"If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down," he said. Mr McWilliams said the EMU was preventing Irish economic recovery. "We are paying twice for the euro: once on the exchange rate and once more on the interest rate," he said.

In the FT Wolfgang Münchau looks at what would happen if one of the member states of the eurozone were to default on its debt. He argues that default would not lead to the break-up of the eurozone: "if a default were to happen, it would almost certainly happen within a eurozone that remained intact." He suggests instead that "Europeans would bail out one of their own, but it would not be fun for anyone, especially not for the defaulter."

He adds that "you could conceive of a scenario under which the bail-out had to be so large that it would bring down the entire system. This could then provide the non-defaulters with an economic incentive to leave. But dream on. If Germany, for example, had such an incentive to leave, it would almost certainly forgo that perceived economic benefit and stay for political reasons."

The spokesman for President Abbas revealed that Mr Obama had told the Palestinian leader that their conversation was his first with a foreign leader since taking office. The new President had promised to "deploy every possible effort to achieve peace", the spokesman said.

Mr Obama also spoke to President Mubarak of Egypt, Ehud Olmert, the Prime Minister of Israel, and King Abdullah of Jordan. He was also due to hold talks about Iraq with the Joint Chiefs of Staff and his national security team. In the White House situation room, he planned to issue new orders for a redeployment of military forces from Iraq to Afghanistan, fulfilling another campaign promise.

Robert Gibbs, the new President's press secretary, said that Mr Obama had used his talks with Middle East leaders to underline a "commitment to active engagement in pursuit of Arab-Israeli peace from the beginning of his term. We'll be making a series of announcements both on domestic and foreign policy that I think will be critical for us to act swiftly on, we're not going to be able to delay," Mr Obama had said on Tuesday night.

GERMANY'S ECONOMY ACCOUNTS FOR ABOUT A THIRD OF EUROZONE OUTPUT. "There is no precedent in post-war history for this economic decline that we unfortunately have to forecast," said economy minister Michael Glos. "The German economy is facing this year the greatest challenges since unification [in 1990]. Germany is integrated into the global economy like hardly any other industrialised country," added Mr Glos. The economy slipped into recession in the third quarter of 2008.

Northern Rock was nationalised in February 2008 after a run on the bank in 2007. Once Britain's fifth-biggest home loan provider, it was taken into public ownership after it failed to find a suitable buyer from the private sector. A Northern Rock spokesman refused to be drawn on how much money was being paid out, but pointed out that the staff-wide bonus scheme had been announced in October. He also stressed that no executives or senior management would benefit. The reward comes after staff met targets on repaying the bank's £26bn loan from the government.

Mr Cable said: "This is an extraordinary action from a state-owned bank which still owes billions to taxpayers. WHEN MILLIONS OF PEOPLE ARE FACING PAY CUTS OR EVEN UNEMPLOYMENT, THIS IS INDEFENSIBLE. The government should step in to stop this now."

Asked whether Mr Brown approved of the bonuses, the prime minister's spokesman said: "Northern Rock, as I think is well known, has repaid its debts to the government at a rate faster than originally planned for. Operational decisions such as this are a matter for Northern Rock."

As one bail-out succeeds another at ever more inflated price tags, RESCUE FATIGUE IS BECOMING PALPABLE. People are bewildered, fearing that good money is being thrown after bad. "It is easy to conclude that none of the Government's policies are working," said Professor Peter Spencer from York University. "We must not lose sight of the fact that they have prevented the collapse of the monetary system."

This is not does mean that recovery is imminent. Nothing can prevent a long purge as years of credit leverage give way to debt deflation. It means only that the downward spiral – the "adverse feedback loop" feared by central banks – has been arrested. The $3 trillion (£2 trillion) fiscal blitz by the US, China, Japan and Europe plugs an emergency gap. With luck, it will keep the world economy on life-support just long enough to stop recession and banking crises from feeding on each other with lethal effect, as they did in 1931.

There is no guarantee that the measures will succeed. The vast scale of government borrowing may exhaust the stock of global capital. Markets are already beginning to question the credit-worthiness of sovereign states. The Fed may find it harder than it thinks to disengage from colossal intervention in the bond markets. IN THE END, THE ONLY WAY OUT OF ALL THIS GLOBAL DEBT MAY PROVE TO BE A BIBLICAL DEBT JUBILEE. Creditors are not going to like that.

Lord Myners, the banking minister, said the Government's toxic debt scheme will run for at least five years and may last for "eight or nine years". The value of sterling also fell to its lowest level against the dollar in more than seven years after a well-known investor said THE BRITISH CURRENCY WAS "FINISHED". Mervyn King, the Governor of the Bank of England, said on Tuesday that the Bank was preparing to print extra money in a desperate attempt to kick-start the beleaguered British economy.

Shares in Lloyds Banking Group, Britain's biggest bank following the takeover of HBOS, fell by 47 percent at one point - wiping billions off the bank's value. Shares in the bank have now fallen by more than 85 percent over the past year. Shares in Barclays also fell sharply, closing the day more than 20 percent lower. There is growing speculation that Royal Bank of Scotland (RBS) is set to be nationalised after its shares fell in value by more than two-thirds on Monday. Shares in RBS fell by more than 12 per cent yesterday.

As the pound plunged, Jim Rogers, a former partner of George Soros, the man renowned for his attack on sterling on Black Wednesday in 1992, told fellow investors: "I WOULD URGE YOU TO SELL ANY STERLING YOU MIGHT HAVE. IT'S FINISHED. I hate to say it, but I would not put any money in the UK."

THE EXPECTATIONS ON ELECTION DAY WERE HIGH - AND THEY HAVE NOW RISEN EVEN HIGHER. On the domestic front, Obama is expected to overcome the financial crisis, stem the rising tide of unemployment, reduce social inequality and achieve nothing less than raising the country to new heights of greatness.

On the foreign policy front, the wish list of the international community has grown even longer over the past eight years with every single disappointment with George W. Bush. Obama is expected to achieve peace in the Middle East, prevent Iran from building the bomb without resorting to bombing the country, integrate the Chinese into the world community, tame the Russians, unite the Europeans and - in his spare time - also achieve reconciliation with communist Cuba.

Obama's new pragmatism is well-founded. No president since the 1930s has faced problems as serious as those Obama must address. "Nothing will be easy," Obama told Americans last Friday in Ohio, "because the extent of the challenges that we face is so enormous."

The economic situation is becoming increasingly gloomy. The measures taken to combat the financial crisis have not yet worked. NOBEL PRIZE-WINNING ECONOMIST PAUL KRUGMAN PREDICTS "HORRENDOUS TIMES" FOR THE COUNTRY.

"We're seeing the dollar stronger again and weak demand is still dominating," said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. "As long as the market ignores the supply side, we'll have weak sentiment."

The U.K. government said yesterday it will spend an extra 100 billion pounds ($142 billion) to support the nation's banks, a second lifeline in three months. The need for the latest package spurred concern that THE GLOBAL FINANCIAL CRISIS IS WORSENING.

"For the next six months we'll see awful economic data coming out, banks possibly having to be nationalized and excess inventories in the U.S.," said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. "THERE IS REALLY NOTHING THAT CAN PULL THIS MARKET HIGHER."

State Street Corp, the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co and Bank of America Corp slumped more than 23 percent on an analyst's prediction that they'll need to take steps to shore up their balance sheets. THE DOW'S 4 PERCENT SLIDE WAS THE MOST ON AN INAUGURATION DAY IN THE MEASURE'S 112-YEAR HISTORY, according to data compiled by Bloomberg and the Stock Trader's Almanac.

"All the banks are going to have to recapitalize," said Greg Woodard, portfolio strategist at Manning & Napier Advisors Inc, which manages $16 billion in Fairport, New York. "That's not done. That's in front of them, and we don't want to try to get in front of that trade."

US financial losses from the credit crisis may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year's economic and stock-market meltdowns. "If that's true, it means THE US BANKING SYSTEM IS EFFECTIVELY INSOLVENT because it starts with a capital of $1.4 trillion," Roubini said at a conference in Dubai today. "THIS IS A SYSTEMIC BANKING CRISIS."

The crowd packed immediately below the podium received Bush in stony silence when he took his seat on the stage surrounding the podium where Barack Obama was scheduled to take the oath of office to become the 44th president of the United States. The jeers are among the final public feedback Bush will receive as president.

That's because for the sixth straight presidential Inauguration, rabbis didn't have a place on the dais. And the Jewish faith isn't the only religious tradition that continues to be snubbed. SINCE 1985, ONLY EVANGELICAL PROTESTANTS HAVE PLAYED A PART IN THE SWEARING-IN CEREMONY. That continued again this year when megachurch pastor Warren delivered the invocation and the Rev. Joseph Lowery, an African-American Evangelical, offered the benediction.

At a time when the United States is more religiously diverse than at any other point in its history, and Obama's entire campaign was built on the notion of a newfound inclusiveness and multiculturalism, it seems a glaring omission. The recent Evangelical Protestant monopoly began in 1989, when George H.W. Bush asked Billy Graham to deliver both the invocation and benediction (the opening and closing prayers) at his Inauguration. Graham did the same for Bill Clinton in 1993 and again in 1997. The decision to delegate the religious role to Graham seemed a reasonable alternative to filling the stage with an ever-growing number of Christian, Jewish, Muslim, Sikh, Buddhist, Hindu and Baha'I clergy.

The famous Evangelist regularly topped the list of people Americans most admired, and he prayed in fairly broad terms, referring just to "God" and using the formulation "I pray" instead of "we pray" to make clear that he was not imposing his Christian prayer on the entire citizenry.

Even the US State Department says the act "quickly became a symbol of the 'beggar-thy-neighbor' policies of the 1930s." BETWEEN 1929 AND 1934, WORLD TRADE DECLINED BY ABOUT TWO-THIRDS. Here we are, almost 80 years later, and possibly about to make the same mistake. Though there have been no headline-grabbing Smoot acts to call the world's attention to the threat, there is mounting evidence that, once again, government and business leaders are inching toward the type of 'beggar-thy-neighbor' policies of the Great Depression.

"Particularly I am concerned about the rising dangers of protectionism," World Bank President Robert Zoellick recently said in Singapore. "This financial and economic and unemployment problem is serious enough," he later added. "If we start to trigger a round of protectionism, as you saw in the 1930s, it could deepen (the global crisis)."

All we can hope is that government leaders have learned the lessons of the past. In a statement issued at the G-20 summit in Washington in November, the participants insisted they understood "the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty." IN TIMES OF ECONOMIC STRESS, HOWEVER, IT IS OFTEN DIFFICULT TO THINK FIRST OF THE GREATER GOOD THAN YOUR OWN.

Russia's gas monopoly Gazprom began pumping gas into Ukraine at around 10:30am Moscow time spokesman Boris Sapozhnikov said by telephone from the Sudzha metering station on the border with Ukraine. Another station in Pisarevka also said gas was flowing, and Ukraine's Naftogaz state gas company confirmed gas was being received.

Naftogaz said the shipments could take up to 36 hours to cross Ukraine, which is the size of France, and reach European customers. Europe receives about a fifth of its natural gas from Russia. Russia halted the supplies on January 7 as it argued with Ukraine argued over 2009 gas prices and allegations that Ukraine was stealing gas destined for Europe.

The higher prices will be a challenge for Ukraine, which needs a huge amount of Russian gas to run its outdated, energy-hungry factories and heating systems. Ukraine was struggling to pay for Russian gas at last year's price as it faced a currency collapse, falling exports and a shaken banking sector.

The group of 40 terrorists were reported to have been killed by the plague at a training camp in Algeria earlier this month. There are now claims THE CELL WAS DEVELOPING THE DISEASE AS A WEAPON TO USE AGAINST WESTERN CITIES. Experts said that the group was developing chemical and biological weapons.

Dr Igor Khrupinov, a biological weapons expert at Georgia University, told The Sun: "Al-Qaeda is known to experiment with biological weapons. And this group has direct communication with other cells around the world. Contagious diseases, like ebola and anthrax, occur in northern Africa. It makes sense that people are trying to use them against Western governments."

Dr Khrupinov, who was once a weapons adviser to the Soviet president Mikhail Gorbachev, added: "Instead of using bombs, people with infectious diseases could be walking through cities." It was reported last year that up to 100 potential terrorists had attempted to become postgraduate students in Britain in an attempt to use laboratories. Ian Kearns, from the Institute for Public Policy Research, told the newspaper: "THE BIOLOGICAL WEAPONS THREAT IS NOT GOING AWAY. WE'RE NOT READY FOR IT."

Unbridled hysteria has been building throughout Washington DC since the weekend, when millions began flocking to the U.S. capital to witness today's inauguration which is being compared, in its historic significance, with the first lunar landing. PERHAPS THE SECOND COMING WOULD BE A MORE APPROPRIATE ANALOGY.

He is charged, among many things, with turning around the battered economy, halting the dizzying growth of unemployment and home repossessions, ending the disastrous wars in Iraq and Afghanistan (while at the same time ending the torture of terrorists and closing Guantanamo Bay) and restoring at least some semblance of peace to the Middle East. He has also promised health care for all in a land where 46million people are too poor to afford medical insurance; vastly improved schools; a cleaner environment reliant more on green energy than expensive imported oil; and, of course, genuine racial equality. All this at a time when the federal coffers have been seriously depleted by multi-billion dollar bailouts for the banks and ailing motor car industry.

A few days ago, George Bush was asked how Obama would feel during his first few moments as Commander in Chief. 'He'll do the lunch, make the speech - and then he'll walk into that Oval Office for the first time, and the weight of responsibility will hit him,' yesterday's man replied pointedly. In other words, the miracle worker will finally have to deliver. It is a tall order, but the American nation believes he can do it, for IN BARACK THEY TRUST.