They argue federal funds could stabilize their trillions in investments and warn that any failure of a life insurer could dry up a key source of corporate financing. But U.S. officials are not convinced. Treasury Secretary Henry Paulson said Tuesday he had not yet decided whether other insurers would get federal funds. The only insurer to get government help so far is American International Group Inc, which was saved from bankruptcy with a rescue package that has ballooned to $152 billion.

As the biggest buyers of U.S. corporate bonds, life insurers say they grease the wheel of corporate America. Industry officials insist the failure of a large U.S. life insurer would drastically shrink bond financing, potentially creating another hurdle to the nation's economic recovery.

But unlike his predecessor President George W. Bush, who in better economic times talked about returning to surpluses by 2012, "balanced budgets" were not in Obama's vocabulary. The government's first obligation, he said, was to spark an economic recovery and put people back to work. To do that, the DEMOCRATIC-LED CONGRESS IS EXPECTED TO HAVE A NEW STIMULUS PACKAGE, COSTING IN THE $500 BILLION RANGE, ready to go when Obama takes office in January.

THAT'S ON TOP OF THE HUNDREDS OF BILLIONS ALREADY SPENT or committed by Treasury and the Federal Reserve to revive the moribund financial markets. On Tuesday the government announced two new programs providing $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available. ALL THAT, IN THE SHORT TERM, WILL SEND THE DEFICIT INTO THE STRATOSPHERE

Borrowing adds to the national debt, the money the federal government owes to states, corporations, individuals and foreign countries such as China and Japan that buy U.S. Treasury notes, bonds and other debt instruments. THE DEBT, WHICH STOOD AT ABOUT $5.7 TRILLION IN 2007, TOPPED THE $10 TRILLION MARK IN OCTOBER AND NOW STANDS AT ABOUT $10.6 TRILLION.

Professor Igor Panarin said in an interview with the respected daily IZVESTIA published on Monday: "THE DOLLAR IS NOT SECURED BY ANYTHING. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than $11 trillion. THIS IS A PYRAMID THAT CAN ONLY COLLAPSE."

The paper said Panarin's dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year's events. When asked when the U.S. economy would collapse, Panarin said: "IT IS ALREADY COLLAPSING. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: AMERICA WILL NO LONGER BE THE WORLD'S FINANCIAL REGULATOR."

"THE FINANCIAL PROBLEMS IN THE U.S. WILL GET WORSE. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. BUT BY SPRING, IT WILL BE CLEAR THAT THERE ARE NO MIRACLES."

The cost of insuring against the bankruptcy of the British state has broken out - upwards - over the last month. Yes, credit default swaps (CDS) are dodgy instruments, but they are the best stress barometer that we have. Today they reached 86 basis points, near Portuguese debt in the league table. For good reason. Alistair Darling has had to admit that THE BRITISH ECONOMY FACES THE MOST SUDDEN ECONOMIC COLLAPSE SINCE WORLD WAR TWO, and THE WORST BUDGET DEFICIT OF ANY MAJOR COUNTRY IN THE WORLD.

Ok, this is a lot lower than Iceland, Ukraine, Hungary, and other clients of the IMF, but is significantly higher than Germany (35), USA (43), and France (49). After trading at similar levels to our AAA-rated peers for years, we started to decouple in August and then began to soar in October.

We reached a fresh record the moment the Chancellor told the House of Commons that the budget would not return to its already awful condition until 2016. Should we be worried? Yes. If and when the storm blows over, Britain should still have a lower national debt than Germany, France, or Italy. It will certainly have a better demographic structure than most of Europe (except France and Scandinavia), and less catastrophic pension liabilities than most. THE SITUATION IS DESPERATE, BUT NOT SERIOUS - as the Habsburgs used to say. Fingers crossed.

About $600bn will be used to buy up mortgage-backed securities while $200bn is being targeted at unfreezing the consumer credit market. Financial institutions are reluctant to lend, deepening the economic slowdown. THE SITUATION HAS BEEN EXACERBATED AS THE CREDIT CRISIS HAS WORSENED. Meanwhile US President-elect Barack Obama said budget reform was "imperative" with the economy in crisis. "It is not an option. It's a necessity," he said.

The announcement came as Commerce Department figures showed US economic output shrank between July and September at a faster pace than initially predicted, which the White House described as "troubling". GDP fell at an annual rate of 0.5% in the third-quarter - from the 0.3% estimated a month ago - as consumers cut spending by the largest amount in 28 years. "This is why we are having to take such bold actions," a White House spokeswoman said. Under the latest rescue plan - WHICH IS IN ADDITION TO THE ALREADY-ANNOUNCED $700BN BANK BAIL-OUT - the Fed is to buy up to $100bn in debt from the troubled mortgage giants Fannie Mae and Freddie Mac.

The central bank said it would also buy another $500bn in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors. The Fed said that the $600bn effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability.

In a Robin Hood-style budget statement of breathtaking scope, the Chancellor asked 800,000 people who earn more than £100,000 to bear the brunt of a package of deferred tax rises designed to bring down borrowing in 2010, when it will reach a record peak of £118 billion, or 8 per cent of national income. Top earners will pay £3 billion of the £4 billion to be raised in extra taxes from that year.

People earning more than £40,000 will contribute some £500 million, averaging at around £3 a week, from a half-point rise in national insurance. It is the second time that national insurance contributions have risen since Labour came to power.

TOTAL DEBT WILL REACH £1,020 BILLION (JUST OVER $1 TRILLION) BY 2012-13, with a further rise to £1,084 billion projected the following year. The figures show that debt will double since last year's total of £526 billion.

Restricted documents seen by The Daily Telegraph, show PARIS WILL DEMAND SUBSIDIES TO FRENCH FARMERS ARE PROTECTED BEFORE AGREEING TO ALLOW GLOBAL FREE TRADE TALKS TO TAKE PLACE NEXT MONTH. The development threatens to break promises made three years ago when the former Prime Minister Blair gave up a chunk of Britain's annual rebate from Brussels on the understanding there would be a cut in farm subsidies after 2013. These subsidies cost the average British household £322 a year.

The recent meeting of G20 leaders called on the EU to come to a quick agreement on World Trade Organisation negotiations aimed at cutting farm subsidies and dismantling import barriers. But diplomats say France, which currently holds the EU's rotating presidency, IS USING ITS POSITION TO HOLD THE EU TO RANSOM BY LINKING PROTECTION FOR FRENCH FARMERS TO THE REOPENING OF TALKS.

Alarm bells have also rung over a demand for the EU to guarantee "THE WHOLESOMENESS OF ITS PRODUCTS FOR CONSUMERS BY PROMOTING AMBITIOUS HEALTH STANDARDS BOTH INSIDE AND OUTSIDE THE UNION". This move and the language used is widely regarded as spelling A NEW FORM OF PROTECTIONISM that will limit imports by demanding that non-European food producers in Latin America, Asia or Africa abide by all the EU's health, environment, workplace and animal rules before food can be exported.

To get the measures through, Mr Sarkozy will need to win over the German Chancellor Angela Merkel who he met with yesterday. In 2002, the former French President Jacques Chirac did a deal with Chancellor Merkel's predecessor, Gerhard Schröder to maintain the high levels of CAP spending. Six years later, amid a recession, say diplomats, GERMANY, THE EU LARGEST ECONOMY AND BUDGET CONTRIBUTOR, is not enthusiastic about guaranteeing subsidies that benefit French farmers.

Dubai, self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall -- has gone pear-shaped. "It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "A FULL-SCALE FRENZY IN WHICH SPECULATION WENT LARGELY UNCHECKED UNTIL IT WAS VERY LATE."

The result may be a new business model for the emirate, one based less on debt and speculation. Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.

Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether. "Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that HAS GENERATED AN ILLUSION OF EXCESS AND ABUNDANCE," Nomura said.

"The biggest question is what, as the owner of bank stocks, do you really own?" said Timothy Ghriskey, chief investment officer at Solaris Group. "It's tough to say this won't happen again." He added, "Financial institutions are leveraged companies, and ANY TIME YOU HAVE A HIGHLY LEVERAGED SITUATION, IT IS BASED ON FAITH AND TRUST."

After long insisting it was strong enough to weather plunging markets, Citigroup agreed on Sunday to its second U.S. government bailout package in two months. The bank is selling $20 billion of preferred stock, slashing its dividend and granting warrants. Citigroup will unload most of the potential losses from $306 billion of risky assets to taxpayers.

The flip-flop is the latest in a series by U.S. banks this year, whose assurances of safety and soundness have been followed soon after by bailouts and rescue financing. These episodes cast further doubt on statements made by banking executives and, investors said, could hurt the next financier that finds itself under the gun. AFTER CITI, IS BANK OF AMERICA NEXT?

Brigadier Gordon Messenger is every inch a military man, which makes it all the more surprising to hear him settle for something that sounds suspiciously close to second best. He would deny that characterisation of his words, but accepts there are limits to the Afghanistan project. The Afghanistan British troops leave behind - and no-one is willing to commit to any timeline other than to repeat the mantra that it will take "many years" - is going to be an imperfect state.

Parts of it may well remain beyond the reach of central government in Kabul, and some of those responsible for the mayhem of the last 30 years could well retain much of their power and influence, perhaps even their militia. It is a far cry from the beacon of democracy some had hoped for. "I don't think it will be recognisable in Western Europe, but Afghanistan will be something which will provide good enough security for the people. I THINK GOOD ENOUGH SHOULD BE WHAT WE LOOK FOR," THE BRIGADIER SAID. "IT'S NOT SECOND BEST, IT'S REALISTIC."

More than two-thirds of Britons think UK troops should leave Afghanistan within a year, a BBC poll has found. Defence Secretary John Hutton has said UK FORCES IN AFGHANISTAN WERE CRUCIAL TO BRITISH NATIONAL SECURITY. "Terrorism poses a direct threat to the security of the British people. So, let us not for one moment think that it does not threaten our way of life, our values of democracy and human rights," he said.

The worst-case scenario could put a net cost of £10,000 on each UK household, he says in a BBC News website article. The government said the costs of not acting on climate change would be higher than the costs of acting now. Mr Lilley says he does not oppose action to curb climate change.

"We all want to save the planet from overheating, just as we all want to save the financial system from meltdown," he writes in the BBC's Green Room series of environmental opinion articles. "We accept that both rescues may cost us a lot." But, he says, the Climate Change Bill, which is broadly supported by the Conservatives, may not represent value for money.

The government has published an impact assessment for the bill that puts its costs at between £30bn and £205bn between now and 2050. The benefits, it calculates, will lie between £82bn and £110bn. "WOULD YOU INSURE YOUR HOME WITH A COMPANY IF THEY CHARGED PREMIUMS WHICH COULD BE DOUBLE THE VALUE OF YOUR HOUSE?" asks Mr Lilley, who has held the posts of secretary of state for social security, and for trade and industry.

The magazine quotes an unnamed Israeli source at the Defense Ministry as saying, "WE HAVE BEEN WARNED OFF." IDF officials hinted in the past that a preemptive attack on Iran's nuclear installations might be timed to take place before the inauguration of US President-elect Barack Obama. Obama is slated to take office on January 20.

The request, reportedly relayed to Israeli officials by senior US counterparts, was likely to be reiterated on Monday during Prime Minister Ehud Olmert's last meeting with Bush with both leaders still serving as of heads of state.

THE UNPRECEDENTED PLEDGE OF FUNDS includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department's $700 billion Troubled Asset Relief Program. FEDERAL RESERVE LENDING LAST WEEK WAS 1,900 TIMES THE WEEKLY AVERAGE FOR THE THREE YEARS BEFORE THE CRISIS.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

"Whether it's lending or spending, it's tax dollars that are going out the window and WE END UP HOLDING COLLATERAL WE DON'T KNOW ANYTHING ABOUT," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "THE TIME HAS COME THAT WE CONSIDER WHAT SORT OF LIMITATIONS WE SHOULD BE PLACING ON THE FED SO THAT AUTHORITY RETURNS TO ELECTED OFFICIALS AS OPPOSED TO APPOINTED ONES."

It was the latest in a series of protests in the capital SINCE OCTOBER'S BANKING COLLAPSE CRIPPLED THE ISLAND'S ECONOMY. At least five people were injured. As crowds gathered in the drizzle before the Althing, the Icelandic parliament, on Saturday, Mr Torfason - a leading pop singer in Iceland and one of the key leaders of the protests - said: "They don't have our trust and they are no longer legitimate." THE VALUE OF THE ICELANDIC KRONA HAS BEEN CUT IN HALF SINCE JANUARY.

Four Nordic countries, as well as the International Monetary Fund (IMF), have pledged to lend the country a combined $4.6 billion to help revive its deflated economy. The loan would be the first by the IMF to a Western nation since 1976. Gudrun Jonsdottir, a 36-year-old office worker, said: "I've just had enough of this whole thing. I don't trust the government, I don't trust the banks, I don't trust the political parties, and I don't trust the IMF. WE HAD A GOOD COUNTRY AND THEY RUINED IT."

ICELAND'S three biggest banks – Kaupthing, Landsbanki and Glitnir – collapsed under the weight of billions of dollars of debts accumulated in an aggressive overseas expansion, shattering the country's currency. Iceland's government seized control of all three institutions in early October.

A state of emergency has been declared and President Luiz Inacio Lula da Silva has offered federal help. By Monday, more than 20,000 people had been forced out of their homes. Some have been able to stay with relatives and friends, while others have gone to public shelters. Civil defence officials said at least 45 people were known to have died.

In total more than a million people are said to have been affected by the flooding. "Santa Catarina is facing its worst weather tragedy," state Governor Luis Henrique Silveira told reporters. Heavy rain and flooding in Brazil have been known to lead to high death tolls in the past partly because homes are often constructed in dangerous locations that are vulnerable to landslides, he adds.