The regime of the ailing dictator Kim Jong-il said it was now in the "EARLY PHASE OF ALL-OUT CONFRONTATION WITH THE US" as it sought to raise tensions on the Korean Peninsular to dangerous new levels. On Friday the Security Council ordered an almost-total arms embargo and a raft of strict financial sanctions against the North in punishment for its testing of a second nuclear device last month.

In a bellicose statement, Pyongyang described the sanctions as the "vile product" of US policy in the region, adding that it would also begin work enriching uranium as it sought to build up stocks of fissile material for its nuclear weapons programme. The North is thought to have approximately 8,000 spent plutonium fuel rods which, if reprocessed, could yield 6-8kg of high-grade plutonium, or enough to make at least one more nuclear bomb.

The sanctions have also authorised UN member-states to stop and search North Korean vessels on the high seas if they suspect they are carrying banned nuclear or missile components, a measure that has drawn particular ire from Pyongyang. NORTH KOREA REPLIED THAT ANY ATTEMPT TO BLOCKADE ITS SHIPS WOULD BE REGARDED "AS AN ACT OF WAR AND MET WITH A DECISIVE MILITARY RESPONSE", AND PROMISED TO MEET ANY CONFRONTATION WITH "ALL-OUT CONFRONTATION".

The result and its violent aftermath raised fresh questions about the direction of Iranian policies at a time when US President Barack Obama wants to improve relations with Iran. SUPREME LEADER AYATOLLAH ALI KHAMENEI TOLD IRANIANS TO RESPECT AHMADINEJAD'S VICTORY, which upset expectations that reformist candidate Mirhossein Mousavi might win the race.

Interior Minister Sadeq Mahsouli, an Ahmadinejad ally, declared the president had been re-elected with 62.6 percent of the vote, against 33.7 percent for Mousavi. Mousavi complained of violations and vote-rigging - allegations rejected by Interior Ministry officials. "I'm warning I will not surrender to this dangerous charade. The result of such performance by some officials will jeopardize the pillars of the Islamic Republic and will establish tyranny," Mousavi said in a statement made available to Reuters.

After the result was announced, thousands of his supporters took to the streets, some chanting, "What happened to our vote?" Others shouted anti-Ahmadinejad slogans. "We are Iranians too," and "Mousavi is our president," they shouted. Ahmadinejad draws most of his support from rural areas and poorer big city neighborhoods. Mousavi enjoys strong backing in wealthier urban centers, especially among women and the young.

Mr Hajj Hassan is one of Hezbollah's 11 members of parliament, following recent elections which were won by a rival Western-backed alliance. HEZBOLLAH IS REGARDED BY THE UNITED STATES AS A TERRORIST GROUP. The EU has previously rejected public contacts with Hezbollah, which also controls Lebanon's most powerful military force. But Mr Solana said: "HEZBOLLAH IS PART OF POLITICAL LIFE IN LEBANON AND IS REPRESENTED IN THE LEBANESE PARLIAMENT."

Mr Hajj Hassan described the meeting with Mr Solana as a "GOODWILL GESTURE FROM THE EUROPEAN UNION TOWARDS HEZBOLLAH." He said it was an attempt by the EU to "get to know" Hezbollah. Britain said earlier this year it favoured re-establishing links with Hezbollah's political wing.

More than 20 of the state's 83 counties have reverted deteriorating paved roads to gravel in the last few years, according to the County Road Association of Michigan. THE COUNTIES ARE STRUGGLING WITH THEIR BUDGETS BECAUSE TAX REVENUES HAVE DECLINED IN THE LINGERING RECESSION.

Montcalm County converted nearly 10 miles of primary road to gravel this spring. The county estimates it takes about $10,000 to grind up a mile of pavement and put down gravel. It takes more than $100,000 to repave a mile of road. Reverting to gravel has happened in a few other states but it is most typical in Michigan. At least 50 miles have been reverted in the state in the past three years.

The government is looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature. Local politicians believe THE CITY MUST CONTRACT BY AS MUCH AS 40 PER CENT, CONCENTRATING THE DWINDLING POPULATION AND LOCAL SERVICES INTO A MORE VIABLE AREA. The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint. Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

MR KILDEE SAID HE WILL CONCENTRATE ON 50 CITIES, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes. Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside. "The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee. "Decline is a fact of life in Flint. Resisting it is like resisting gravity."

But Mr Kildee, who has lived there nearly all his life, said he had first to overcome a DEEPLY INGRAINED AMERICAN CULTURAL MINDSET THAT "BIG IS GOOD" AND THAT CITIES SHOULD SPRAWL – FLINT COVERS 34 SQUARE MILES. He said: "The obsession with growth is sadly a very American thing. Across the US, there's an assumption that all development is good, that if communities are growing they are successful. If they're shrinking, they're failing." But some Flint dustcarts are collecting just one rubbish bag a week, roads are decaying, police are very understaffed and there are simply too few people to pay for services, he said. IF THE CITY DOESN'T DOWNSIZE IT WILL EVENTUALLY GO BANKRUPT, he added.

It can be used for special forces stealth operations, for crawling through Hamas tunnels or into Hizbullah bunkers. In addition, it could be used for locating survivors inside collapsed buildings after natural disasters or terror attacks.

The six-foot long snake can also be fitted with explosives and detonated inside enemy positions - a capability dubbed as 'suicide.' The snake is currently in the prototype stage of development and has no price tag yet, but the Defense Ministry plans to begin production on a large scale soon. According to a report on Channel 2, the snake can crawl into enemy positions through sewage pipes, under buildings and through forests. It is operated by one person with a laptop computer.

Mr Soros, the Hungarian-born US fund manager, said that the swaps were 'truly toxic', grossly distorting risk, encouraging speculation and with the potential to bring ruin on financial institutions and companies. Citing the recent bankruptcy of General Motors in America, Mr Soros said that some bondholders had stood to gain more from bankruptcy than re-organisation as a result of their CDS positions. "IT'S LIKE BUYING LIFE INSURANCE ON SOMEONE ELSE'S LIFE AND OWNING A LICENCE TO KILL HIM," he said of THE SWAPS, WHICH PAY THE BUYER FACE VALUE IF A BORROWER DEFAULTS, in exchange for the underlying securities or the cash equivalent.

In remarks to a meeting of international bankers and financiers in Beijing, Mr Soros set out his vision for a new regulatory system for global finance that would require regulators to intervene to stop the kind of credit and asset bubbles which precipitated last year's banking crisis.

The crisis had forced governments to put the global banking system on 'life support' in a crisis whose nearest parallel was the Great Depression of the 1930s, he told the Institute of International Finance, an association representing 370 international financial institutions.

The appointment raised fears that LIVESTOCK FARMERS' VIEWS WILL FALL ON UNSYMPATHETIC EARS. There are also concerns THE FORMER MINISTER FOR LONDON HAS LITTLE KNOWLEDGE OF RURAL AFFAIRS. Mr Fitzpatrick already faced an uphill battle as his predecessor Jane Kennedy, who quit last week in protest at Gordon Brown's leadership style, was hugely popular with farmers.

One pressing issue facing Mr Fitzpatrick is the menace of bovine TB, which could require a controversial badger cull. Former BBC presenter Robin Page, of the Countryside Restoration Trust pressure group, said: 'NEW LABOUR HAS SHOWN NO INTEREST IN THE COUNTRYSIDE and this appointment seems to confirm this. We want people who understand farming and the importance of the livestock industry and who know that Britain needs to produce more of its own food.'

Devon beef farmer Richard Haddock, formerly a delegate to the National Farmers' Union, said: 'There is concern that he will not be sympathetic to the decline of the UK meat industry.'

He appeared at odds with Gordon Brown after declaring it was an 'important objective' for Britain to sign up. It is the first time for years that any senior minister has enthused openly about the benefits of euro entry. His remarks caused consternation, COMING JUST DAYS AFTER 60 PER CENT OF VOTERS BACKED PARTIES HOSTILE TO THE EU IN EUROPEAN ELECTIONS.

CRITICS ALSO QUESTIONED LORD MANDELSON'S MOTIVES, since he is not allowed to criticise the EU if he wants to keep his £31,000-a-year pension as a former European commissioner. Lord Mandelson, on a trip to Berlin, said: 'Does it remain an important objective for Britain to find itself in the same currency as that single market in which it interacts? Obviously yes.'

He insisted such a decision was for 'the future' and had to be made on the 'right terms in the right circumstances'. However, he added: 'IT IS PERFECTLY CLEAR THAT THE EURO HAS BEEN A GREAT SUCCESS in anchoring its eurozone members during the financial crisis. 'I hope people will recognise this represents a major vindication for the single currency.'

"THE EXPRESSION PALESTINIAN STATE SHOULD NOT BE USED," Likud MP Miri Regev said on Thursday, echoing the sentiment of several other members of Netanyahu's right-wing Likud party ahead of Sunday's speech. To date, the hawkish prime minister has not endorsed the concept of a Palestinian state and has defied US pressure to freeze construction activity in West Bank settlements that are home to more than 280,000 Israelis.

Netanyahu hopes that his landmark speech will help ease the mounting tension in relations with the United States, Israel's prime ally. But he faces a delicate balancing act if he is to avoid infuriating his partners in the governing centre-right coalition, which is divided between those who reject a two-state solution, and those, like Defence Minister and Labour chief Ehud Barak, who support it.

Regev insisted that US President Barack Obama cannot force decisions upon the Israeli government. "The US pressure is mainly psychological; one should not forget that the president is not the only one in the United States, there's the Congress and the Senate, which support Israel," she said. Also among those pressing Netanyahu to steer clear of the concept of a Palestinian state is Benny Begin, a minister without portfolio and son of former premier Menachem Begin. "IF THE ONLY SOLUTION IS TWO STATES FOR TWO PEOPLES, THEN THERE IS NO SOLUTION," he said.

Begin insisted that the Palestinians were not after a two-state solution but wanted a "TWO-STAGE SOLUTION AT THE END OF WHICH THERE WOULD BE A SINGLE PLO-HAMAS STATE." Infrastructure Minister Uzi Landau from the far-right Israel Beitenu party insisted that in any case Israel "HAS NO PALESTINIAN PARTNER WITH WHOM TO NEGOTIATE. In the Gaza Strip, there is some kind of a terrorist state in the hands of Hamas, while (Palestinian president Mahmud Abbas) does not control the Arabs in the occupied West Bank," Landau said.

The Irish government was offered a series of 'guarantees' last year on a number of issues including taxation, neutrality and workers' rights in return for a second referendum on the Lisbon Treaty, but with no clear plan as to how the 'guarantees' might become legally binding.

The article reports that it is understood that BRITAIN, IN PARTICULAR, IS VERY NERVOUS ABOUT REOPENING A NATIONAL DEBATE ON LISBON by agreeing to ratify an Irish protocol on the 'guarantees' through the House of Commons, and that a final agreement on the nature of the 'guarantees' will have to be found at next week's summit to enable a second referendum to be held in the autumn.

Meanwhile, Conservative Home has published an open letter to Polish President Lech Kaczyski from Daniel Kawczynski MP, urging the President to "be a friend to the British people", and withhold his signature from the Lisbon Treaty, which is holding up its ratification in Poland, until a Conservative government is elected in the UK and can give UK voters a referendum on the Treaty.

Dejan Krusec, the ECB's financial stability expert, said the banks are strong enough to weather the current downturn so long as there is a rapid "V-shaped" recovery but not if it takes longer to refloat the economy. "If this is 'U-shaped', the banks will have problems. There are 25 banks we monitor that are strategically important," he told a Fitch Ratings conference on Eastern Europe.

"The problem is not 2009. Euro-area banks are well enough capitalised to cover losses. THE PROBLEM IS 2010. We are concerned about the length (of recession)." The ECB has slashed its forecasts, predicting a 4.6pc contraction this year and a further fall of 0.3pc next year, with no recovery until mid-2010. This precludes any chance of a V-shaped rebound. The clear implication is that the ECB is battening down the hatches for another storm as rising defaults eat into bank capital.

This aligns the ECB with the International Monetary Fund, which has called for urgent action by EU authorities to clean up Europe's banks and disclose likely damage. Piroska Nagy, an adviser to the European Bank for Reconstruction and Development, said the danger is that West European banks will retreat from Eastern Europe, "CAUSING A COLLAPSE OF THE BANKING SECTOR" across the region.

A number of UK bankers and brokers have told the Financial Times they believe Mr Brown and his ministers are too weak and distracted by their domestic political travails to lobby effectively in Europe. Partly as a result, some banking and private equity groups are asking their counterparts elsewhere in Europe to lobby their home governments rather than rely on the UK to deal with the Continent, as they have in the past.

Some City leaders are particularly concerned about the outcome of next week's EU summit, at which Mr Brown will discuss a pan-European financial stability regulator as well as the recently proposed directive on hedge funds and other alternative investment managers .

"You have to be worried about having a politically enfeebled prime minister whose thumbprints are all over the current regulatory system," said Tim Linacre, chief executive of Panmure Gordon, the UK stockbroker. "LONDON COULD END UP BEING SIGNIFICANTLY WEAKENED."

Europe's justice ministers will hold talks on the "domestic security policy" and surveillance network proposals, known in Brussels circles as the "Stockholm programme", on July 15 with the aim of finishing work on the EU's first ever internal security policy by the end of 2009. Jacques Barrot, the European justice and security commissioner, yesterday publicly declared that the aim was to "develop a domestic security strategy for the EU", once regarded as a strictly national "home affairs" area of policy.

"NATIONAL FRONTIERS SHOULD NO LONGER RESTRICT OUR ACTIVITIES," he said. Mark Francois, Conservative spokesman on Europe, has demanded "immediate clarity on where the government stands on this. THESE ARE POTENTIALLY DANGEROUS PROPOSALS WHICH COULD INTERFERE IN BRITAIN'S INTERNAL SECURITY," he said. "The chaos and division in Gordon Brown's government is crippling Britain's ability to make its voice heard in Europe."

Critics of the plans have claimed that moves to create a new "information system architecture" of EUROPE-WIDE POLICE AND SECURITY DATABASES WILL CREATE A "SURVEILLANCE STATE". Tony Bunyan, of the European Civil Liberties Network (ECLN), has warned that EU security officials are seeking to harness a "digital tsunami" of new information technology without asking "political and moral questions first".

The Lisbon Treaty, currently stalled after Ireland's referendum rejection last year, creates a secretive new Standing Committee for Internal Security, known as COSI, to co-ordinate policy between national forces and EU organisations such as Europol, the Frontex borders agency, the European Gendarmerie Force and the Brussels intelligence sharing Joint Situation Centre or Sitcen.

EU officials have told The Daily Telegraph that the radical plans will be controversial and will need powers contained within the Lisbon Treaty, currently awaiting a second Irish vote this autumn. "THE BRITISH AND SOME OTHERS WILL NOT LIKE IT AS IT MOVES POLICY TO THE EU," said an official. "SOME OF THINGS WE WANT TO DO WILL ONLY BE REALISTIC WITH THE LISBON TREATY IN PLACE, SO WE NEED THAT TOO."

They said they have gathered a growing body of evidence to show the compound, also known as BPA, might damage human health. The Endocrine Society issued a scientific statement on Wednesday calling for better studies into its effects. Studies presented at the group's annual meeting show BPA can affect the hearts of women, can permanently damage the DNA of mice, and appear to be pouring into the human body from a variety of unknown sources.

BPA, used to stiffen plastic bottles, line cans and make smooth paper receipts, belongs to a broad class of compounds called endocrine disruptors. The US Food and Drug Administration is examining their safety but there has not been much evidence to show that they are any threat to human health. "We present evidence that endocrine disruptors do have effects on male and female development, prostate cancer, thyroid disease, cardiovascular disease," Dr Robert Carey of the University of Virginia, who is President of the Endocrine Society, told a news conference.

The society issued a lengthy scientific statement about the chemicals in general that admits the evidence is not yet overwhelming, but is worrying. US government toxicologists at the National Institute of Environmental Health Sciences expressed concern last year that BPA may hurt development of the prostate and brain. A 2008 study by British researchers linked high levels of BPA to heart disease, diabetes and liver-enzyme abnormalities.