Charles Bean said the downturn was at least as bad as in the 1970s and that every time the markets began to look better, "another grenade" exploded. But he said growth should pick up and inflation fall next year, if oil prices and credit markets stabilised. Mr Bean described the crisis as a "transitory period" that would pass.

The deputy governor, who was speaking at the annual conference of the world's top central bankers in Jackson Hole, Wyoming, said those at last year's event believed the crisis would have been over by Christmas 2007. But instead, he said, it had carried on for a year and every time the markets looked like they were stabilising, "another grenade" exploded as bouts of FEAR OVER SUSTAINABILITY HIT FINANCIAL INSTITUTIONS. "It looks like it will drag on for some considerable time further yet."

He described the mood at the conference as one of "considerable caution for the next year". "We've got our fingers crossed that things will improve. But there is the recognition that there is still a long way to go yet," he said. Bank of England governor Mervyn King has already warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.

It argues that "the notion that they would magically transform a deeply divided club into a single powerful force is belied not just by recent history (think of the wars in former Yugoslavia and Iraq) but by the Georgian crisis itself."

It argues that "the policy response from France, Germany and Italy has been diametrically opposite to that of Britain, Sweden and the east Europeans. The French and Germans, eager to preserve their links to Moscow, have tried to be neutral, while the Italians have blamed the entire war on Mr Saakashvili. The British, Swedes and most east Europeans have loudly condemned Russia's aggression. SO LONG AS EU MEMBERS HOLD SUCH DIVERGENT VIEWS, NO AMOUNT OF INSTITUTIONAL TINKERING CAN EVER CREATE A FORCEFUL COMMON FOREIGN POLICY."

BELGIAN FOREIGN MINISTER: A COMMON EU ENERGY POLICY IS "URGENT" - De Standaard - Belgian Foreign Minister Karel De Gucht says it is "5 minutes to midnight for a common EU energy policy, as the conflict in Georgia has made clear that the biggest challenge for Europe now is to set up an energy policy that has to reduce dependence to Russia, as for example Hungary is dependent on Russian energy for 100%."

LIBYA TO SIGN FREE TRADE AGREEMENT WITH EU - Reuters - Libyan leader Muammar Gaddafi's influential son Saif al Islam told a youth rally yesterday that they are close to forming a free trade agreement with the EU, which would allow Libya to export goods to European markets without facing tariff barriers.

EUROFIGHTER SALE - Telegraph - The U.K. Ministry of Defence is said to be in talks with foreign countries to offload its Eurofighter orders after running up a £2 billion deficit.

ECB FACING "A CRUEL DILEMMA" - Irish Independent - Writing in the Irish Independent, Brian Keenan comments on the current problems of the ECB. He says that the Bank is facing a dilemma in choosing which fiscal crisis to confront first from the many that are occurring simultaneously. He says "the strains from these competing choices on the euro area - a monetary union with a collective central bank and no government, could be immense".

TALK OF AN ENERGY SUPPLY CRUNCH IS GOVERNMENT SCAREMONGERING – BBC - Lib Dem leader Nick Clegg has claimed that Britain can be energy independent by 2050 without new coal or nuclear plants. Clegg believes that 'green energy' and increased energy efficiency would allow the UK to return to its position as a net energy exporter.

Moscow has reacted with anger to Poland's deal with the US on missile defence. Last night the Russian foreign ministry said ITS RESPONSE TO THE SHIELD "WOULD GO BEYOND DIPLOMACY" and said the deal was creating a new arms race in the European "continent and beyond its borders." Moscow has announced it plans to freeze all military ties with NATO. Describing the Russian threats as "bizarre", US Secretary of State Condoleezza Rice promised that the US would "guarantee" Poland's territory. Some 58 percent of Poles are now in favour of the missile shield, almost twice the number who supported the deal six months ago.

Russian suspicions of a new western-led arms race were exacerbated by the timing of the deal, which was struck last week as Russian forces entered Georgian territory in the Caucasus. Russian president Dmitry Medvedev said it was nothing but "fairy tales" to suggest the shield was only directed against "rogue states".

Poland's new Prime Minister Donald Tusk wanted American Patriot missile batteries, capable of destroying incoming short-range warheads, on Polish territory. Under the terms of the deal signed yesterday, a US patriot battery will be relocated to Poland by 2009. "The presence of the Patriot battery which will defend our territory and the US installation is a practical dimension of this watershed agreement," Mr Tusk said.

However, as the Irish Times notes, Moscow made clear yesterday that it had no intention of withdrawing to the positions its forces held before the invasion of Georgia - Russian troops will continue to occupy large buffer zones around the breakaway enclaves of South Ossetia and Abkazia.

The article notes that Russia's "line of responsibility" around the enclaves is consistent with the peace plan brokered by President Sarkozy - although "it is not clear whether western governments had bargained on such a large zone being occupied by Russian troops for the foreseeable future."

Early on Sunday, dozens of police and internal intelligence agents raided the offices of the al-Aqsa institution, which belongs to the movement, in the northern city of Umm al-Fahm in the occupied territories. The Israeli forces carried away documents, computers, and a safe with hundreds of thousands of shekels (dollars) in the operation which was ordered by the Israeli Defense Ministry, AFP quoted a police official as saying.

Over the past two months, Israelis have raided Hamas institutions including mosques, charities and medical centers and confiscated their property. The al-Aqsa institution protects al-Aqsa Mosque in al-Quds, the third holiest site in Islam, from Israeli excavations.

ISRAEL IS BUILDING A TUNNEL UNDER AL-AQSA MOSQUE which experts warn is menacing the foundations of the building, increasing the probability of collapse.

"The army of our enemy will witness an unprecedented method of fighting by courageous, tough and devoted resistance fighters in the battlefield; something they had never seen since the establishment of their usurping entity," the Hezbollah leader told al-Manar TV on Sunday. Nasrallah made the remarks shortly AFTER ISRAELI PREMIER EHUD OLMERT THREATENED TO WAGE A NEW WAR AGAINST LEBANON if the Lebanese government allows Hezbollah to gain more power.

"We do not underestimate or undervalue these threats, but we deal with them with confidence and resolution," Nasrallah said adding that any aggression against Lebanon would be short term and followed by a quick and decisive victory.

He said that the recent Israeli threats fell within the regime's same policy of intimidation and spywar against Lebanon and were rooted from the regime's internal crisis. The regime is facing one of its worst crises with Olmert setting to resign within few months. Olmert is accused of receiving bribes from a U.S. businessman during his tenure as trade minister.

This is not a matter of producing gourmet food for environmentally attuned consumers but rather something of a life-and-death choice in villages like this one, where the benefits of the Green Revolution have been coupled WITH UNANTICIPATED HARMFUL CONSEQUENCES FROM CHEMICAL POLLUTION.

As for driving their actions, the new organic farmers cite the rising costs of seed, fertilizer, and pesticides, and concerns that DECADES OF CHEMICAL USE IS RUINING THE SOIL. But many are also revolting against what they see as the environmental degradation that has come with the new farming techniques, particularly the serious pollution of drinking water that village residents blame for causing cancer and other diseases. "People are fed up with chemical farming," says Amarjit Sharma, a farmer for 30 years who began organic farming four years ago. "THE EARTH IS NOW ADDICTED TO THE USE OF THESE CHEMICALS."

Lying under a tree on a charpoi, a traditional bed made of taut rope, Santosh Rani, 30, believes she is one of the victims. "I have cancer," she says, her voice barely above a whisper as she clenches her stomach. Since 2001, 40 people have died from various forms of cancer in Rani's village of about 3,300; UNTIL 10 YEARS AGO, VILLAGE RESIDENTS SAY CANCER WAS VERY RARE or at least largely unknown by villagers who now regard it as a menace stalking all of them.

The signing was aborted after local officials of Christian-dominated provinces petitioned the Philippine Supreme Court in protest. In response, some members of the Moro Islamic Liberation Front, the separatist group, went on a two-day rampage in which 33 people were killed and dozens of houses burned. That violence left the peace process in tatters.

It also left Mrs. Arroyo with a difficult choice: whether to try to salvage the peace negotiations or abandon them and rely on force to combat the rebels, as her predecessor, Joseph Estrada, had done. Either way, according to analysts and experts, THERE ARE BIG POLITICAL RISKS.

Mr. Lingga of the Institute of Bangsamoro Studies warned that failing to forge a peace settlement would be very costly. "As the conflict will be prolonged," he said, "secession might become an option to some." Indeed, the front's chairman, Ebrahim Murad, said Saturday at his camp that "war is among the options." Zachary Abuza, an American expert on Islamic extremism and a senior fellow at the United States Institute of Peace, said, "IF THE SUPREME COURT RULES AGAINST THE AGREEMENT, BRACE YOURSELF FOR A LOT MORE FIGHTING."

Amateur investors who plunged money into familiar brands and those who clung to privatisation and demutualisation stocks were the worst hit, financial advisers say. Shrewder investors who picked less-well-known mining and oil companies prospered. Ben Yearsley, the investment manager for Hargreaves Lansdown, said: "You've had the popular names and free shares falling, which has added up to a torrid year for private shareholders."

Research by Capita Registrars indicates that total private shareholdings hit a peak of £209 billion in May last year. By July last year, however, they were down to £196.4 billion and at the end of last month they had shrunk to £161 billion.

Hurling up a cloud of blinding white dust, Chinese road engineers are helping to lay down the first kilometres of tarmac to replace a 530-km (330-mile) forbidding rock track that joins Kenya's farms and port to landlocked Ethiopia. The stretch of road from Isiolo to Moyale on the border is one of the last unpaved sections of the Great North Road, a British colonial dream to connect Cape Town to Cairo.

BUT WHERE BRITAIN AND POST-INDEPENDENCE KENYAN GOVERNMENTS FAILED, CHINA IS LEADING THE WAY: helping to build a major trade route that will open up the northern half of Kenya, a region that has been effectively sealed off for 100 years. In what is a now familiar sight across Africa, CHINA'S DRIVE TO SECURE MINERALS, OIL, AND A PLACE FOR ITS WORKERS AND INDUSTRIES TO THRIVE is converging with Kenyan government plans to tap the potential of undeveloped regions.

The road could turn promises of oil into reality and increase tourism and trade in a starkly beautiful land where, until now, only banditry, desolation and poverty had flourished.

"About 2,000 organised Zionists and 7,000 to 8,000 agents of Zionism have dragged the world into turmoil," Ahmadinejad told a rally in the central Iranian city of Arak carried live on state television. He said that if the West does not restrain Zionism, "the powerful hand of the nations will clean these sources of corruption from the face of the earth," without specifying which nations.

Iran does not recognise the Jewish state and Ahmadinejad has drawn international condemnation by repeatedly saying since his election in 2005 that Israel is doomed to disappear.

Israel, the Middle East's sole if undeclared nuclear power, accuses Iran of seeking atomic weapons and wants tougher sanctions against the Islamic republic to make it halt its controversial nuclear programme. Iran insists that its nuclear ambitions are purely peaceful and aimed at meeting the country's growing energy needs.

The National Weather Service says areas of northeast Minnesota and northwest Wisconsin could see patchy frost this weekend. That's right, patchy frost in August. The weather agency says clear skies could allow temperatures to dip into the low to mid-30s late tonight into early Monday. Meteorologist Roman Berdes says an unusual cold-air mass from Canada will bring lower temperatures.

The sporting extravaganza failed to quell criticism of China's human rights record, although the International Olympic Committee (IOC) gave the organisers the thumbs-up and said the Games would leave a positive legacy for future generations. China's Communist leadership no doubt breathed a collective sigh of relief as the giant Olympic torch was extinguished. The run-up to the Games had cast a harsh light on China, bringing unrest in its Tibetan region to a global audience and showing that its rulers would not brook internal dissent.

But critics said enough jarring notes had sounded to spoil the symphony, with China refusing any protests during the Games, and sentencing two elderly women to a year of re-education for pushing for the right to demonstrate. Rogge told reporters on Sunday the IOC could not force change on a state "or solve all the ills of the world", but that the Games had promoted a heightened awareness of the environment in China and left an array of venues to nurture future champions.

It all ended tonight with a suitably sacred ceremony in the Bird's Nest Stadium. Our camera position was a few metres away from the VIP section. China's leaders sat in the front row with the IOC President Jacques Rogge. On each of their desks was a pair of binoculars and also a pen and paper (just in case any of them suddenly felt moved to write a speech).

London's mayor, Boris Johnson took part in a rather solemn three-way Olympic flag waving contest. Then came the final moment of a decade of work. The Olympic flame (always known here as the "sacred flame") was put out. A BILLION PEOPLE WILL NOW HAVE TO FIND SOMETHING ELSE TO BELIEVE IN.