The Shamsi base, about 300km from Quetta and close to the Afghan border, has been used to launch drone strikes on militants - part of a campaign the US says has wiped out about half of al-Qaeda's leadership. "No US flights are taking place from Shamsi any longer. If there have to be flights from this base, it will only be Pakistani flights," Mr Mukhtar told the Financial Times. "We have ended all US flights from the base."

Separately, a senior Pakistani government official said the US had been told to remove infrastructure from the airbase. But he claimed that drone attacks had not taken place since 2009. "The US has been told to remove all of its belongings [from Shamsi]," the official said. The White House, which refuses officially to acknowledge that it carries out drone strikes in Pakistan, declined to comment.

The US raid that killed bin Laden, launched from Afghanistan, is viewed as the Pakistan military's worst humiliation since the loss of East Pakistan and the creation of Bangladesh in a war in 1971. Pakistan's army has been wounded by its failure to detect the US helicopter-borne raid and Washington's decision not to share intelligence about bin Laden's whereabouts with Pakistani counterparts.

An investigation by the Bank of England, reported in its Financial Stability Report released on Friday, found widespread evidence that banks are extending loan forbearance to weakened borrowers. And because loans in forbearance often aren't classified as impaired, banks may be skimping on loan provisions, giving a deceptively flattering account of their capital position and health.

Forbearance, usually some form of break given to a borrower such as extending the term or making the loan interest-only, is offered to some borrowers when they miss a payment or violate part of the loan agreement. What's surprising about the BOE's findings is how widespread the practice is, not only in residential mortgages, but in commercial real estate lending and corporate lending. Commercial real estate, which has suffered deep and widespread declines in value, is the other shoe that never dropped for the British banking system. Perhaps this is because, as the BOE points out, around a third of all UK commercial property lending may have benefited from some form of forbearance.

The bank also said that as many as 12 percent of residential mortgages may be in receipt of some form of break on their loan. An earlier investigation by the Financial Services Authority found that 63 percent of all troubled home loans have been switched onto some form of forbearance. Some 3 percent of borrowers with mortgages totaling 60 billion pounds ($97 billion) have switched to interest-only mortgages, under which no principal is retired, since the onset of the financial crisis in 2007, according to the FSA.

So, there we have it; all significant parts of the British economy are being helped by loan repayment forbearance from a banking industry which is not sufficiently disclosing how it decides how it operates or if it is setting aside enough money for future losses. There are two ways to look at this. The cynical, and quite possibly correct, way to view the mass forbearance is that, of course, this is what banks do when faced with failure, and they mostly get away with it. US and international banking history are littered with banks that in retrospect would have failed if they had played things straight, but lived to lend again by extending and pretending, almost often with the witting participation of their regulators. It doesn't always work out too badly.

The second way is to look at this as not only a warning about the grave risks the UK banking system faces, but an indicator of exactly how weak the economy is and will be.

In a statement to lawmakers, Hague said: "Iran has also been carrying out covert ballistic missile tests and rocket launches, including testing missiles capable of delivering a nuclear payload in contravention of UN resolution 1929." He said Iran had also announced plans to triple its capacity to produce 20 percent enriched uranium, adding: "These are enrichment levels far greater than is needed for peaceful nuclear energy.

"We will maintain and continue to increase pressure on Iran to negotiate an agreement on their nuclear programme," including sanctions, he said. There was no immediate reaction from Tehran, which denies Western claims that it is pursuing nuclear weapons under the guise of its civil atomic programme. On Tuesday Iranian state media said the Revolutionary Guards fired nine Zelzal missiles, two Shahab-1s, two Shahab-2s and a single medium-range Ghadr on the second day of their Great Prophet-6 exercise.

On the first day of the exercise on Monday, the Guards unveiled an "underground missile silo" which they said was designed for launching their medium-range missiles, state television reported. The Guards' aerospace commander Brigadier General Amir Ali Hajizadeh insisted Iran's missile programme posed no threat to European nations but was intended to provide defence against "US targets in the region and the Zionist regime." Iran has said that its latest exercise is not aimed at any country but carries "a message of peace and friendship."

"Our facilities and nuclear material are protected and safe," Laboratory Director Dr Charles McMillan told ABC News. Fire crews have also began a series of targeted, preventative burns along the western edge of the property to remove any fuel from the fire's path. The Los Alamos facility - the birthplace of the atomic bomb - was shrouded in secrecy long before it was surrounded by smoke after the Las Conchas fire began Sunday.

"It contains approximately 20,000 barrels of nuclear waste," former top security official Glen Walp said. "It's not contained within a concrete, brick-and-mortar-type building, but rather in a sort of fabric-type building that a fire could easily consume. Potential is high for a major calamity if the fire would reach these areas," he added.

The flames from the 108-square-mile fire reportedly have reached as close as 50 feet from the grounds. With a wildfire so close, lab officials, along with government officials such as New Mexico Governor Susana Martinez, are trying to reassure the public of the plant's safety. "I'm confident in saying that they are committed to making it safe," Martinez told ABC News.

After a mass evacuation, the city of Los Alamos remains a ghost town. Most of its 12,000 residents were evacuated Monday, with some leaving their sprinklers on to protect their homes.

Prince Turki al-Faisal, a former Saudi intelligence chief and ambassador to Washington, warned senior Nato military officials that the existence of such a device "would compel Saudi Arabia... to pursue policies which could lead to untold and possibly dramatic consequences". He did not state explicitly what these policies would be, but a senior official in Riyadh who is close to the prince said yesterday his message was clear.

"We cannot live in a situation where Iran has nuclear weapons and we don't. It's as simple as that," the official said. "If Iran develops a nuclear weapon, that will be unacceptable to us and we will have to follow suit." Officials in Riyadh said that Saudi Arabia would reluctantly push ahead with its own civilian nuclear programme. Peaceful use of nuclear power, Turki said, was the right of all nations.

Turki was speaking earlier this month at an unpublicised meeting at RAF Molesworth, the airbase in Cambridgeshire used by Nato as a centre for gathering and collating intelligence on the Middle East and the Mediterranean. According to a transcript of his speech obtained by the Guardian, Turki told his audience that Iran was a "paper tiger with steel claws" that was "meddling and destabilising" across the region.

Governments across the single currency bloc are pushing the banks, pension funds and insurance firms that hold Greek sovereign debt to play a role in a second rescue package for the heavily indebted euro zone nation. Josef Ackermann cautioned against any steps that could spread the crisis to other vulnerable countries in the 12-year old currency bloc.

"If it is Greece alone, that's already big. But if other countries are drawn in through contagion, it could be bigger than Lehman," the Deutsche Bank chief said at a Reuters banking event on Monday. The Swiss banker, who is also chairman of the Institute of International Finance, an international bank lobbying group set up to deal with international debt crisis, cautioned politicians against rushing a deal with the private sector.

European leaders have said they want precise figures on private creditor involvement by a July 3 meeting of euro zone finance ministers. "Political leaders expect a solution by the end of the week, but we should not rush it," Ackermann said. "It is important to have a good solution. The issues are complex and need to be discussed." At issue is how to share the burden of a new 110 billion euro ($155.8 billion) bailout for Greece being readied by euro zone politicians.

Athens also desperately needs to secure a 12 billion euro EU/IMF lifeline from its first rescue by next month to avoid an immediate default. While many economists believe some form of debt restructuring is inevitable, European banks are eager to avoid a disorderly process that could trigger a Lehman-style meltdown of inter-bank lending markets and undermine other euro zone debt. "We see the first signs of a stiffening of the money market," Ackermann said.

* GREECE - Greek unions promised to fill the streets of Athens on Tuesday at the start of a two-day strike to protest against painful austerity measures demanded by international lenders as the price for more financial aid.

- Thousands of Greeks have taken to the streets in recent weeks belonging to ADEDY, the public sector union representing half a million civil servants, and GSEE, which represents 2 million private sector workers.

- Protesters besieged parliament during a vote of confidence in the cabinet last week, shouting insults at politicians and shining hundreds of green laser lights at the building and at police. They held up a mock gallows with several nooses.

- Greek protesters threw petrol bombs and clashed with police on June 15 at buildings housing the finance ministry.

- On June 9 workers on the Athens metro and bus service staged a strike. Staff from companies earmarked for privatisation also held a protest march.

* BRITAIN - The government and unions said talks over public sector pension reforms made progress on June 27 but planned strikes by up to 750,000 teachers and civil servants will still go ahead on Thursday, closing schools and government offices and potentially disrupting airports and ports.

- Public sector workers are already facing a wage freeze and more than 300,000 job losses as the government cuts spending. For some in the unions, the pension reform was the last straw and they have vowed to stage coordinated national action in what could be Britain's worst labour stoppages for decades.

* SPAIN - Dozens of "los indignados" (the indignant), demonstrating against high unemployment and economic stagnation, camped outside parliament to protest as lawmakers debated amendments to the Socialist government's wage reform bill, meant to make the economy more competitive. The reforms were decreed into law by Prime Minister Jose Luis Rodriguez Zapatero's cabinet on June 10 and have been criticised by both unions and business groups.

- On June 15, politicians in the Catalonia region of northeastern Spain were forced to enter parliament by helicopter or under police escort as protests grew against a planned 10 percent cut in public spending.

- Last month, tens of thousands of demonstrators, angry over unemployment and austerity measures, packed Madrid's Puerta del Sol square before local elections. Demonstrators have filled Spain's city plazas, outraged over government austerity measures, marking a shift after years of patience over a long economic slump.

- At night the crowds on the square have swelled to up to 30,000 people. Hundreds of protesters camp out overnight and occupy the plaza during the day.

* FRANCE - Solidarity with "los indignados" in Madrid has already inspired several dozen French youths to spend nights camped out at the Place de la Bastille, the Paris square where a jail was torn down during the 1789 French Revolution.

Here are key challenges and deadlines that Greece will need to meet in coming weeks:

WEDNESDAY, JUNE 29

* Parliament votes on a 28 billion euro (25 billion pound), five-year austerity package of tax hikes and spending cuts agreed with the European Union and the International Monetary Fund. The session starts at 10am Athens time (0700 GMT) and is expected to conclude sometime in the afternoon with a vote.

THURSDAY, JUNE 30

* Parliament votes on a separate implementation law spelling out the fiscal measures in more detail - potentially more difficult as the laws will cover individual privatisations, tax steps and spending cuts.

SUNDAY, JULY 3

* Deadline set by the EU for the Greek parliament to pass the austerity laws. Euro zone finance ministers hold an extraordinary meeting on this date and have said the laws must be passed by then for Greece to obtain its next, 12 billion euro tranche of bailout loans. Greece has said it will be unable to pay its debts by mid-July if it does not get the tranche.

EARLY JULY

* Euro zone finance ministers have said they will define by early July "the main parameters" of a new international bailout plan for Greece, which will supplement the 110 billion euro bailout launched in May last year. The new package will include additional official loans and a voluntary rollover of Greek debt by private investors.

FRIDAY, JULY 15

* Six-month Greek Treasury bills worth 2.4 billion euros mature.

FRIDAY, JULY 22

* Three-month Greek T-bills worth 2 billion euros mature.

FRIDAY, AUGUST 12

* Six-month Greek T-bills worth 480 million euros mature.

FRIDAY, AUGUST 19

* Three-month Greek T-bills worth 2.0 billion euros mature.

SATURDAY, AUGUST 20

* A 5.9 billion euro, 3.9 percent five-year Greek government bond matures.

THIS AUTUMN

* Papandreou has announced a referendum will be held this autumn on Greek electoral and political changes, including the responsibilities of ministers. This could develop into a de facto test of support for the government and austerity.

The sources said planning had been going on for several weeks and was designed to ensure Greece gets the liquidity needed to avoid default in the absence of the next, 12 billion euro (10.7 billion pound) tranche of its emergency loan package, due by mid-July.

As well as preventing default, the aim is to head off any contagion spreading from Greece to Ireland, Portugal and Spain, and the potential knock-on impact on Europe's banking system, with French and German banks large holders of Greek debt.

The plan is distinct from a French proposal for private sector involvement in a second Greek bailout programme and is being discussed despite European Commission President Jose Manuel Barroso and other senior EU officials repeatedly saying that "there is no Plan B for Greece".

"There's been thinking about contingency for some time, for several weeks," one senior euro zone finance official involved in the Greek bailout told Reuters. The other sources seconded that line, saying there was "active planning" to step in if the Greek parliament rejects the austerity programme. "In this sort of situation, you can't afford not to think about what might happen next," the first source said. The sources would not confirm in detail what the current plan involved, but said several options had already been dismissed, including an EU bridging loan to Athens.

Greece has to roll over 2.4 billion euros of 6-month treasury bills on July 15 and 2.0 billion euros of 3-month bills a week later. In August, it has 5.9 billion euros of 5-year bonds maturing and must roll over 2.5 billion of bills. Failure to refinance the debts would result in the first default since the euro zone was created in 1999.

More than 10 million people are now affected in drought-stricken areas of Djibouti, Ethiopia, Kenya, Somalia and Uganda and the situation is deteriorating, it said. "Two consecutive poor rainy seasons have resulted in one of the driest years since 1950/51 in many pastoral zones," Elisabeth Byrs, spokeswoman of the UN Office for the Coordination of Humanitarian Affairs, told a media briefing. "There is no likelihood of improvement (in the situation) until 2012," she said.

Food prices have risen substantially in the region, pushing many moderately poor households over the edge, she said. A UN map of food security in the eastern Horn of Africa shows large swathes of central Kenya and Somalia in the "emergency" category, one phase before what the UN classifies as catastrophe/famine - the fifth and worst category.

The Obama administration issued the warning after members of the US Congress threatened to cut off further UN funding if the General Assembly holds such a vote. The Palestinian Authority, led by Mahmoud Abbas, has stated that Israeli-Palestinian peace talks have gone nowhere and it may seek a path to statehood that effectively would be an end-run around any UN Security Council action, where the US probably would cast a veto.

To do that, the PA could invoke the Uniting for Peace resolution and make an appeal directly to the UN General Assembly. If a majority of the 192 members vote to take it up, then two-thirds of the members would need to approve the measure, and that would override any Security Council veto. Palestinians believe they are close to obtaining such a vote but the General Assembly does not have the power to confer UN membership on a new Palestinian state, thereby making any such vote symbolic.

However, if the General Assembly would hold that vote, Republican members of the US Congress have threatened to introduce legislation to withdraw further US funding of the United Nations. The US provides about 25 percent of the UN's annual $2.5 billion budget, making the US contribution almost $600 million.

The Obama administration wants to avoid such a confrontation in the UN this September when the issue is expected to be taken up. The administration is attempting now to get peace talks restarted, but that appears unlikely due to continued settlement construction by Israel on the West Bank and in East Jerusalem, two areas which could be included in a new Palestinian state, as well as the Gaza Strip.

The exercise, titled the "Great Prophet Mohommad War Games," and referred to internallyas "Great Prophet-6," will reportedly feature the firing of ballisitic missiles of various ranges. Hajizadeh confirmed the missile-launching exercise will take place for the press, without specifying how long the maneuvers will last. "Short, medium and long-range missiles will be fired, especially the Khalij-Fars, Sejil, Fateh, Ghiam, and Shahab-1 and -2 missiles," Hajizadeh said.

In late May, Iran said it had equipped the Revolutionary Guards with a new surface-to-surface missile, the Qiam-1, which was built locally and test-fired last August. Iran maintains it has a wide range of missiles, some capable of striking targets inside arch-foe Israel as well as US bases in the Middle East.

Iran's missile program is under the control of the Guards. Iran's space and missile programs have been a concern in the West, which fears Tehran is developing a ballistic capability to launch potential nuclear weapons, which it suspects Iran is developing under the guise of its civilian atomic program. Iran has steadfastly denied its nuclear program has military aspirations.

Because of an agreement signed under Labour, the UK is about to double its IMF payment from just over 10 billion pounds a year to almost 20 billion pounds, a significant proportion of which will be used to service Greek debt. So even though David Cameron last week managed to exempt Britain from contributing to the separate European Union bailout fund for Greece, any savings could be cancelled out by our IMF commitment.

The increase in the UK's IMF contribution is higher than that of Germany, Switzerland, Canada or the Netherlands - although India and China are paying much more to reflect their growing share of the world economy. The UK contribution is rising from 10.5 billion pounds a year to 19.7 billion pounds. Mr Redwood pointed out that the 88 per cent increase in British contributions dwarfs the extra cash put in by oil-rich countries such as Kuwait, which is offering only a 40 per cent increase, and Saudi Arabia, which is paying 43 per cent extra. Germany's contribution has risen by 83 per cent.

Mr Redwood said: 'If the UK matched Belgium and Saudi our new subscription would be 4.3 billion pounds. In our financial position that would be a lot more comfortable.' Fellow Tory Douglas Carswell said: 'Think of the tax cuts we could afford with that 9.2 billion pounds or the guarantees we could give to maintain public services.'

Admitting that the projections for the number of people falling behind on loan payments could get "scary" if lenders did nothing to prepare for higher rates, he added: "You can see if you don't do something about it, you can see a tsunami. If you don't get into the hills you could get drowned by this. If you don't manage this properly it could get very messy."

In an interview with The Guardian, he also claimed that forbearance by some lenders to keep families in their homes had forced some homeowners further into debt. Warning that the industry may have been too lenient with some customers, he said he believed a policy of "tough love" would be fairer to people struggling to pay off debts taken at the peak of the boom.

UKAR was set up to take on the "bad" mortgages of Bradford & Bingley and parts of Northern Rock, made up of risky buy-to-let borrowers and loans of up to 125 per cent of the value of the property. It is the country's fifth-largest mortgage lender with 750,000 customers, of which 23,000 are six months behind on their payments. Although the troubles were concentrated within UKAR, Mr Banks stressed the problem was industry-wide.

Fashion chain Jane Norman yesterday became the latest high-street casualty, putting 1,600 jobs at risk. Its demise takes the number of retail jobs hanging in the balance up to 5,300, after Habitat and Homeform called in administrators last week. Department store chain TJ Hughes is expected today to add to the roster of failed retailers, after filing an intention to appoint an administrator yesterday.

Ernst & Young is believed to have been lined up, though the firm declined to comment. TJ Hughes, which has 57 stores, employs 4,000 staff. M&S will today add to the growing sense of unease when it launches its summer sale two weeks early. "Everyone is in the sale at the moment," a spokesman said. "The market is responding to customer demand." Jane Norman, which has 90 stores and more than 100 concessions, was put on the block by its banks this month but failed to find a buyer.