Merkel shrugged off calls for more spending despite a report by Germany's leading economic institutes which will show tomorrow that Europe's biggest economy may shrink as much as 6 percent this year - almost three times the contraction of 2.25 percent forecast by the government in January.

The coalition won't expand its 82 billion euro ($107 billion) stimulus agreed under two separate programs, Merkel told reporters in Berlin today after a meeting with business leaders and economists. "We shouldn't talk about a third stimulus package," Merkel said. "Instead we'll let current measures take effect." The chancellor's comments echo statements today by her finance and economy ministers underlining unity in the coalition over not stretching the budget more to pay for new stimulus steps.

A leaked report from Germany's leading economic institutes - confirmed by a government official - forecast the economy may shrink 6 percent this year, a steeper decline than that expected in the UK. The IMF predicted the German economy will shrink by 5.6 percent compared with 4.1 percent in the UK, 2.8 percent in the US and 3 percent in France.

She said extremists were being allowed to control territory such as the Swat Valley, in north-western Pakistan. She also called Pakistan's judicial system corrupt, adding that it has only limited power in the countryside. Earlier this month, Pakistani President Ali Zardari signed a law implementing Islamic law - or Sharia - in the Swat Valley region as part of a deal to end a two-year Taleban insurgency there.

Once one of Pakistan's most popular holiday destinations, the Swat Valley is now mostly under Taleban control. Thousands of people have fled and hundreds of schools have been destroyed as a result of a Taleban-led insurgency. The Swat Valley is only about 100km (62 miles) from Islamabad, and reports suggest the Taleban are trying to expand the area under their control.

Giving evidence in Washington to the House Foreign Affairs Committee, Mrs Clinton said the situation in Pakistan "poses a mortal threat to the security and safety of our country and the world. I think the Pakistani government is basically abdicating to the Taleban and the extremists," she said.

The unprecedented borrowing programme sparked warnings that a generation of British workers face higher taxes to pay off the debt, and raised doubts about international investors' willingness to go on lending to the UK. The final figures could be even higher, since Mr Darling based his borrowing plans on an assumption that the UK economy will start to grow again later this year and rebound sharply by 2011.

According to projections in the Budget, public sector net debt, the accumulated stock of outstanding Government borrowing, will reach £1,370 billion in 2013/14. When Labour took office in 1997, debt was £350 billion. In November, Mr Darling said borrowing would peak at £118 billion during this financial year, falling to £105 billion next year.

But in his Budget yesterday, the Chancellor admitted that collapsing tax revenues meant he would now have to borrow £175 billion in 2009/10. That is 12.4 per cent of gross domestic product (GDP), the biggest annual deficit ever recorded in peacetime. Borrowing will be £173 billion in 2010/11, Mr Darling said. Overall, he announced £703 billion of borrowing over five years.

The Chancellor raised the spectre of a 70s-style brain drain in his second Budget as he ignored advice not to raise taxes on wealth creators to cope with "the most serious economic crisis for 60 years," which will see national debt hit £1.37 trillion in 2013/14. Business leaders said the move to tax those earning over £150,000 a year from next April would hurt the UK's position as a global financial centre and undermine initiatives in his "Budget for Jobs".

The Institute of Directors said the income tax increase "sends out all the wrong signals". Miles Templeman, the IoD director-general, said: "The increase will have a damaging impact on the wider economy and undermine the UK's attractiveness as a place to invest." Richard Lambert, director-general of the influential CBI, said: "The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgement must be that it does not."

In pushing to a new 50p income tax rate, the Chancellor broke Labour's 2005 General Election manifesto pledge which said: "We will not raise the basic or top rates of income tax in the next parliament". He also announced plans to cut back on tax relief on pension contributions made by people who earn more than £150,000.

He also cut future spending plans in a Budget which added 2p on fuel, 1p on a pint of beer and 7p on cigarettes. The package would steer the UK through to recovery, he said. The Tories said the economy was in an "utter mess". Total government debt will double to 79% of GDP by 2013 - the highest level since the Second World War. The annual budget deficit will rise sharply to £175bn for the next two years. The Budget received a cool reception in the City with the pound down - and the Confederation of British Industry said it did not set out a "credible and rigorous" path to recovery.

In other Budget measures, fuel duty will increase by 2p per litre in September and then by 1p a litre above inflation each April for the next four years. Alcohol duties will go up by 2% - about 4p on a bottle of wine and 13p on a bottle of spirits - from midnight. Mr Darling said the various tax raising measures would raise more than £6bn by 2012.

In his speech, Mr Darling confirmed the economy would shrink by 3.5% in 2009 - far worse than his pre-Budget forecasts. Public borrowing will also soar to record levels as the Treasury wrestles with a combination of falling tax receipts, higher spending and the cost of bank bail-outs. But Mr Darling insisted other major countries were suffering a worse downturn.

The news could herald widespread pay freezes or cuts because the RPI is used by many employers to set wages. It also suggests the deepening recession is forcing firms to slash prices. Coming on the eve of one of the most difficult Budget statements since the Second World War, the report is a serious concern for Gordon Brown and Chancellor Alistair Darling.

It will also cause alarm at the Bank of England, which is printing at least £75billion of fresh cash to prevent a deflationary spiral. "Falling headline inflation masks the fact that many older people's real rate of inflation remains far higher than the average," said Michelle Mitchell, of the charity Help the Aged and Age Concern. "Most older people aren't benefiting from falling mortgage interest rates, which are driving down inflation, and are still struggling with high food and fuel bills."

Pensioners are being particularly badly stung by rising utility bills and the cost of everyday household essentials. Costs of food and non-alcoholic drinks also rose rapidly, with a 10.5 per cent annual gain. The price of meat was up 14.6 per cent, while vegetable costs rose 15.8 per cent and the price of tea, coffee and cocoa increased 14.1 per cent.

The peace process has been beset by conflict and adversity which President Barack Obama has pledged to address. There is no indication the Arab and Israeli leaders will meet directly. Mr Obama's spokesman Robert Gibbs said the visits were likely to take place before the president's scheduled trip to France on 6 June.

"With each of them the president will discuss ways the United States can strengthen and deepen our partnerships with them, AS WELL AS THE STEPS ALL PARTIES MUST TAKE TO ACHIEVE PEACE BETWEEN ISRAEL AND THE PALESTINIANS AND ISRAEL AND THE ARAB STATES," Mr Gibbs told a news conference.

He said the invitations had been extended after Mr Obama met Jordan's King Abdullah II at the White House on Tuesday. Mr Obama has "invited other key partners in the effort to achieve a comprehensive peace in the Middle East to the White House in the coming weeks". He added: "We are actively working to finalise dates for the visits."

Meanwhile, Hamas leader Khaled Mashaal is to address the House of Lords via video despite objections by the British government. In a separate development, the Bloomsbury theatre acceded to demands from pro-Arab groups that it cancel an appearance by an IDF choir scheduled for Israeli Independence Day celebrations.

Foreign Secretary David Miliband told Parliament Tuesday that it will review weapons export licenses "in light of recent events in Gaza," meaning the Operation Cast Lead counterterrorist campaign three months ago. The statement came a day before Hamas's top leader Khaled Mashaal was to address members of the House of Lords and Members of Parliament via video from Damascus. The address comes shortly after four British parliamentarians, led by British Labor party member Roger Godsiff, met with Mashaal in Damascus.

The Foreign office comments, "We are aware that some MPs are planning to talk to members of Hamas in a private capacity on Wednesday. Hamas is a terrorist organization. We believe that to talk to Hamas directly at this time would simply undermine those Palestinians who are committed to peace." The European Union officially has defined Hamas as a terrorist organization, but Hamas has succeeded in breaking the boycott, working through constant international pressure on a country-by-country basis.

The cloning was recorded by an independent documentary film-maker who has testified to The Independent that the cloning had taken place and that the women were genuinely hoping to become pregnant with the first cloned embryos specifically created for the purposes of human reproduction.

Panayiotis Zavos has broken the ultimate taboo of transferring cloned embryos into the human womb, a procedure that is a criminal offence in Britain and illegal in many other countries. He carried out the work at a secret laboratory, probably located in the Middle East where there is no cloning ban. Dr Zavos, a naturalised American, also has fertility clinics in Kentucky and Cyprus, where he was born. His patients – three married couples and a single woman – came from Britain, the United States and an unspecified country in the Middle East.

None of the embryo transfers led to a viable pregnancy but Dr Zavos said yesterday that this was just the "first chapter" in his ongoing and serious attempts at producing a baby cloned from the skin cells of its "parent". There is absolutely no doubt about it, and I may not be the one that does it, but the cloned child is coming. There is absolutely no way that it will not happen," Dr Zavos said in an interview yesterday with The Independent.

Banks may need $1.7 trillion in additional capital, the IMF forecasts. And it warns that the cost of the bail-out will severely hit UK government finances with its added debt burden. The IMF report estimates that the total costs of bailing out THE UK BANKING SYSTEM WILL ADD 13.4% TO GOVERNMENT DEBT, OR ABOUT £200BN - compared with 12.1% in the US and 13.9% in Ireland.

One year ago, the IMF estimated that total losses from the credit crunch would be $1 trillion, which has been exceeded, showing how rapidly the financial meltdown has escalated. The IMF now says that banks are likely to lose $2.7 trillion, but other financial institutions such as insurance companies and pension funds are also coming under strain.

The IMF's latest Global Stability Report says that the banking system has not yet been stabilised, despite the billions of dollars spent by governments. But it warns that political support for further bank bail-outs is waning. It says that there may be "a real risk that governments will be reluctant to allocate enough resources to solve the problem" because the public has become "disillusioned by what it perceives as abuse of taxpayer funds".

UPDATE - The International Monetary Fund (IMF) was facing a potentially huge embarrassment after IT WAS FORCED TO WITHDRAW A CLAIM THAT BRITAIN FACES A BILL FOR ALMOST £200 BILLION FOR THE BANK BAILOUT. IMF retracted the figure correcting it to the original estimate of £130 billion. There was no immediate explanation for the error in the IMF's Global Financial Stability Report. The Chancellor is expected to give a much lower estimate of a final bill of £60 billion.

Katz claims that in a private meeting with the unnamed leader, Emanuel said, "In the next four years, there will be a peace agreement with the Palestinians on the basis of two states for two peoples, and it does not matter to us who is the prime minister."

In the letter, a Hebrew version of which was provided to The Jerusalem Post by Katz's parliamentary aide, Katz wrote: "For many Israelis, this report is a cause for worry because it reveals a condescending attitude toward our prime minister and Israeli public opinion. This is an attitude that Israel does not expect from a real friend such as the US, and all the more so from an Israeli Jew who has succeeded in being appointed White House chief-of-staff."

Katz went on to compare Emanuel to the biblical Esther, who ended up using her influence with Persian King Ahashverosh to intervene on behalf of the Jews of the Persian Empire. "For if you remain silent at this time, relief and deliverance for the Jews will arise from another place, but you and your father's family will perish. And who knows but that you have come to royal position for such a time as this?" Katz wrote, quoting from the Book of Esther (4:14).

Katz was hinting that Emanuel should use his influence to protect Israeli interests, which, he believes, are best served by preventing the creation of a Palestinian state in the West Bank and the Gaza Strip. Emanuel was born in Chicago in 1959. His father, Benjamin M. Emanuel, a Jerusalem-born pediatrician, was a member of the IZL (Irgun).

Around 20 delegates, including envoys from the UK, France, and Finland stood up and left the room at what was considered an anti-Semitic remark by the Iranian leader, who has repeatedly called for Israel to be wiped off the map. Nine Western countries including Israel and the United States had already decided to boycott the conference entirely because its draft declaration endorsed the conclusions of an anti-racism conference in South Africa eight years ago in which Islamic nations pushed through a text equating Zionism with racism.

Opening the conference this morning, the UN Secretary-General Ban Ki Moon urged the world to rally against the threat of intolerance. "I fear that today's economic crisis, if not handled properly, could evolve into a full-scale political crisis marked by social unrest, weakened governments and angry publics who have lost faith in their leaders and their own future," Mr Ban said. "In such circumstances, the consequences for communities already victimised by prejudice or exclusion could be frightening."

Dr Phil Edwards, of the London School of Hygiene and Tropical Medicine, said: "Moving about in a heavy body is like driving in a gas guzzler." Each fat person is said to be responsible for emitting a tonne more of climate-warming carbon dioxide per year than a thin one. It means an extra BILLION TONNES of CO2 a year is created, according to World Health Organisation estimates of overweight people.

The scientists say providing extra grub for them to guzzle adds to carbon emissions that heat up the world, melting polar ice caps, raising sea levels and killing rain forests. Dr Phil Edwards said: "Food production accounts for about one fifth of greenhouse gases. We need to do a lot more to reverse the global trend towards fatness. It is a key factor in the battle to reduce carbon emissions and slow climate change. It is time we took account of the amount we are eating. This is about over-consumption by the wealthy countries. And the world demand for meat is increasing to match that of Britain and America.

UK health surveys estimate fatness has increased from an average body mass index of 26 to 27 in the last ten years. That's equivalent to about half a stone for every person. Anyone with a BMI above 25 is overweight, while more than 30 is obese. A staggering 40 per cent of Americans are obese, among 300 million worldwide.

It warns agencies are in danger of being overwhelmed by events such as flooding, storms and drought. The group called for a radical shift so that humanitarian aid is sent impartially, instead of on the basis of political or other preferences. Oxfam's Rob Bailey told the BBC a big increase was needed in aid spending, but that the problem was not just about the amount of money.

"We need to see that money spent in better ways," he said. "At the moment, poor people in the developing world who are facing up to these disasters, they are almost facing a kind of lottery on a global scale." He said that in 2004, the equivalent of more than $1,200 (£823) was spent on each victim of the Asian tsunami, compared with just $23 per person for the recent crisis in Chad. "There's a huge mismatch in where the money goes," said Mr Bailey.

The Sun normally undergoes an 11-year cycle of activity. At its peak, it has a tumultuous boiling atmosphere that spits out flares and planet-sized chunks of super-hot gas. This is followed by a calmer period. Last year, it was expected that it would have been hotting up after a quiet spell. But instead it hit a 50-year year low in solar wind pressure, a 55-year low in radio emissions, and a 100-year low in sunspot activity.

According to Prof Louise Hara of University College London, it is unclear why this is happening or when the Sun is likely to become more active again. "There's no sign of us coming out of it yet," she told BBC News. In the mid-17th Century, a quiet spell - known as the Maunder Minimum - lasted 70 years, and led to a "mini ice-age".