At an EU summit in Brussels at the end of October that was dominated by the euro crisis and wrangling over whether to bail out Ireland, Merkel became embroiled in a row with the Greek prime minister, George Papandreou, according to participants at the event's Thursday dinner. Merkel's central aim, which she achieved, was to win agreement on re-opening the Lisbon treaty so a permanent system of bailout funding and investor losses could be established to deal with debt crises that have laid Greece and Ireland low and are threatening Portugal and Spain. The Germans also called for bailed-out countries to lose voting rights in EU councils.

At the Brussels dinner on 28 October attended by 27 EU heads of government or state, the presidents of the European commission and council, and the head of the European Central Bank, witnesses said Papandreou accused Merkel of tabling proposals that were "undemocratic".

"If this is the sort of club the euro is becoming, perhaps Germany should leave," Merkel replied. It was the first time in the 10 months since the euro was plunged into a fight for its survival that Germany, the EU's economic powerhouse and the lynchpin of the euro's viability, had suggested that quitting the currency is an option, however unlikely.

The zone's financial stability is still far from certain and many analysts believe the crisis will worsen before it gets better. ECB head Jean-Claude Trichet is keeping the pressure on governments to fix the debt crisis as the bank buys bonds to win politicians time to cut deficits. The bank snapped up Portuguese and Irish bonds again on Friday after Trichet assured investors that policy makers will delay the withdrawal of emergency liquidity. The ECB's purchases have triggered a surge in bonds across the euro region's periphery.

'The refusal to be more aggressive reflects a belief at the ECB that Europe's debt woes can only be solved by governments embracing austerity and that providing more liquidity would only delay the day of reckoning,' said Peter Dixon, an economist at Commerzbank AG in London. 'The ECB is effectively putting a sticking plaster over many of the problems in order to ensure that markets continue to function, but this requires governments to sit down and think much more clearly.'

Many Germans who embraced the EU after WW2, seeing it as a way to preserve peace and forge new business opportunities, now view it as a vast, unaccountable, bloated bureaucracy that stole their beloved D-mark and gave them the struggling euro. The recent crises in Greece and Ireland have contributed to further disillusion among them. The euro is now known in Germany as the 'Teuro' - a play on the word Teuer meaning expensive.

Most Germans still calculate prices in their heads in marks. They nurture their resentment against the hated currency with venom and it is a 'constant source of irritation,' said a commentator on Radio Berlin this week.

His Excellency Ali Abdullah Saleh, the first and so far only president of the Republic of Yemen, ruler over 23 million inhabitants and 50 million firearms, is not a good man to have as an enemy - but having him as a friend is even worse. In Yemen he is called "The Boss." Since 2004, The Boss has been fighting a ruthless war against the Houthi rebels in the north. They are Shiites - and politically marginalized. In August 2009, this conflict entered a new phase when the Yemeni army launched a new offensive designed to wipe out all Houthi resistance.

The president categorically rejects negotiations with the rebels: "The war will never stop no matter how much money or martyrs it costs," he said a year ago. Saleh appears indifferent to the ravages of the war, the civilian casualties, the streams of refugees and the devastating damage to the region's infrastructure. He is pouring an increasing number of weapons into the battle against the Houthi stronghold of Sadah, and sending in an increasing number of soldiers into his deadlocked conflict with the rebels. He is also paying less and less attention to the fight against the terror group known as al-Qaida in the Arabian Peninsula (AQAP).

"We are fighting on behalf of you, the Americans, and Israel," he said in a conversation with the US ambassador, according to one of the tens of thousands of US diplomatic dispatches that have now been made public by WikiLeaks. Saleh maintains that the war against the Houthis is actually a proxy war between Iran and the US. The Americans, however, feel that the Yemeni president is fighting a senseless war, a viewpoint that is made crystal clear by hundreds of reports that the US Embassy in the Yemeni capital of Sanaa has sent to Washington over the past few years. Nevertheless, the Americans play a role in the war.

During a confirmation hearing Friday, Kim warned that South Korea would launch air strikes on the communist North if it stages another attack. "If North Korea carries out a military provocation on our territory and people again, we must retaliate immediately and strongly until they completely surrender," Kim Kwan-jin said in a speech Saturday to senior military officials.

Kim also called for military readiness, saying North Korea would plot new provocations. He later visited the island targeted by the North Korean attack. He said the military would quickly hold firing drills if the weather permits, according to the Yonhap news agency. Skirmishes occur periodically along the two Koreas' disputed maritime border, but the latest assault was the first since the 1950-53 Korean War to target a civilian area.

Also Friday, US Secretary of State Hillary Rodham Clinton said she will meet with her South Korean and Japanese counterparts on Monday in Washington "to review the approach we should be taking" toward North Korea. "What we object to is a pursuit of nuclear weapons that can be used to threaten and intimidate their neighbors and beyond," Clinton said in Bahrain. "That is unacceptable, and it is destabilizing."

MK Yaakov Katz (Ketzaleh) of the National Union was the first leader Thursday to publicly give voice to the possibility that the fire was a terror attack - "an act of arson that turned into a massacre," in his words. Most of the large forest fires in Israel are set by hostile Arabs, Katz said. He noted that he had proposed a bill for minimum punishment of terror arsonists nine months ago, and blamed Justice Minister Yaakov Ne'eman for torpedoing it.

Member of Knesset Michael Ben-Ari (National Union) called on Prime Minister Netanyahu Thursday evening to recruit "the entire Shin Bet" (Israel Security Agency) to investigate the Carmel Mountain fire and what he described as "the ongoing arson activity in the Galilee in general." MK Ben-Ari said, "Fires are not decrees from above and the people of Israel must receive an answer regarding what's behind this great tragedy."

The fire spread from three locations simultaneously - making arson a likely possibility.

The British state, which did little to hamper this takeover, now stands to lose millions of pounds in corporation tax, thanks to a surreptitious restructuring which will relocate much of the Bournville factory's profits to Switzerland. This is only the latest sign that all is not well with this deal. Kraft broke its pledge to retain Cadbury's Somerdale factory near Bristol as soon as it actually gained control.

Its chief executive, Irene Rosenfeld, simply declined to appear in front of MPs investigating the takeover - an interesting contrast to the US Senate's bullying treatment of BP, whose sins against the environment were much exaggerated. FOREIGN COMPANIES NOW OWN NEARLY 40 PER CENT OF BRITAIN'S INFRASTRUCTURE - ports, rail services, water and energy supplies.

The more this proportion grows, the more we have to fear from businessmen to whom our tax revenues and employment levels are a minor matter. British politicians need to look far more carefully at overseas takeover bids in future. They should also cease to be so easily won over by the smiling reassurances of multinationals.

Police spokesman Micky Rosenfeld said two people suspected of starting the blaze through negligence had been arrested. Israel Radio said the suspects were 16-year-old boys from a village bordering on the Carmel region woodlands where the fire was focused. Regional police commander Roni Atiya said he believed the blaze had spread from a campfire that was not properly extinguished. "It looks as though this is the result of negligence," said Atiya, adding there was no evidence of any link to terrorism.

Foreign firefighting planes joined the battle to contain the blaze after Prime Minister Benjamin Netanyahu appealed for help because of a shortage of such aircraft in Israel. Planes and helicopters from the United States, Spain, Azerbaijan and Switzerland were expected to join those from Russia, Turkey, Greece, Britain, France and Cyprus, already dumping water on the flames.

Citing the cables, the Times said China made repeated and often successful hacking attacks on the US government, private enterprises and Western allies as far back as 2002. Google, the world's top Internet search engine, closed its China-based search service in March, two months after it had said it would stop censoring search results in response to what it said was a sophisticated cyber attack that it traced to China and increasing limits on freedom of expression.

The dispute was resolved in July after Google tweaked the way it directs users to an unfiltered search engine. The Times quoted one cable dated earlier this year as saying: "A well-placed contact claims that the Chinese government coordinated the recent intrusions of Google systems. According to our contact, the closely held operations were directed at the Politburo Standing Committee level."

The paper added that the cable quoted the contact as saying the hacking of Google "had been coordinated out of the State Council Information Office with the oversight" of two members of the Communist Party's Politburo: Li Changchun and Zhou Yongkang. It said Zhou is China's top security official.

I have just read William Oddie's blog on Pakistan, its blasphemy laws and the appalling injustice done to Asia Bibi, who has now been released. The case he highlights is very disturbing and makes me raise the question: is violence intrinsic to Islam? Or is it really - as its defenders say - a peaceable religion, regrettably distorted by Islamist terrorists such as Anwar al-Awiaki, who believes jihad is an obligation for every Muslim?

This same question was posed by Pope Benedict in his famous (or should I say 'notorious'?) Regensburg Address in 2006. I know he has been widely criticised for raising the subject at all, but personally I think he was right to do so. Referring to a dialogue in 1391 by the Byzantine Emperor Manuel II Paleologus to an educated Persian, the Pope said, "The Emperor touches on the theme of a holy war. He addresses his interlocutor with a startling brusqueness, a brusqueness that we find unacceptable on the central question concerning the relationship between religion and violence..."

Note that it is the 'brusqueness' that is unacceptable, not the question itself. The Christian Emperor's point (and Pope Benedict's) is that to spread one's faith through violence ('the sword' preached by Mohammed) is incompatible with the nature of God. The Pope went on to say, "The truly divine God is the God who has revealed himself as logos (the word). Christian worship is worship in harmony with the eternal Word and with our reason."

Commenting on the Regensburg Address in the Sunday Telegraph at the time of the papal visit, Mona Siddiqui, Professor of Islamic Studies at Glasgow University, wrote, "Benedict... quoted a 14th century Byzantine emperor who had strongly criticised Islam and its propensity for violence. Tragically, many Muslims around the world did react violently, demanding an apology and fuelling the growing frustration within Western society that Muslims tolerate free speech only as long as it doesn't offend them'.

Moderate and sensible though her article was, nowhere in it did the Professor actually repudiate the idea that violence, holy war or jihad might be intrinsic to Islam.

But Europe's problems have investors reconsidering whether lending to developed countries is always a risk-free endeavor. Citigroup's chief economist said this week the euro zone turmoil may be the "opening act" of a debt crisis that could even infect the United States and Japan, while a top Federal Reserve official said it was "a wake-up call" for America.

In that environment, US ailments - a rising ratio of debt-to-gross domestic product, one of the highest peacetime budget deficits, strapped state governments, and banks that many fear are still "too big to fail" - make investors queasy. While the prospect of US default is remote, that doesn't mean the United States will always be able to borrow money at less than 3 percent for 10 years, as it can today.

"Americans are kind of sleeping at the switch," said Joseph Quinlan, chief market strategist at US Trust and author of "The Last Economic Superpower." "Markets want to see we're serious about tackling deficits. We should never be so complacent as to think the market won't impose discipline on us." The yield on the benchmark 10-year Treasury fell to a five-decade low in 2008 near 2 percent and has since not climbed above 4 percent even as US debt levels rose.

Ireland, by contrast, must pay nearly 9 percent to borrow money for 10 years, while Greece pays 12 percent. But if market anxiety about sovereign debt in general continues to grow, some investors are bracing for US yields to rise next year. That could complicate efforts by policy makers to boost a struggling economy, lifting mortgage rates and interest payments on outstanding public debt, which at $9.3 trillion is more than 60 percent of gross domestic product.

"If there are further provocations, we will definitely use aircraft to bomb North Korea," Kim said, when asked how he would respond to another attack after last week's North Korean bombardment of an island near their disputed border, killing two South Korean marines and two civilians. For nearly 60 years, the two Koreas have faced each other across one of the world's most heavily armed borders. They have never signed a peace treaty to end the 1950-53 Korean War.

The North alone has more than 5,000 multiple-launch rockets pointed at the capital Seoul which, with its satellite cities, is home to some 25 million people. The foreign ministers of the United States, Japan and South Korea, long-time allies, meet in Washington on Monday to discuss North Korea.

Clinton said: "North Korea poses an immediate threat to the region around us, particularly to South Korea and Japan. It poses a medium-term threat if it were to collapse to China, because of refugees and other instability. And it poses a long-term threat to the entire world, because of its nuclear program, and its export of weapons around the world." South Korea had exercised great restraint, she said in the Kyrgyz capital Bishkek, according to a transcript released by the State Department.

Temperatures in Poland have fallen to as low as -33C (-27F) in the past few days. Police in the country say 18 people are now known to have died from exposure, most of them homeless people who had been drinking alcohol outside. Russian media reported three deaths in Moscow and at least two people were also reported to have been killed in Germany.

Denmark mobilised its army to help emergency vehicles make their way through snow in the south-east. Snowfalls trapped hundreds of motorists in Brittany and Normandy. In Belgium, 650km (403 miles) of traffic jams were reported, with Flanders hit hard. Cold air moving down from Siberia has contributed to the wintry conditions in northern Europe. Temperatures are an average 5-10C below average in some major cities. Thousands of railway passengers in Germany had to spend the night in their trains after the snow forced high-speed inter-city routes to a halt. The authorities in Berlin kept underground stations, soup kitchens and heated buses open all night to provide shelter for the city's homeless.

There has been widespread disruption to international travel, with several major airports forced to close. Significant flight delays were reported at London Heathrow, Paris Charles de Gaulle, Amsterdam Schiphol, Berlin Tegel and Duesseldorf airports. London's Gatwick airport re-opened on Friday morning after two days, but passengers have been warned to expect delays and cancellations. London City airport and Edinburgh airport in Scotland also suffered closures. Eurostar says it expects to operate a significantly reduced service until Sunday, but that no more tickets will be available until Monday.

Meanwhile, heavy rain has led to severe flooding in parts of Albania, Bosnia, Serbia and Montenegro. More than 1,000 people have fled their homes to escape rising waters and officials have declared a state of emergency in several affected areas.

Desire Petroleum's shares went up by 24% on the news. Chairman of Desire Stephen Phipps called the find in the North Falkland Basin "highly encouraging." Another British company, Rockhopper, found oil in the same area in May. It is not clear if either find will prove commercially viable. The resumption of oil exploration around the Falklands earlier this year revived the long-running dispute between Britain and Argentina over the islands.

In February Argentina announced new controls on shipping to the Falklands. It has also raised the issue at the United Nations and rallied support for its sovereignty claim among Latin American countries. Britain says it has no doubt about its sovereignty over the islands, where most of the population is of British descent. The Argentine military invaded the Falklands in 1982 but was defeated by Britain in the war which followed.

The exercises come 10 days after North Korea shelled a South Korean island, killing four people. South Korean observers are present for the first time. The joint military exercises - codenamed Keen Sword - are being held to mark the 50th anniversary of the US-Japan alliance. They are intended to be a show of solidarity between the Pacific allies at a time of heightened tension in the region, says the BBC's Roland Buerk in Tokyo.

The drills were planned well before North Korea shelled the South Korean island of Yeonpyeong last month, killing two marines and two civilians. But they come just days after the United States and South Korea carried out their own joint military exercises, putting on a show of force in the Yellow Sea. US Secretary of State Hillary Clinton said North Korea remained "an immediate threat to the region around it, particularly to South Korea and Japan". North Korea also posed "a medium-term threat, should it collapse, to China", she said.

About 50,000 US soldiers are stationed in Japan. The US-Japan exercises will continue until 10 December.

Wikileaks says it has faced disruption since it began publishing thousands of secret US diplomatic cables. The memos, which discuss US diplomatic relations and military activities, have been causing controversy across the world. It was not clear how long disruption to the site would last for. In a statement on its website, EveryDNS.net said it had issued a 24-hour termination notice to Wikileaks which ended at 0300 GMT on 2 December.

It said the domain wikileaks.org had become the target of "multiple distributed denial of service (DDOS) attacks". "These attacks have, and future attacks would, threaten the stability of the EveryDNS.net infrastructure, which enables access to almost 500,000 other websites," it said. "Any downtime of the wikileaks.org website has resulted from its failure to use another hosted DNS service provider," it added.

Wikileaks says its website has been under attack since it began publishing more than 250,000 classified US diplomatic cables. It turned to the online store Amazon to host its site but the company ended the agreement on Wednesday - a move welcomed by US officials. Wikileaks said its site is now being hosted by servers in Europe.