The South's naval live-fire drills are scheduled to run Monday through Friday at 27 sites. The regularly scheduled exercises are getting special attention following a North Korean artillery attack on front-line Yeonpyeong Island that killed two South Korean marines and two civilians. The November 23 artillery barrage, the North's first assault to target a civilian area since the end of the 1950-53 Korean War, began after the North said South Korea first fired artillery toward its territorial waters. South Korea says it fired shells southward, not toward North Korea, as part of routine exercises.

After the attack, South Korea staged joint military drills with the United States and also pushed ahead with more artillery exercises, despite the North's warning that they would aggravate tension. A South Korean Joint Chiefs of Staff officer tried to play down the significance of this week's drills, saying they are part of routine military exercises and would not occur near the disputed western Korean sea border where last month's attack took place. The officer, who spoke on condition of anonymity because of office policy, gave no further details.

North Korea, however, lashed out at Seoul, accusing South Korea of collaborating with the United States and Japan to ratchet up pressure on Pyongyang. That cooperation "is nothing but treachery escalating the tension between the North and the South and bringing the dark clouds of a nuclear war to hang over the Korean peninsula," Pyongyang's main Rodong Sinmun newspaper said in a commentary carried by the North's official Korean Central News Agency.

Although Britain's banks "should be able to absorb the likely losses on their direct exposures to Greece, Ireland, Portugal and Spain without too much difficulty" thanks to the efforts made "over the past couple of years", the indirect impact of a resurgent eurozone crisis holds serious dangers. "Harder to gauge is the potential effect on household and, especially, business confidence. In the aftermath of the collapse of Lehman Brothers, this was arguably the most significant transmission channel to the real economy," Mr Bean said.

"An intensification of the sovereign debt problems in the euro area could therefore administer a blow to the recovery here. But given the very high degree of uncertainty, there is little that the MPC can do to deal with this risk ahead of crystallisation." His comments follow a warning from the Ernst & Young Eurozone Forecast that the single currency area has a 10 per cent chance of collapsing into serious recession again and a further 25 per cent chance of crippling downturns in the peripheral member states.

Mr Bean refused to rule out the prospect of the crisis spreading to Portugal, Italy and Spain, saying: "Support to Greece and Ireland from the IMF and rest of the European Union has given those countries a breathing space in which to undertake the necessary adjustments. Financial support for other countries may or may not prove necessary - only time will tell." A eurozone crisis is just one risk lingering over the coming year. Although "the recovery has remained on track", he said, "there remain significant challenges for the year ahead".

How can Germany or France agree lightly to plans that amount to an EU debt union, with a common treasury, tax system, and budget policy, the stuff of civil wars and revolutions over the ages? To do so is to dismantle the ancient nation states of Europe in all but name. Even if Chancellor Merkel wished to take this course - and even if the Bundestag approved it - the scheme would still be torn to pieces by the German constitutional court unless legitimised by radical EU treaty changes, which would in turn take years, require referenda, and face populist revolt in half Europe.

What the German people are being asked to do is to surrender fiscal sovereignty and pay open-ended transfers to Southern Europe, taking on a burden up to six times [the cost of] reunification with East Germany. "If we pool the debts of the countries in the south-west periphery of Europe, we are blighting our children's future: the debt levels are astronomic," said Hans-Werner Sinn, head of Germany IFO institute.

At the end of the day, debtor governments still have to persuade Japanese life insurers, Mideast wealth funds, or French and German banks, to put up real money to buy their bonds at a bearable interest rate. Credit Agricole said last week that it would hold back at next week's auction of Spanish debt because it is not yet clear whether the ECB will back-stop the country. "The risk is simply too large for our appetite," it said. So we drift on with rising yields into 2011, when Portugal must raise 38 billion euros, Belgium 85 billion euros, Spain 210 billion euros, and Italy 374 billion euros - according to Goldman Sachs.

The reflex of the EU elites is to blame this structural mess on lack of statesmanship. "There is something surreal about the unfolding financial crisis," said Stefano Micossi from the College of Europe, the sanctum sanctorum of the European Project. "Leaders grudgingly do what is needed to prevent disaster at the last minute before it is too late, and the next minute they go back to the behaviour that brought them against the wall in the first place. The eurozone is in bad need of a psychiatrist," he wrote at VoxEU.

"If the eurozone follows this path, either all of the sovereign debts become German public debt, or the euro will collapse," he said. This is admirably candid in one sense, but is today's crisis really just a failure of leadership? Was EMU not dysfunctional from the first day? Did it not inflict negative real interest rates on Club Med and Ireland in the boom years, driving them into distastrously pro-cyclical policies?

Did it not lock in chronic imbalances between North and South? Has it not left victim states trapped in debt deflation or slumps which have gone too far to respond to an austerity cure, and from which there seems to be no escape on terms acceptable to Germany? Should we blame the current hapless leaders, or the guilty men of Maastricht who created this doomsday machine? If the project itself is rotten, surely what the eurozone needs most is an undertaker.

Painfully cold, arctic air sweeping across the Midwest has already been driving temperatures well-below zero. Temperatures will remain or plunge back below zero in the Upper Midwest with lows between 10 and 20 below zero across much of Iowa, Minnesota, western Wisconsin and the eastern Dakotas tonight.

Tonight into Monday, the bitter cold will overspread the rest of the eastern half of the country, creating a flash freeze in many places where a storm has made roads wet or slushy. While actual temperatures may not fall below zero, horrendous winds will make it feel that way for millions. AccuWeather.com RealFeel temperatures, which provide a measure of how cold it feels with the wind factored in, will plummet below zero as far south as Atlanta and Birmingham, Alabama, early Monday morning. Early Tuesday and Wednesday morning, these values will be near zero all the way east into New York City and Philadelphia.

In Chicago, Detroit, Minneapolis, Indianapolis and Pittsburgh, people will have to endure RealFeel® temperatures that stay below zero for 36 to 48 hours straight. Frostbite and hypothermia can set in very quickly is such extreme cold. Meanwhile, subfreezing temperatures will reach all the way into Deep South Texas, central Florida and many areas along the Gulf Coast, including Houston, New Orleans, Gulfport, Mississippi, Mobile, Alabama, and Panama City, Florida. The cold will put additional stress on winter crops across the Southeast and especially in Florida. Damage was already done during last week's freeze.

The storms have ended a long drought in Lebanon, Syria and Israel and come just a week after more than 40 people died in a forest fire. A Moldova-registered cargo ship sunk off the Israeli port of Ashdod. All of its 11 crew members were rescued. A woman died when an uprooted tree fell on her car in Lebanon's northern port city of Tripoli.

Shipping has been delayed through the Suez Canal and most Egyptian ports, both on the Red Sea and the Mediterranean - including the country's largest at Alexandria - have closed, with winds reaching speeds of up to 60km/h (37mph). Waves of up to 10 metres (33 feet) battered coasts, damaging fishing boats in Lebanon. In Syria, snow blanketed the streets of the capital, Damascus, and closed roads.

The BBC's Jon Leyne, in the Egyptian capital Cairo, says there are strong, cold winds in the city and the murky yellow sky of a sand storm. He says the storms, which caused temperatures to plunge to below freezing in some places, have ended weeks of unseasonably warm and dry weather across the region. Last week a devastating forest fire, fanned by drought and hot weather, killed more than 40 people near Israel's northern port city of Haifa. Thousands of hectares of forest were destroyed there and in Lebanon by fires.

Such a sharp rise in US benchmark market interest rates matters a lot - and it matters way beyond America. The US government is now servicing $13.8 trillion (8.7 trillion pounds) in declared liabilities - making it, by a long way, the world's largest debtor. Around $414 billion of US taxpayers' money went on sovereign interest payments last year - around 4.5 times the budget of America's Department of Education.

Debt service costs have reached such astronomical levels even though, over the past year and more, yields have been kept historically and artificially low by "quantitative easing (QE)" - in other words, Federal Reserve Chairman Ben Bernanke's virtual printing press. Now borrowing costs are 28 per cent higher than a month ago, with the 10-year Treasury yield reaching 3.33 per cent last week, an already eye-watering debt service burden can only go up.

Few on this side of the Atlantic should feel smug. The eurozone's ongoing sovereign debt debacle has pushed up Germany's borrowing costs by 27 per cent over the last month - to 3.03 per cent. The market has judged that if Europe's Teutonic powerhouse wants the single currency to survive, it will ultimately need to raise wads of cash to absorb the mess caused by other member states' fiscal incontinence.

Over the coming months, the world's appetite for dollar assets will be very severely tested - perhaps very close to destruction. America boasts the world's reserve currency, of course, but its ability to borrow from the rest of the world is not without limit. Last week's US tax move poses great dangers. There is little point in a fiscal giveaway that's cancelled out by higher rates. All you end up with is even more sovereign debt. Upgraded growth forecasts don't cause yield spike like that we saw last week - and it's absurd to suggest that they do. There's a new mood in the bond markets - a mood of zero tolerance.

The dispute over the area, home to sensitive Jewish, Muslim and Christian holy sites, has derailed past peace talks and spilled into violence. Palestinians claim the sector as the capital of their future state. Israeli Prime Minister Benjamin Netanyahu's reaffirmation of his intention to hold on to east Jerusalem drew criticism from the Palestinians and was likely to increase friction with the Americans. The White House Mideast envoy is scheduled to arrive this week in another attempt to push peace efforts forward.

Netanyahu's defense minister, Ehud Barak of the centrist Labor Party, called for sharing Jerusalem with the Palestinians. But a government official said Barak's idea does not reflect the government's view. The Palestinians want to establish their future state in the West Bank and east Jerusalem, lands Israel captured in the 1967 Middle East war. Israel later annexed east Jerusalem in a move that is not recognized by the international community.

US-led negotiations broke down after just three weeks and Israel refused to renew a 10-month moratorium on new settlement housing. Palestinians said they would not return to the talks unless there was a total freeze in West Bank and east Jerusalem construction. Israel countered that such a condition had never been made before, and the issue should be part of the negotiations. Washington's special envoy to the Mideast, George Mitchell, is expected to meet with Israeli and Palestinian leaders this week.

The sum is enormous: 6 billion euros ($7.9 billion) is how much the Irish government wants to cut from the public finances next year. The drastic course of treatment, the fourth budget in two years, was passed by the Irish parliament late on Tuesday night. It will be a huge test of strength for the small country: The average Irish household will be 7,500 euros worse off by 2012, according to the Irish Independent.

The Dublin government has been congratulated and encouraged from across the European Union for being so brave in sticking to its austerity goals. The unemployed, low-income workers, pensioners, students - hardly any sector of society has been left unscathed. Yet this huge national sacrifice will not significantly improve the country's massive debt problem. The sometimes severe cuts to social welfare payments, public sector pay and state investment pale into insignificance when compared to the massive gaps in the Irish banks' accounts. That is why INVESTORS ARE CONTINUING, UNDETERRED, TO SPECULATE ON IRELAND'S EVENTUAL INSOLVENCY.

However, the high interest rates mean that IRELAND HAS NO PROSPECT OF PAYING BACK THE LOAN. There remains only the hope that the government won't have to avail of all the funds. But no expert believes that this will be possible - after all, the Irish banks have repeatedly sought fresh capital over recent months.

Bombs used against civilians; millions paid to corrupt officials; and a kidnapping industry that employs students during university vacations: The US diplomatic cables from the Nigerian cities of Abuja and Lagos paint an unusually bleak picture of the situation in the oil-rich Niger Delta. Hardly any of the international oil companies active in the delta publishes production figures, kidnappings and hostage-taking are a daily occurence and the civilian population is suffering - not least because they too are occasionally targets of the Nigerian Army's special forces.

The central government in Abuja has neglected the delta for decades. It has failed to build schools, hospitals and roads and has simply ignored the serious environmental problems. All that mattered was that the oil kept flowing - and continued to produce kickbacks for the political elite. "The Federal Government has not funded one road in the key Niger Delta States in the last 10 years," reads one February 2009 cable from the US Consulate in Lagos, citing a high-ranking politician.

In the face of such neglect, organized crime has become rampant in the delta. There are kidnappers who are in bed with the authorities and special military units that, while they sometimes fight rebels in the delta, frequently have a stake in the oil business. The rebels, although they stage attacks on the multinational oil companies, also sell oil and enjoy police protection. The political elite thrives on the chaotic situation.

A blizzard warning was in effect Sunday for Chicago and much of northern Illinois, all of Iowa, large sections of southern Minnesota and Wisconsin, and smaller areas in North Dakota, South Dakota, Missouri and Michigan, according to the National Weather Service. Most of the rest of the region was under a winter storm warning or a hard freeze watch. Wisconsin authorities issued a statewide no-travel advisory Saturday, citing blizzard and winter storm warnings in nearly every county.

The sinking temperatures were considered even more treacherous than the snow in some places. North Dakota experienced wind chills of 20 degrees below zero Saturday, and the arctic air was expected to drop temperatures below zero by Sunday night throughout the Dakotas and in parts of Iowa, Minnesota and Wisconsin.

Eastern Minnesota's Oakdale area got 20 inches of snow Saturday, according to the National Weather Service. The storm was moving eastward, where it dumped about a foot of snow in Chippewa County in northwestern Wisconsin and was expected to drop 20 to 24 inches by Sunday morning in the Eau Claire area.

Economists surveyed by Dow Jones Newswires had expected a shortfall of $126.5 billion. November is traditionally a month for deficits. The Treasury report, detailing the government's spending programs, prompted an economic research firm, Macroeconomic Advisers, to lift its forecast for economic growth from October through December by four-tenths of a percentage point, to 2.7%.

Last month's red ink pushes up the deficit to $290.8 billion for the fiscal year, which began October 1. That figure is a little smaller than the deficit during the same period last year. But President Barack Obama's administration expects the deficit to top $1 trillion in this fiscal year. Washington has spent in excess of $1 trillion during each of the last two fiscal years, as revenues were reduced by the deep recession. At the same time, the economic slump and Wall Street bailout raised the government's expenses.

The administration last July said it was projecting a 2011 budget deficit of $1.416 trillion. But Michael Feroli, an analyst at JP Morgan Chase, said Friday he expects the budget gap to set a new record in fiscal 2011, reaching $1.5 trillion as the government pays for the extension of tax cuts.

"We are once again assured of the rectitude of our choice of the songun (army first) policy, and in strengthening a defence that relies on nuclear forces for deterrence," he said. Moments after his comments, the Russian foreign ministry issued a statement stating that "all sides must avoid taking any actions that can escalate the situation."

This year has seen military and security experts often warn about the prospects of "cyberwarfare". Few expected the most prominent assaults against large companies to come from a scattered group of anarchists and idealists with no identifiable leader, membership or nationality. The loose internet grouping that calls itself Anonymous has been notorious in web circles for years, particularly for its apparently random attacks on the music industry, Kiss singer Gene Simmons, YouTube and the Scientologists. Its wilfully illiterate grammar and black humour has permeated the internet far beyond the 4chan messageboard, which originally spawned it.

Even as the more serious matters of attacks on big companies were plotted this week, Anonymous followers in 4chan's open chat rooms chimed in with insults and jokes. But with what it has dubbed "Operation Payback" the group has mounted its most ideological crusade yet. Attempts to scupper WikiLeaks last week, as payment and web hosting companies pulled their support for the site amid intense political pressure, have made Julian Assange, the whistle-blowing website's imprisoned founder, the pin-up for Anonymous's campaign against censorship.

"WikiLeaks is a litmus test for freedom of speech and freedom of information," one Operation Payback participant told the Financial Times. Operation Payback has hit targets far and wide. As well as Amazon, the trader, and payment companies, websites belonging to the Swedish government; the Dutch police; Senator Joe Lieberman, a critic of WikiLeaks; and Sarah Palin, the former US vice-presidential candidate, were targeted.

The rules are much tougher than those agreed by the G20 countries, raising fears that bankers may emigrate to more lightly regulated countries. The bonus limits will apply to the entire global staff of European banks. However, non-European banks will only face restrictions on what they pay staff working for subsidiaries based in the European Economic Area (the European Union plus Norway and Iceland).

Some European banks have warned that the rules create an added incentive for their employees to relocate to Asian cities such as Singapore that have looser bonus rules, as well as lower tax rates and access to Asia's booming economies. Moreover, according to the BBC's business editor, Robert Peston, British banks HSBC and Standard Chartered have voiced concerns that they may lose Asian staff to non-European competitors because the bonus rules apply to their worldwide staff - including those in Asia.

And although they have made no such threat, the rules may encourage the two banks to move their corporate headquarters to Asia in order to avoid having to apply the rules to employees located outside Europe. The rules will not apply to Switzerland, a major international banking centre that is not part of the European Economic Area.

Foreign Minister Carl Bildt said a "terrorist attack" which could have been "truly catastrophic" had failed. A local news agency, TT, said it had received a threatening e-mail shortly before the blasts, which called for "mujahideen", or Islamist fighters, to rise up in Sweden and Europe.

Attacking the country over caricatures of the Prophet Mohammed drawn by Swedish artist Lars Vilks as well as Sweden's military presence in Afghanistan, the email promised Swedes would "die like our brothers and sisters". Sweden has some 500 soldiers deployed in Afghanistan as part of the international military force.