believe the reduced pace of Italy's economic activity to date will make the government's revised fiscal targets difficult to achieve," S&P said in a statement.

"Furthermore, what we view as the Italian government's tentative policy response to recent market pressures suggests continuing future political uncertainty about the means of addressing Italy's economic challenges." Italy follows fellow eurozone countries Spain, the Republic of Ireland, Greece, Portugal and Cyprus in having its credit rating downgraded this year. The surprise move by the ratings agency will fuel fears of contagion in the eurozone.

The 6.9-magnitude quake Sunday evening triggered landslides, damaged buildings and sent people rushing into the streets. The epicenter was in India's Sikkim state near borders with Nepal and China's Tibet region, but the shaking was felt across northern and eastern India and to the south in Bangladesh. The quake killed at least seven people in India's Sikkim state and injured more than 50, said the state's top official, Chief Secretary Karma Gyatso. The north Indian state of West Bengal reported six deaths, and Bihar state reported three.

In China, at least seven people were confirmed dead and 22 hurt in southern Tibet, the official Xinhua News Agency said. It did not immediately give any details. Nepal's government said seven people died there, including two men and a child who were killed when a brick wall toppled outside the British Embassy in the capital, Katmandu. Nearly 70 people were injured, some of them seriously, and were in hospitals across the city. Much of the damage was not immediately known because the region is sparsely populated, with many people living in remote areas now cut off by mudslides triggered by the quake, Sikkim state police Chief Jasbir Singh told The Associated Press.

The quake was also felt as far as the Indian capital, with New Delhi residents also rushing out of shaking buildings. The quake caused some houses in China's Himalayan region of Tibet to collapse and disrupted a border county's telecommunications services, Xinhua said. There were at least two aftershocks of magnitude 6.1 and 5.3, Indian seismology official RS Dattatreyan said. He warned more aftershocks were possible.

A joint statement by Catholic, Orthodox, Anglican and Lutheran priests pledged their "support for the diplomatic efforts being deployed to win international recognition for the State of Palestine... on the June 1967 borders with Jerusalem as our capital." The priests went further than their bishops, who in a statement this week confined themselves to a call for intensified prayer and diplomatic efforts ahead of the Palestinian membership request, to be sent to the UN Security Council on Friday.

"Palestinians and Israelis should exercise restraint, whatever the outcome of the vote at the United Nations," the bishops said. "We call upon decision-makers and people of good will to do their utmost to achieve the long-awaited justice, peace and reconciliation between Israelis and Palestinians."

Palestinian president Mahmud Abbas and Israeli Prime Minister Benjamin Netanyahu look set for a UN showdown next week, with Abbas planning to push for membership for a Palestinian state and Netanyahu arguing against it. "Despite the pressures that we face, Palestine goes to the UN on the 23rd of this month to seek admission as a full member," Abbas told Egyptian television on Wednesday.

"There is great volatility in the markets," Evangelos Venizelos said after emerging from crisis cabinet talks. "If we want to avoid default, to stabilise the situation, to remain in the eurozone... we must take big strategic decisions. Measures must be specified," he added, referring to reforms outlined in a contentious budget plan passed in July. "After tomorrow's talks with the troika [of representatives from the EU, ECB and IMF] we will spell out the measures."

With the threat of bankruptcy looming, Greece was told in no uncertain terms over the weekend that a critical 8 billion euros rescue loan would not be released next month unless it proved that it had bitten the bullet with reforms. The funds would be the sixth instalment of cash Athens has received since being bailed out to the tune of 110 billion euros in May 2010.

But reading the riot act to Greece as never before, EU finance ministers meeting in Poland insisted that without "concrete facts and figures" to show that Athens was intent on bringing its budget deficit in line, the aid would not be forthcoming. Without the cash injection, the ruling socialists will be unable to cover state wages and pensions in October. "The atmosphere was far from diplomatic," said one Greek insider. "They don't seem to have faith in us. The choice is clear. Either we go down or show real determination, not words but deeds."

The lack of political consensus over the austerity measures has further eroded Greece's credibility. The main conservative opposition leader, Antonis Samaras, is calling for snap elections and for the loan conditions to be renegotiated.

The portrait was described by Foreign Minister Ahmet Davutoglu of Turkey in an hourlong interview before he was to leave for the United Nations, where a contentious debate was expected this week over a Palestinian bid for recognition as a state. Viewed by many as the architect of a foreign policy that has made Turkey one of the most relevant players in the Muslim world, Mr Davutoglu pointed to that issue and others to describe a region in the midst of a transformation. Turkey, he said, was "right at the center of everything."

He declared that Israel was solely responsible for the near collapse in relations with Turkey, once an ally, and he accused Syria's president of lying to him after Turkish officials offered the government there a "last chance" to salvage power by halting its brutal crackdown on dissent. Strikingly, he predicted a partnership between Turkey and Egypt, two of the region's militarily strongest and most populous and influential countries, which he said could create a new axis of power at a time when American influence in the Middle East seems to be diminishing.

Mr Davutoglu credited a "psychological affinity" between Turkey and much of the Arab world, which was ruled by the Ottoman Empire for four centuries from Istanbul. The foreign minister, 52, remains more scholar than politician, though he has a diplomat's knack for bridging divides. Cerebral and soft-spoken, he offered a speech this summer to Libyan rebels in Benghazi - in Arabic. Soon after the revolution in Tunisia, he hailed the people there as the "sons of Ibn Khaldoun," one of the Arab world's greatest philosophers, born in Tunis in the 14th century. "We're not here to teach you," he said. "You know what to do. Ibn Khaldoun's grandsons deserve the best political system."

The Vatican has been working for years to bring the breakaway Society of St Pius X back into its fold, and this week told its members they must accept some core church teachings if they want to be fully reintegrated into the church. But the Holy See said some expressions contained in documents from the Second Vatican Council could be left open for "legitimate discussion." The 1962-65 Vatican II meetings brought modernizing reforms to the Catholic Church, including outreach to Jews and introduction of the Mass in the vernacular rather than Latin. The Swiss-based Society of St Pius X was formed in 1969, opposed to many of Vatican II's reforms.

The Vatican refused to say which core teachings the society must accept to be reintegrated, and which elements of Vatican II documents could be left open for discussion. A key Vatican II document, Nostra Aetate, revolutionized the Catholic Church's relations with Jews by declaring that Christ's death couldn't be attributed to Jews as a whole. Other Vatican II teachings to which the society objects concern religious freedom and ecumenical relations. The uncertainty over what is being required of the society provoked unease among some Jewish groups, which issued veiled warnings Friday about the possible impact on Vatican-Jewish relations were Nostra Aetate and other Vatican II teachings to be now considered ripe for discussion.

The German-born Benedict has worked for two decades, as pope and as cardinal, to bring the group back into the Vatican's fold, eager to prevent further schism and the expansion of a parallel church. Benedict, who has won praise from Jews for his decades of outreach, nevertheless provoked outrage in 2009 when he lifted the excommunication of Williamson, who denied gas chambers were used during the Holocaust.

As it turned out, the demonstrators found much of their target off limits on Saturday as the city shut down sections of Wall Street near the New York Stock Exchange and Federal Hall well before their arrival. By 10 am, metal barricades manned by police officers ringed the blocks of Wall Street between Broadway and William Street to the east. (In a statement, Paul J Browne, the Police Department's chief spokesman said, "A protest area was established on Broad Street at Exchange Street, next to the stock exchange, but protesters elected not to use it.")

Organizers, promoters and supporters called the day, which had been widely discussed on Twitter and other social media sites, simply September 17. Some referred to it as the United States Day of Rage, an apparent reference to a series of disruptive protests against the Vietnam War held in Chicago in 1969. The idea, according to some organizers, was to camp out for weeks or even months to replicate the kind, if not the scale, of protests that erupted earlier this year in places as varied as Egypt, Spain and Israel.

Throughout the afternoon hundreds of demonstrators gathered in parks and plazas in Lower Manhattan. They held teach-ins, engaged in discussion and debate and waved signs with messages like "Democracy Not Corporatization" or "Revoke Corporate Personhood."

The president on Monday will announce a proposal that includes repeal of Bush-era tax cuts for the wealthiest taxpayers, nearly $250 billion in reductions in Medicare spending, $330 billion in cuts in other mandatory benefit programs, and savings of $1 trillion from the withdrawal of troops from Iraq and Afghanistan, the officials said.

The plan includes no changes in Social Security and does not include an increase in the Medicare eligibility age, which the president had considered this summer. The officials briefed reporters Sunday evening, but spoke on the condition of anonymity in advance of the president's announcement. The new taxes in particular have little or no chance of passing Congress as proposed. Republicans were already lining up against the president's tax proposal before they even knew the magnitude of what he intended to recommend.

So long as this level of political capital is invested in the euro, monetary union is highly likely to survive. However, the talk among investors and some European politicians this week has been of Greek default.

Plan A, as far as European authorities are concerned, is to implement the agreement struck on July 21. Under the deal, Greece was offered a second programme of loans, worth 109 billion euros, including the guarantee that Athens would not need to return to financial markets for years, borrowing instead from other European countries and the International Monetary Fund at low interest rates. The private sector would take a writedown of its debt to help ease the burden facing Greece. And the European financial stability facility - the temporary bail-out fund - would become more flexible in order to limit contagion from one eurozone country's bonds to others.

By 2013, the replacement permanent European stability mechanism should be in place to provide greater economic governance in the eurozone, and as a fund to ensure that countries with difficulties borrowing in the markets had rapid access to loans alongside adjustment programmes until they were again able to roll over their debt in the markets.

That is the plan. But in the meantime, something might give - such is the unpredictability of events in a crisis. In those circumstances, Greece could default. A momentous decision not to service its debts - owed to other European countries, banks and the private sector - would start an alternative, and potentially dangerous, sequence of events.

Geithner's decision to travel to the small city of Wroclaw to discuss the sovereign debt problems of Greece, Ireland, Italy and the wider euro zone was the clearest indication yet of the severity of the near two-year-old crisis, which now threatens the global economy not just the single currency bloc. Officials said Geithner was coming to propose how the region might try leveraging its emergency bailout fund - the 440 billion euro European Financial Stability Facility - to better tackle the crisis, much as the United States used leverage to handle the fallout from the subprime collapse.

But however good Geithner's intentions, the indications were that the meeting did not go as smoothly as he might have hoped. Held in a concert hall, the gathering lasted for about 30 minutes. The euro zone ministers arrived together by bus. Geithner was sped to the doors in a private car. There was no word on whether voices were raised or what the temperature of the exchanges was, but Austria's finance minister, for one, was less than warm to Geithner's message.

"I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone that they tell us what we should do and when we make a suggestion... that they say no straight away," Maria Fekter told reporters afterwards, recalling a difference of opinion between Geithner and German Finance Minister Wolfgang Schaeuble on how to reinvigorate the euro zone and tax financial deals.

But his language was perhaps too blunt for European ministers, fatigued by the crisis and the countless disagreements it has prompted amongst them. "We can always discuss with our American colleagues. I'd like to hear how the United States will reduce its deficits... and its debts," Belgian Finance Minister Didier Reynders said somewhat tartly.

The latest round of American financial assistance came Thursday with a promise by the Federal Reserve to swap as many dollars for euros as European bankers need. In the short run, those transactions won't have much impact because the central banks are simply swapping currencies of equal value. If the move helps avert a wider crisis, it could help spare the global economy from another recession.

But over the long term, consumers could feel the impact of central bankers flooding the financial system with cash, according to John Ryding, chief economist at RDQ Economics. "This is a lender of last resort function," he told CNBC. "With the dollar injections that the Fed has done, it's like giving a patient medicine with really bad side effects." Ryding said the bad side effect in the US has been inflation, which has picked up to 3.8 percent year over year.

Fed policymakers meet next week to decide whether the flagging US economy needs another round of easy-money measures that could include buying more Treasury bonds to push more cash into the financial system. So far, no one has floated publicly the idea of the US underwriting a broader bailout of the European financial system. But Senate Republicans have already voiced concerns over such a move.

"Our concern is that innocent American taxpayers will pay for yet another bailout - this time to one or several countries whose spending and debt choices led them to financial calamity," Senator Orrin Hatch, Republican for Utah, and seven other Republican senators wrote in a letter to Treasury Secretary Timothy Geithner in June.

Last night David Cameron was urged to get a grip on the spiralling crime to prevent power blackouts. Nothing is sacred to the criminals, who also steal garden ornaments, farm gates and road signs. They plumbed new depths when they tore railings from a baby's grave. The distraught parents of Jordan Lee Cardiss, who died from meningitis at just 18 months, were left "sickened". The railings, put up by his father, 27-year- old Dean Cardiss, were taken, along with the gates to New Wortley Cemetery in Leeds. Mother Stacey Plain, 27, said: "It is all I have left of my son. You can tell it's a baby's grave. The people who did this are scum."

Soaring prices and a rampant black market have caused the theft of metal to rise by 1,000 per cent in two years.

Ministers met last week to discuss converting the British metal trade to a cashless system where all transactions require identification and a credit or debit card. With France and Belgium already going cashless, the UK has fallen prey to "theft tourism" with gangs coming from mainland Europe to rip out our power network.

Graham Jones, Labour MP for Hyndburn, Lancashire, said the UK was seen as the "soft option" for European criminals because scrap metal dealing legislation was outdated. Audacious gangs have scaled 30ft pylons to cut overhead wires. National Grid last month reported the first theft of an earth wire from a large pylon, carrying a 275,000 volt line. The wire fell to the ground and was spirited away. Had it fallen on live wires, it would have blacked out 100,000 homes.

David Shepherd, of the Energy Networks Association, which represents the electricity and gas industries, said copper prices have trebled in two years to 6,000 pounds per ton. "Safety is our biggest concern because the criminals risk death," he said. In March 2009, there were 70 reported metal thefts. By March this year, the figure had risen to 700. Wire theft caused 750 cases of loss of supply to 25,000 homes.

After Abbas delivered a speech Friday explaining his bid to the United Nations for recognition, Hamas spokesman Fawzi Barhoum ridiculed Abbas for "unilateral moves" that he said are part of a move to resume talks with Israel. Israel, the United States, and many other Western leaders have said the unilateral move, which violates the Oslo Accords, is designed to preclude any chance of direct discussions with Israel over the establishment of the Palestinian Authority as an independent country.

Barhoum explained that recognition by the United Nations would lead to acknowledging the existence of Israel and would abandon "the legitimate Palestinian Right of Return and self-determination." Islamic Jihad Spokesperson Daoud Shihab said that Abbas should spend his efforts on achieving unity with Hamas, which controls Gaza and leaves the Palestinian Authority a split entity.

Mrs Thatcher used to say: "The unexpected always happens." But there is nothing unexpected about the euro's present problems, which I have watched with mounting concern. The year 1991 is one I could never forget. As Chancellor of the Exchequer, each time I set off to negotiate Britain's opt-out from the euro in the proposed Maastricht Treaty, I did so with a heavy heart. It was a wearying task, fending off the pressure for us to join the euro. I made it clear to my European colleagues that I and many others did not believe a single currency could work. Europe was not a natural labour market; a "one size fits all" interest rate wouldn't work; and you couldn't have monetary union without fiscal, and therefore political, union, which was unacceptable to the British government.

The reaction of my European colleagues varied from the outright hostile to the condescending. One said: "When the time comes, you will join." Another, perhaps under the influence of whisky late at night, told me: "Everything you say is correct, but the euro is going to happen." At home, the reaction was hardly less scornful. Anyone who was sceptical about the euro was "a little Englander", marginalising Britain or, worst of all, "a headbanger".

None of that matters now that the euro endgame is in sight. What matters is avoiding a crisis turning into a disaster, one that engulfs not just the eurozone but a large part of the Western world. Which goes some way to explain the rare appearance of Timothy Geithner, the US Treasury Secretary, at the EU summit of finance ministers and central bankers in Poland this weekend. What also matters is that Europe admits it has taken a wrong road. But facing reality has never been Europe's strong point.

The euro owes little to economics and much to politics. At Maastricht, one of the Germans' main objectives was to secure a "no bail-out" clause to joining a single currency, because they were worried about the large indebtedness of Italy. But the logic of currency union is that the strong countries should assist the weaker ones.

Today, there are only two answers to the euro crisis: cough up or break up.