Investors shied away from riskier assets amid worries over faltering growth in China and a far worse than expected plunge in US consumer confidence during May. The Footsie was off 144.1 points at 4927.3 following the data - with every single blue-chip stock in the red - as Wall Street's Dow Jones Industrial Average also plunged more than 2 per cent in early trading.

The effect of European austerity plans on economic growth added to the negative mix as the Dax in Germany and France's Cac 40 both fell more than 3 per cent.

The euro was also at a 19-month low against the pound, with sterling steady at 1.50 against the dollar.

As well as heavy falls for minors, under-pressure BP shares were back near last week's 14-year low after dropping 7.95p to 300.3p. Royal Dutch Shell dropped 58.5p to 1633p. Barclays was the leading top-flight faller with a 6 per cent or 18.1p slide to 267.3p as the stock continued to suffer following yesterday's rating downgrade from Nomura.

The Budget also tells us that, having not had a pay rise since 1990, the Queen cannot be given the additional 7 million pounds she desperately needs to cover her household's expenses. With Government debt still rising, according to the Taxpayers' Alliance, by 18.6 million pounds an hour, it takes only 22 minutes for it to exceed the 7 million pounds we cannot afford to give the Queen.

According to the Pink Book, we hand over 15 billion pounds yearly to the EU, so we are giving 7 million pounds to Brussels every four hours. In two years' time, the year of her Diamond Jubilee, the Queen's cash reserves, we are told, will run out - while the Government continues to receive 226 million pounds a year from the Royal Estates.

Half of the 440 chief executives and heads of banks questioned say there is a greater than 50 percent chance of one or more countries leaving the eurozone by 2013. More than a third (36 percent) see at least a 25 percent chance of a complete breakup over the same period. Germany is perceived as the fifth most likely country to pull out, which the article notes may reflect the respondents' concern that Berlin may lose confidence in monetary union if the crisis continues.

Saturday's Guardian reported that, in its first major test, Greece will next month launch its first debt sale since it was forced to accept a 110 billion euros (90 billion pounds) bailout in May.

In the FT Wolfgang Munchau argues that the "eurozone will need to commit itself to a full-blown fiscal union and proper political institutions that give binding macroeconomic instructions to member states for budgetary policy, financial policy and structural policies."

He said the European human rights judges who have repeatedly overturned laws set by Parliament would 'benefit' from understanding that legal rights can be achieved in different ways. The rebuke from Lord Neuberger, who is the leading civil law judge in England, is the second high-level judicial criticism of the Strasbourg court this year.

The head of the judiciary, Lord Chief Justice Lord Judge, said in April that the French-based rights body was threatening to 'assume an unspoken priority' over English common law. It indicates deepening unease among judges at the willingness of European judges to intrude into and overrule Parliamentary and British court decisions. Lord Neuberger rebuked Strasbourg in a lecture to lawyers about the 'incoming tide' of European law.

Lord Neuberger called for a 'dialogue' between Strasbourg and London which, he said, 'will require a more robust approach by our courts through their judgments to explain the common law position and exactly how and why it sets out a perfectly consistent means of facilitating the rule of law and protecting fundamental rights.'

George Osborne attempted to address the issue in last week's Budget, with plans to close the deficit - the shortfall between tax revenue and public spending - by 2014/2015. As a result, the volume of gilts to be issued this year has been reduced by 20 billion to 165 billion pounds, following last year's record 227 billion pounds.

Mr Moulton believes a sovereign debt crisis elsewhere would spill over to the UK as investors lose their appetite for government bonds. "There is so much sovereign debt out there that it's a real problem," he said. "It doesn't have to be a UK failure but one or two others would quickly infect the UK."

He described the global system as a "giant experiment". "Everyone is running deficits, everyone's debt is at high levels," he said. "There are lots of low probability events that add up to a decent probability in total... I reckon there's a one in three shot of a rate rise during the course of this year." Economists expect the Bank of England to start raising rates, currently at 0.5 per cent, at the end of this year and to stop at 2 per cent in late 2011. However, Bank policymaker Andrew Sentance has already called for a rate rise this month.

While it may seem far-fetched to worry about the future of one of the world's largest currencies, the wealthy speculator George Soros expressed doubts last week and several other commentators have done so earlier.

All euros are backed by the European Central Bank but the serial numbers prefixed with X may be regarded as most secure because they are issued by Germany. N is also a good prefix, because these come from Austria. P, L, U and Z prefixes may also be favoured because these are issued by the authorities in Holland, Finland, France and Belgium. If you share widespread fears that the euro cannot last in its present form, you might want to avoid notes with the prefixes F, G, M, S, T or Y. These are issued by Malta, Cyprus, Portugal, Italy, Ireland and Greece.

Here and now, in a long-planned move to make life difficult for forgers, about 150 million British 20-pound-notes with a picture of Edward Elgar will be replaced as legal tender on Thursday, July 1, by notes with a picture of Adam Smith. When the change was first announced during the last Labour government, I noted how apt it was that Gordon Brown should replace a great English composer with a Scots tax collector - for that was Smith's day job before he became an economist.

The transition will no doubt be smooth and the Bank of England says it will continue to honour all the notes it has issued. Let's hope the same can be said of the European Central Bank and all its euros.

Over the past five years, it's averaged 6,000 square miles. The prediction comes from measurements of nutrient flows in the Mississippi River, which pours farm waste into the Gulf. Those nutrients stimulate excessive growth of algae that is broken down by oxygen-sucking bacteria.

University of Michigan ecologist Donald Scavia says the BP spill could make the dead zone larger because microbes gobble oxygen when consuming oil. But the effect could be offset if the oil limits algae growth.

"People from all walks of life - mostly young women - come here asking for prayers that can solve their problems," says YaAli sitting on a chair in a crumbly old alley in Tehran. Stroking his white beard, YaAli - a nickname he has been given by his customers - explains how each prayer must be used in its own specific way.

"There are lots of methods depending on the problems. Some prayers (written on a piece of paper) should be burned and some should be put in a bowl of water. You should follow the instructions." According to Islam, prayers have a divine source and make a spiritual connection between God and his servants. Those who have the right religious knowledge can write prayers for others to help them obtain better results.

Iran's clerics also believe in the power of prayer but they advise people against using prayers that lack a religious basis. Magic and superstition are both illegal under Islamic law. "Writing prayers quoting Shia's immaculate Imams and receiving money for that has no legal obstacle," said Grand Ayatollah Lotfollah Safi Golpaygani when asked about the religious legitimacy of the prayer sellers.

With the brashness of a teenager, in some cases literally, China's scientists and inventors are driving a resurgence in potentially world-changing research. Unburdened by social and legal constraints common in the West, China's trailblazing scientists are also pushing the limits of ethics and principle as they create a new - and to many, worrisome - Wild West in the Far East.

A decade ago, no one considered China a scientific competitor. Its best and brightest agreed and fled China in a massive brain drain to university research labs at Harvard, Stanford and MIT. But over the past five years, Western-educated scientists and gutsy entrepreneurs have conducted a rearguard action, battling China's hidebound bureaucracy to establish research institutes and companies. Those have lured home scores of Western-trained Chinese researchers dedicated to transforming the People's Republic of China into a scientific superpower.

"They have grown so fast and so suddenly that people are still skeptical," said Rasmus Nielsen, a geneticist at the University of California at Berkeley who collaborates with Chinese counterparts. "But we should get used to it. There is competition from China now, and it's really quite drastic how things have changed."

China has invested billions in improving its scientific standing. Almost every Chinese ministry has some sort of program to win a technological edge in everything from missiles to medicine. Beijing's minister of science and technology, Wan Gang, will visit the United States in early July and is expected to showcase some of China's successes.

"The action is here," said S Ming Sung, the chief Asia-Pacific representative for the Clean Air Task Force, a US-based nonprofit entity, and a former Shell Oil executive. "In the US, there are too many paper researchers. Here, they are doing things."

Iranian officials often speak of impending US and Israeli attacks in general terms; never until now have they named a specific location.

Other Iranian sources report that in the last few days, Israel has secretly transferred a large number of bomber jets to bases in Azerbaijan, via Georgia, and that American special forces are also concentrated in Azerbaijan in preparation for a strike. On Tuesday, June 22, Dr Uzi Arad, head of Israel's National Security Council and Prime Minister Benjamin Netanyahu's closest adviser, said "The latest round of UN Security Council sanctions on Iran is inadequate for thwarting its nuclear progress. A preemptive military strike might eventually be necessary."

The global economy as well as financial markets were on the mend, though the recovery remained fragile in the advanced economies and in the euro zone the debt crisis put the recovery at risk, the BIS said in its annual report, published on Monday. Global leaders meeting in Toronto agreed to take different paths for shrinking budget deficits and making banking systems safer and Washington in particular has warned against cutting too fast.

The head of the BIS said there was no time to waste."We cannot wait for the resumption of strong growth to begin the process of policy correction," BIS general manager Jaime Caruana told the bank's annual general meeting. "In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress."

Caruana later told a news conference that recently announced fiscal consolidation in some countries together with the publication of bank stress tests in Europe and the support of the G20 for regulatory reforms were important steps forward.

The BIS, which acts as a bank to central banks and a discussion platform for policymakers, said reforms of the financial system remained key to prevent further crises.

"It seems like damage brought by the oil gusher has spread way beyond the ocean, coastal areas and beaches. Collateral damage now appears to include agricultural damage way inland in Mississippi," writes Benjamin. The disease has caused widespread damage to plants from weeds to farmed organic and conventionally grown crops.

Benjamin believes the disease is the result of BP spraying the oil dispersant Corexit 9500 in the Gulf of Mexico. Corexit 9500 is believed to be responsible for widespread reports of oil cleanup crews reporting various injuries including respiratory distress, dizziness and headaches. "Dispersants have never been applied on this scale, leaving environmental scientists guessing about the consequences."

"Corexit may have caused seven cleanup workers to be admitted to the hospital with shortness of breath and nausea," reports Popular Science . "Many have focused their concerns about Corexit... on what it's doing under the water. But as we know, the oceans are part of a larger precipitation cycle, and scientists are worried that soon the consequences of using dispersants could be falling from the sky," writes Beth Buczynski for Care2, an environmental website. The EPA asked BP to stop using Corexit, which is banned in 18 countries due to its toxicity, but the oil transnational has refused.

Over the last few weeks a naval carrier - the USS Harry S Truman - has been positioned in the north Indian Ocean, not far from the Strait of Hormuz, which leads into the Persian Gulf. The carrier joins the USS Dwight D Eisenhower, which was already located in the area.

Reports of mass movements of Israeli and US naval warships have been circulating through the media for weeks. On June 19, the Israeli newspaper Ha'aretz reported that 12 US and Israeli warships were seen moving through the Suez Canal from the Mediterranean Sea to the Red Sea. And a report from the Associated Press published Saturday evening cited "unconfirmed" reports from Israeli and Iranian media that Saudi Arabia has allowed Israel to use its territory in preparation for an attack on Iranian nuclear facilities.

An article in the Gulf Daily News, largely dismissed by Western observers, did not mention any Saudi involvement but said Israel is preparing to attack Iranian targets from the former Soviet republics of Azerbaijan and Georgia. The claims that Israel may be preparing for an assault on Iranian nuclear facilities were strengthened this weekend by Italian Prime Minister Silvio Berlusconi, who told reporters at the G8 summit in Canada that G8 leaders "believe absolutely" that Israel will "probably" strike Iran.

Entitled "Deflation: Making Sure It Doesn't Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost." Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on "monster" quantitative easing (QE). "We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he said in a note to investors.

Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70 per cent of GDP to 100 per cent by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy.

At first glance, the promises of the G20 nations, which were meeting in this format for the fourth time, sounded impressive. National deficits will be "at least" halved by 2013, according to the summit's closing statement. But the agreement has no teeth, given that it does not foresee any binding mechanisms to make sure that the commitment is kept. Every country will manage its own cost-cutting efforts, with some taking action sooner, others later. The measures will be "tailored to national circumstances," the statement reads.

The discussion of possible new rules for the financial sector was postponed to the next summit in South Korea, which is scheduled for November. Merkel was not able to find sufficient allies to push through a worldwide bank levy or a global financial transaction tax. France and Germany are now working on a EU plan for a financial transaction tax. The G20 members may have been united during the crisis, but now they are diverging - both in terms of regulation and their economic health. National interests have once again become more important than the big picture.

Merkel wants to economize. The British have no other choice but to do so. China is allowing its currency to slowly appreciate against the dollar. And the Americans are expected to continue with their strategy of racking up new debt, at least for the time being. The big question now is: Will the stimulus efforts already undertaken be enough? Or will the bad economic news once again dominate the headlines?