Italian Father Gheddo is a highly respected figure from the Vatican's Pontifical Institute for Foreign Missions, a society of missionaries. He blamed Christians for failing to live up to their own beliefs and creating a 'religious vacuum' which was being filled by Islam. 'The challenge must be taken seriously,' he said.

'Certainly from a demographic point of view, as it is clear to everyone that Italians are decreasing by 120,000 or 130,000 persons a year because of abortion and broken families - while among the more than 200,000 legal immigrants a year in Italy, more than half are Muslims and Muslim families, which have a much higher level of growth.' He added: 'If we consider ourselves a Christian country, we should return to the practice of Christian life, which would also solve the problem of empty cradles.'

The Bank of Japan agreed at an emergency meeting to boost its special loan facility by 10 trillion yen to 30 trillion yen (220.7 billion pounds). "We need to watch out more carefully for downside risks to Japan's economy," said Governor Masaaki Shirakawa, who cut off his trip to the Jackson Hole forum in the US.

"Several weak US figures came out, while the yen rose and stock prices fell. When we saw this, we decided that we need to take more precautions." Premier Naoto Kan said Tokyo would tap into its reserve fund for a 920 billion yen spending package on jobs and investment. "We want to take swift measures as the second pillar of stimulus to support easing by the bank," he said. The sums are tiny, a sign of Mr Kan's limited room for manoeuvre as public debt reaches 225 percent of GDP. Rating agencies are already circling ominously.

Haunted by memories of Japan's hyperinflation, the bank is moving gingerly. Even so, it is the first central bank to start loosening again. While the Bank of England has hinted at more quantitative easing, and the Fed is taking steps to avoid "passive tightening", neither has yet launched fresh QE.

Equity investors learned this week that they had misjudged the risk of a relapse as fiscal stimulus wears off, and misread the willingness of the US Federal Reserve to respond. Wrongly viewing Ben Bernanke's Fed as a soft touch, they took a fresh blast of quantitative easing for granted before it was agreed.

What has emerged since the acrimonious Fed meeting on August 10 is that Bernanke was unable to marshal a consensus behind fresh QE. Seven members argued that Fed should not take such a drastic step until the economy was in serious trouble, according to Wall Street Journal Fed-watcher Jon Hilsenrath. They settled on a compromise that the Fed should roll over holdings of bonds as they reach maturity to avoid passive tightening. But there was no deal on further action. Philadelphia's Charles Plosser grumbled that the Fed had sent "a garbled message".

Market tensions have been simmering for days. They erupted on Tuesday when Japan's yen smashed through resistance against all major currencies, reaching a 15-year peak against the US dollar. The Nikkei index buckled below 9,000 as yen strength pushed Japan's export industry deeper under water. "This has been one of the most interesting days in finance ever," said Andrew Roberts, head of credit at RBS. "We are right at the tipping point. Yields are about to collapse even further, equities are about to turn over. THE END GAME APPROACHES, PROBABLY IN NEXT FEW WEEKS."

"The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30 percent without major riots," he said, speaking at the elite European House Ambrosetti forum at Lake Como. "Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks," he said.

Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes. "Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union," he said, describing the failure of the EU's bail-out strategy to include a haircut for the banks as an invitation to moral hazard. "There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we'll never have debt discipline in the eurozone," he said.

Dr Sinn said Germany is now super-competitive after clawing back 18 percent in competitiveness during its long slump. "We're in a new phase of history. The toggle switch has turned and we are going to see a mirror image of the last 15 years. This time it is Germany that will have an internal boom," he said. Germans will not recyle their savings in the Club Med region. They will invest at home.

"More quantitative easing (bond purchases) by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5 percent yet credit spreads are widening again. Monetary policy can boost liquidity but it can't deal with solvency problems," he told Europe's policy elite. Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5 percent to zero, a budget deficit of 10 percent of GDP, and $3 trillion to shore up the financial system.

The anaemic pace compares with rates of 4-6 percent at this stage of recovery in normal post-war recoveries. "We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009," he said, describing a self-feeding process as the real economy and the credit system hurt each other. "There is a 40 percent chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it," he added.

Hans-Werner Sinn, head of Germany's IFO Institute, said the US would have to purge its debt excesses the hard way. "The bitter truth is that there is no way out of this with monetary and fiscal policy. They will just have to see their living standards go down. I see a decade of difficulties for the US," he said.

Students taking English 333 will watch 16 classic zombie films and read zombie comics. As an alternative to a final research paper they may write scripts or draw storyboards for their ideal zombie flicks. The university isn't the first to have a class on the undead. Columbia College in Chicago has offered a course on Zombies in popular media for years, and at Simpson College in Iowa students spent the spring semester writing a book on "The History of the Great Zombie War."

The activists are angry at government plans to overhaul pensions and raise the retirement age from 60 to 62. France's retirement age is lower than many countries in Europe, but analysts say the issue is polarising politics in the country. Labour Minister Eric Woerth introduced the pensions bill to the National Assembly, warning of dire consequences if it did not pass. "If we don't modify our pension plan, then tomorrow there will be no money left to pay the French pensions," he told parliamentarians.

Under current rules, both men and women in France can retire at 60, providing they have paid social security contributions for 40.5 years - although they are not entitled to a full pension until they are 65. The government says it will save 70 billion euros (58 billion pounds) by raising the retirement age to 62 by 2018, the qualification to 41.5 years, and the pension age to 67. President Nicolas Sarkozy says reforms are needed to cope with an ageing population and the country's budget deficit.

The official census figures released Monday state the number of Israeli Jews at 5,770,900, an increase of nearly 67,000 over the previous year. The remainder of the total population of 7,645,000 includes 1,559,100 Arabs, an increase of 23,000. The Jewish birth rate rose to 2.9 percent from 2.88, while the Muslim birth rate dropped from 3.84 to 3.73, a continuing trend that belies the claim that Jews will be a minority in the future.

The 1.7 percent growth in the Jewish population was mostly internal, as the once-massive number of new immigrants from the former Soviet Union has dwindled over the past several years. Despite this, the number of new immigrants during the past year was 14,572, a 65 percent increase over the previous year. The Muslim population grew by 2.8 percent, while the Christian population increased by only 1 percent.

The State of Israel, now 62 years old, remains a young country, with nearly 28 percent of its residents under the age of 15, providing a base for continued economic growth as opposed to the aging population in other countries such as the United States.

The Exeter University academic also urged manufacturers to cut down on BPA in food packaging and containers. BPA is used to harden plastics and is found in baby bottles, CD cases, plastic knives and forks and the lining of food and drink cans. Because the chemical mimics the female sex hormone oestrogen, many scientists believe it interferes with the way hormones are processed by the body.

Although some animal studies have indicated it is safe, others have linked injections of BPA to breast cancer, liver damage, obesity, diabetes and fertility problems. Experts estimate that BPA is detectable in more than 90 per cent of people. Earlier this year, Denmark banned the chemical in food and drink containers for the under-threes. A study by Professor Melzer, an epidemiologist, found changes in sex hormones associated with exposure to BPA in men.

He told a briefing at the Royal Institution in London: 'Millions of pounds of this compound are being produced every day, but we still don't know how it gets into humans. 'I think small effects for large numbers of people matter and it's reasonable that a tiny proportion of the costs of BPA should be put to human drug trial-type assessments to settle once and for all whether this compound is bio-active in humans.

"This one was really terrifying," said Anissa Siregar, 30, as she and her two sleepy children arrived by truck at an emergency shelter near the base, adding that the whole mountain shook violently for at least three minutes. "It just keeps getting worse."

The volcano in North Sumatra province erupted last week for the first time since 1600, catching many scientists off guard. With more than 129 active volcanoes to watch, local vulcanologists had failed to monitor it for rising magma, slight uplifts in land and other signs of seismic activity. There are fears that current activity could foreshadow a much more destructive explosion in the next few weeks or months, though it is possible, too, that the mountain will go back to sleep after letting off steam.

More than 30,000 people living along the volcano's fertile slopes have been relocated to cramped refugee camps, mosques and churches in nearby villages.

The first batch of 45,000 letters demanding cash to be repaid will start to arrive on Tuesday - with the rest sent out over the next four months. But accountants said recipients should act swiftly to use a little-known loophole which forces HM Revenue and Customs to abandon 'out of the blue' demands and effectively write off the money.

They also insisted many of those affected are entitled to argue that they or their employer have done nothing wrong and should not be penalised for someone else's blunder. The advice has been issued after last week's admission by HMRC - highlighted by the Daily Mail on Saturday - that it has claimed too little, or too much, tax from 5.7 million individuals.

But accountants have revealed that under a technicality, called the 'A19: Extra-Statutory Concession', the law states that HMRC may have to write-off the money. There is no limit to the amount of money which can be written off under this concession. Under the working of the A19 concession, it states HMRC will back down if the victim 'could reasonably have believed that his or her tax affairs were in order'. The Low Incomes Tax Reform Group accused the department of being 'notoriously reticent' about the A19 loophole. Chairman John Andrews said: 'It is important to know that the concession exists.'

A 12-month rule also usually applies, which means the tax can be written off if the victim was told by HMRC more than a year after the end of the tax year that information was provided. Mike Warburton, senior tax partner at accountants Grant Thornton, said: 'Most reasonably intelligent people will assume that the taxman has got its calculations right.'

Mr Lewandowski, the Budget Commissioner, said an ongoing review of the EU's budget would target a number of previously 'taboo' subjects, including Britain's rebate. His comments provoked an angry response in Britain, where critics say that the UK's 8.3 billion pounds a year net contribution to the EU is already far too high.

Tonight Downing Street said David Cameron would defend the British rebate in the forthcoming negotiations on the EU's budget. The annual rebate was worth 5 billion pounds last year, but is forecast to fall to 3.25 billion pounds this year. Mrs Thatcher won it after years of negotiations, which culminated in a threat to withhold payments to Brussels. Other European leaders finally gave way and accepted the then Prime Minister's argument that Britain received far less back in farm payments than countries such as France and Germany.

But the rebate has long been targeted by the Brussels elite. With the European Commission now bidding for a 6 per cent increase in its 107 billion pounds annual budget, the rebate looks likely to be in their sights again. Mr Lewandowski, a 59-year-old Polish economist, said the rebate would be included in the review of the EU budget to be published next month.

The proposal, to be laid out Wednesday in a speech in Cleveland, tops a raft of announcements, from a proposed expansion of the research and experimentation tax credit to $50 billion in additional spending on roads, railways and runways. But unlike those two ideas, both familiar from Obama's 2008 campaign, the investment incentive would embrace a long-held wish by conservative economists that had never won support from either Republican or Democratic administrations.

"Temporary investment incentives like this can have big effects because they really pull investment forward," R Glenn Hubbard, dean of the Columbia University. School of Business and a former chairman of the Council of Economic Advisers under President George W Bush. "This could have a big stimulative effect."

But the response Monday from business lobbyists hinted at uncertain political prospects for the idea: Many said a higher priority for their members remains extension of the Bush income-tax rates for higher earners that are set to expire at the end of 2010. Obama and many congressional Democrats want to let those breaks expire.

"It could endanger troops and it could endanger the overall effort," General Petraeus said in an interview. "It is precisely the kind of action the Taliban uses and could cause significant problems. Not just here, but everywhere in the world we are engaged with the Islamic community."

Hundreds of Afghans attended a demonstration in Kabul on Monday to protest the plans of Florida pastor Terry Jones, who has said he will burn copies of Islam's holy book to mark the September 11 terrorist attacks. Afghan protesters chanted "death to America," and speakers called on the US to withdraw its troops. Some protesters threw rocks at a passing military convoy.

Military officials fear the protests will likely spread to other Afghan cities, especially if the event is broadcast or ends up on Internet video.

Mr Jones, head of the 50-member Dove World Outreach Center in Gainesville, Florida, said in a statement that "We understand the General's concerns. We are sure that his concerns are legitimate." Nonetheless, he added, "We must send a clear message to the radical element of Islam. We will no longer be controlled and dominated by their fears and threats." Mr Jones has been denied a permit for the demonstration, but has said he plans to go forward with the protest.

Military officials also fear that if video of the Quran burning is broadcast in Afghanistan, tensions could rise between NATO forces and the Afghan military and police. Allegations of mishandling the Quran have interrupted Afghan security training at least twice this year, General Caldwell said.

US infrastructure has long been considered underfunded and receives poor grades from government agencies. The move comes amid signs that the US economy is faltering. On Friday, the US Labor Department announced that the US economy had lost a further 54,000 jobs, while the unemployment rate rose to 9.6%, from 9.5% in July.

The infrastructure announcement marks the start of a week in which Mr Obama will focus on the economy, seen as the most important issue for voters in November's congressional elections. The proposals call for investments over six years, but would be backed by an initial $50 billion. The goals of the infrastructure plan include: rebuilding 150,000 miles (241,000km) of roads; building and maintaining 4,000 miles of railways, repairing 150 miles of airport runways, and installing a new air navigation system.

Mr Obama will also call for the creation of a permanent infrastructure bank that would focus on funding national and regional infrastructure projects, the Associated Press reported. In 2009, a report from the country's top civil engineers found that the state of America's infrastructure had not improved in the past four years.