But Sir David Pepper, who ran the GCHQ listening centre for five years, told the BBC lives would be at risk if the state could not track communication. Agencies faced "enormous pressure" to keep up with technology, he said. "It's a constant arms race, if you like. As more technology, different technology becomes available, the balance will shift constantly." The work of GCHQ, which provides intelligence on foreign and domestic threats, is so secretive that until the 1980s the government refused to discuss its existence.

In his first interview since departing as its director in 2008, Sir David told BBC2 programme Who's Watching You that the agency had "very sophisticated targets. There are plenty of people who will do all they can to make themselves difficult to find. It puts enormous pressure on you. Everybody in the agency is acutely aware that if they don't do their job properly one of the consequences may be another terrorist outrage. The thing you worry about most is the attack that you haven't seen coming."

However, the Liberal Democrats said the government's plans were "incompatible with a free country and a free people". In February, the Lords constitution committee said electronic surveillance and collection of personal data had become "pervasive" in British society. ITS MEMBERS SAID THE SITUATION THREATENED TO UNDERMINE DEMOCRACY. However, Sir David said he was speaking out to help people understand that agencies were there to protect them.

Investors will also be taking some care ahead of a Group of Eight finance ministers meeting at the end of the week and the scheduled termination of many International Monetary Market credit default swaps and options a week later. Britain will be in focus, too, with political uncertainty swirling around the ruling Labor government.

Credit Suisse said this week that it was lowering its exposure to US stocks because the recent rise in bond yields had undermined equity valuation. Similarly, UBS is looking for a bit of a pullback in the equity market rally. Emerging market investors, meanwhile, have also been shaken on a regional basis by Latvia's currency problems. Speculation is mounting that the Baltic state may be forced to devalue its currency, which is pegged to the euro, unless it receives fresh assistance from the International Monetary Fund and the European Union.

Politics in Britain, meanwhile, has been shaken by an expenses scandal that, while effecting all parties, has put huge pressure on Prime Minister Gordon Brown, who reshuffled his cabinet on Friday. Brown's economic team remained in place, but the political crisis is unlikely to die down quickly and uncertainty could deter investors.

But with companies still reluctant to hire, the nation's jobless rate rose to a quarter-century high of 9.4 percent, and it likely will keep rising into 2010, possibly within striking distance of its post-World War II peak of 10.8 percent. The economy shed 345,000 jobs in May, the Labor Department said Friday - half what it was losing in a month at the start of the year.

But the report also underscored how hard it has been for America's 14.5 million unemployed to find new jobs. The 345,000 jobs lost was down sharply from 504,000 in April, and an even bigger improvement over the average of nearly 700,000 jobs lost monthly during the first quarter of this year. Ripple effects from the twin bankruptcies of General Motors and Chrysler could muddy the job market this month.

She notes that "If there is a snap election in Britain before the Irish vote and the Conservatives win the victory that the polls project, then, according to William Hague, the Shadow Foreign Secretary, they will hold a referendum. That would yield a "no", polls firmly suggest."

Meanwhile, in a survey looking at political reform, the Guardian asked its readers, "Some people say Europe now has too much power over Britain's government, but others say it is only by working together with Europe that the UK can influence the issues that matter most. Bearing this in mind please select which of the following two approaches you would prefer the UK to take towards the Lisbon Treaty (which aims to streamline European decision making)".

A majority in every age group up to the age of 44 opted for "Holding a referendum on the treaty - and then, IF THE VOTE IS NEGATIVE, DEMANDING THAT THE REST OF EUROPE RENEGOTIATE IT".

Labour's Glenys Kinnock, aged 64, and Eluned Morgan, aged 42, who have both given 15 years' service to the European Parliament, are set to stand down. Each will be paid up to two years' salary to help them adjust to their new lives, along with a share of a £10 million index-linked pension pot.

In total, Mrs Kinnock and Ms Morgan will each receive £86,352 in transition payments, as well as an annual pension of £22,020. The first £30,000 of the transitional allowance is tax-free. They will also receive up to £55,000 to close their offices and lay off staff.

Now, on the eve of tomorrow's European elections, campaigners are demanding an end to the practice of giving "golden parachutes" to public servants. Mats Persson, of the think tank Open Europe, said: "It is scandalous that MEPs are receiving this level of pay-off."

This is in contrast to the House of Commons, which costs taxpayers £364,000 for each member per year, and the House of Lords, which costs £208,000 per member per year. In a recent article for the Guardian newspaper this week, Dermot Scott, Head of the European Parliament's UK Office, claimed that an MEP's allowances are "comparable to an MP's allowance" and accused British media reports of being "inaccurate or tendentious."

However, Open Europe's comparison, based on the respective parliaments' budget allocations, finds that while national MPs at Westminster on average claim £148,297 in allowances each year, their counterparts in Brussels can claim £363,000 per year. Furthermore, MEPs do not have to produce receipts to claim their allowances, in contrast with national MPs.

The European Parliament's UK office also misleadingly claims that MEPs' "Pension rights are the same as for a Westminster MP". In fact, under the new rules coming into force following the European elections, MEPs will be entitled to a far more generous pension scheme than MPs.

If MPs contribute the standard 10% of their salary to their pension over a ten year period (a whole year's salary of £63,291), they will have access to a pension of £15,822 per year. By contrast, under new rules to come into force after the elections, MEPs will receive an annual pension of £27,954, after paying in nothing at all from their own salaries over the same ten year period.

The report, by the National Conference of State Legislatures, also provided a scorecard for how well drafters of state budgets read the recession's economic tea-leaves — and the short answer is, not very well.

Thirty-one states said estimates about personal income taxes had been overly optimistic, and 25 said that all three major tax categories — sales taxes, personal income taxes and corporate taxes — were not keeping up with projections.

Even gloomy-Gus states that saw the recession coming and low-balled their tax estimates had little room for celebration, the report said. "The handful of states that have weathered the economic decline reasonably well are starting to report adverse revenue developments," it said. "The news is alarming."

Geert Wilders and his populist Party for Freedom (PVV) appeared to be the big winners of Thursday's elections for European Parliament in the Netherlands. Exit polls released soon after the Dutch voting stations closed at 9 pm on Thursday evening predicted he would get four of the 25 Dutch seats in the European Parliament, making the PVV the second largest of all Dutch parties in Brussels.

Wilders, who has become popular in the Netherlands running on AN ANTI-ISLAM AND ANTI-POLITICAL ESTABLISHMENT PLATFORM, promised voters he would be tough on immigration and criticized Turkey's bid to join the EU. "Should Turkey as an Islamic country be able to join the European Union? We are the only party in Holland that says, it is an Islamic country, so no, not in 10 years, not in a million years," Wilders said.

Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929. In all, GOVERNMENT SPENDING ON BENEFITS WILL TOP $2 TRILLION IN 2009 — an average of $17,000 provided to each US household, federal data shows. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.

Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps. The safety net is working, advocates say. "We're not seeing the hunger we saw in the 1930s because the food stamp program is doing what it's supposed to do," says Florida food stamp director Jennifer Lange.

Adam Lerrick, economist at the conservative American Enterprise Institute, says THE BENEFITS' EXPLOSION WILL EVENTUALLY LEAD TO AN ECONOMIC CRISIS. "We've seen this movie before in many countries. It always has the same ending," he says.

"AS THE FINANCIAL CRISIS EASES, AN ENERGY SHORTAGE LIES AHEAD," Goldman analysts Jeffrey Currie in London and David Greely in New York said in a report e-mailed today. The bank set a 12-month price target of $90 a barrel for West Texas Intermediate crude, up from $70, and introduced a forecast of $95 for the end of 2010.

Oil posted its biggest monthly gain in a decade in May, and this month traded above $69 a barrel for the first time since November on speculation a global economic recovery will trigger a rebound in demand. A decline in the value of the dollar has also drawn investors to crude and other commodities as an inflation hedge.

But Mr Obama took them on, not with threats to "smoke them out" or warnings that "you are with us or against us", but with eloquence, authority, a deep grasp of Muslim history and an understanding of Muslim grievances. Opening with a broad smile and the Muslim greeting of "Assalum Alaykum" (peace be upon you), MR OBAMA DREW ON HIS FAMILY TIES TO ISLAM (mentioning his middle name Hussein) and his respect for Islamic civilisation to present himself as a credible interlocutor eager to end the "cycle of suspicion and discord".

Rarely, if ever, has an American leader drawn so much applause from an audience in the Muslim world, or dared to quote the Koran so often. The audience, selected by the US to include friends and foes of America, gave Mr Obama a standing ovation.

Throughout the speech his message was the US was neither weak nor looking to appease its enemies but would act with fairness and on the basis of mutual respect. But the speech also poses risks for Mr Obama. While he addressed masterfully the conflicting pressures the US faces in the region, he will find translating them into coherent policies far more challenging, if not impossible.

Mr Obama called for a joint effort to create a world where extremists no longer threatened Americans, US troops returned home, Israelis and Palestinians lived in secure states of their own, and nuclear energy was used only for peaceful purposes. IT IS AN AMBITIOUS VISION THAT WOULD TRANSFORM THE MIDDLE EAST, BUT IT RAISES EXPECTATIONS FAR BEYOND THE US'S ABILITY TO DELIVER.

"The moment is now, to act on what both sides know to be truth," he said. Mr Obama also plans to visit the Nazi concentration camp in Buchenwald and then a US Army hospital. His visit to Buchenwald has a personal significance. He discovered during the presidential election campaign that a maternal great-uncle, Charles Payne, had been one of the US servicemen present at the liberation of Auschwitz, the Nazi death camp.

At the US military hosptial, he will meet troops injured on active duty in Afghanistan and Iraq. Mr Obama flew to Germany from Egypt, where he said the "cycle of suspicion and discord" between the United States and the Muslim world must end. The German chancellor said she and Mr Obama had discussed a timeframe for diplomatic action in the Middle East and pledged to offer whatever help Germany could provide.

The UK, along with the Netherlands, will kick off voting in the European elections and local elections on Thursday (4 June), with the governing Labour party facing the prospect of its worst electoral defeat in history.

The beleaguered Labour prime minister, Gordon Brown, charged with reacting too slowly and then inadequately to the unfolding scandal, has been buffeted further in recent days by announcements that four members of his government, including two ministers, are leaving.

The weakened government has emboldened the opposition Conservatives, who feel 10 Downing Street is within their grasp sooner rather than later. Conservative leader David Cameron on Wednesday in a rowdy parliamentary question time renewed his call for an early general election, saying the "government was collapsing before our eyes. Get down to the palace. Ask for a dissolution, call an election," he told Mr Brown.

Katz called on Christian and Jewish supporters of Israel to get tough with President Obama and tell the administration that they will not accept such policies. The American people must stand up and say that A PRESIDENT WHO SAYS THESE THINGS IS ANTI-SEMITIC. They must not be silent – and the fact that they are silent is what's scaring me!

"Ever since we liberated Jerusalem, the Golan and the other Biblical Jewish areas over 40 years ago," Katz said, "American administrations have always been pushing us and trying to stunt our growth in Judea and Samaria; what the Obama Administration is trying to do is not new. I would just like to add that for the Obama Administration, there is no difference between Jerusalem and the rest of Judea and Samaria. In the Jerusalem neighbourhoods that were liberated in 1967, we have close to 300,000 Jews, and we have another 350,000 Jews in Judea and Samaria. For the Americans, all 650,000 are the same; they are all to be boycotted, discriminated against and told to stop building and stop growing. There is no difference for them."

"There is one other difference [between past US administrations and this one]. In the past, other administrations have also pressured us – but this is the very first time that THEY ARE ACTUALLY SAYING THAT THE JEWISH PEOPLE HAVE NO RIGHT TO GIVE BIRTH, OR TO BUILD KINDERGARTENS, OR TO GROW. President Barack Hussein Obama is the first one to say that a population of 650,000 Jews in Israel is not allowed to build even one square metre. He is bringing us back to the Middle Ages, with Jews facing discrimination simply because they are Jews."

"This is the first time," Katz continued with fervour, "that Americans – Christians and Jews – hear a President saying that the Biblical areas, areas that they believe and know are completely Jewish – must be sterilized of Jews. They hear him saying, just like King Pharaoh decreed so many years ago, that Jews must not give birth!"

"We have to ask the American people – Rush Limbaugh, Sean Hannity, Senators and Congressmen of both parties, and others – to stand up and say: We refuse to fight against the Biblical nation in the Biblical land, and we have to stop this President from discriminating against the Jewish people. THIS IS THE FIRST TIME SINCE THE HOLOCAUST THAT A WESTERN LEADER HAS SAID JEWS HAVE NO RIGHT TO GIVE BIRTH. I repeat this – because [Secretary of State] Hillary Clinton said that even natural growth will not be allowed. They don't say this about dogs or cats; only Jews in the Holy Land, a population of 650,000 Jews, has no right to grow and develop!"

MK Dr Michael Ben-Ari (National Union) said: "The Zionist vision of the rebuilding of the Land of Israel is stronger than any President or government. WE OUTLASTED PHARAOH, AND WE WILL OUTLAST OBAMA." Obama said, "The United States does not accept the legitimacy of continued Israeli settlements. It is time for these settlements to stop." Ben-Ari said, "Everyone can now see that Obama is not interested in Maoz Esther, but in Jerusalem.

MK Zevulun Orlev (Jewish Home): "The speech arouses fears and concerns regarding the future of American relations towards Israel. I fear an erosion of the traditional American commitment to Israel's security needs and its very existence and independence. Our response must not be to cave in, but rather to have dialogue with, and persuade the Administration, while waging an emergency call-up of all the resources of Israel and the Jewish nation."

Colonel(retired) Moti Yogev told Channel One television news, "Obama's speech was very professional and peace-seeking. But he quoted our Sages, which he attributed to the Quran, and the same Sages and sources have spoken of the Jewish People's right to this Land. Just as he said that the State of Israel will not disappear, the same is true about the settlements in Judea and Samaria."

Yogev added, "Though the speech was not inflammatory, I am sure that it will give a push to the settlement effort throughout Judea and Samaria, and we will grow even stronger than the five percent growth rate we already enjoy."