AU Chairman John Kufuor said both sides had agreed to work with an African panel headed by former U.N. Secretary General Kofi Annan. But President Mwai Kibaki and opposition chief Raila Odinga neither met nor agreed how to end the crisis. Controversy over Kibaki's re-election in a December 27 vote triggered political and ethnic bloodletting that has displaced 250,000 people, dented the stable reputation of east Africa's biggest economy and disrupted supplies to nearby countries.

Odinga says Kibaki rigged the election. Odinga's Orange Democratic Movement (ODM) distributed the text of a draft agreement it said had been drawn up with representatives of both Kibaki and the ODM under the facilitation of the World Bank's country director, Colin Bruce. The text agreed to re-examine the elections and hold fresh polls if needed, but the ODM said Kibaki refused to sign.

Kibaki has insisted the poll results stand despite inviting Odinga to direct talks on Friday -- an offer the opposition leader has dismissed unless it is internationally mediated. Behind closed doors, Kibaki watched the swearing-in of a core cabinet whose appointment on Tuesday prompted more violence in Nairobi slums and western towns dominated by Odinga. A U.S. State Department spokesman criticized Kibaki's move. "He (Kibaki) announced a cabinet in a way that caused serious problems in the political process," he said. "We did not think the move was appropriate at the time."

In relation to the Government's manifesto pledge to hold a referendum on the Treaty, he dismissed calls for a vote saying previous treaties like Maastricht had not had one. He went on to add that issues like giving up of national vetoes "are boring debates [that] fascinate maybe 200 people across Europe." While calling for a "mature debate", he claimed that critics of the EU Constitution see the issue as "SIMILAR TO THE THREAT FROM NAZI GERMANY".

The Telegraph reports that Gordon Brown is facing a court case over his refusal to allow a referendum on the revised Constitution. Stuart Bower, a former Labour activist, has persuaded Brighton county court to hear his claim that the PM is in breach of a contract with voters to hold a vote in its 2005 manifesto.

The job could pay Mr Blair about £500,000 a year, according to Wall Street recruitment consultants. Since he left office last June, several international banks are said to have wooed Mr Blair, hoping to make use of his extensive contacts with governments around the world. He will act part-time for JP Morgan and is likely to take similar advisory roles elsewhere.

He said he expected to accept "a small handful" of similar roles with international firms in the coming months. "I have always been interested in commerce and the impact of globalisation," he told the Financial Times in New York. "Nowadays, the intersection between politics and the economy in different parts of the world, including the emerging markets, is very strong." Jamie Dimon, JP Morgan's chief executive, said Mr Blair would be "enormously valuable" to his bank. "There are only a handful of people in the world who have the knowledge and relationships that he has."

On Saturday, Mr Blair will fuel speculation about his becoming the first permanent European Union president when he shares a platform in France with President Nicholas Sarkozy, who has backed him for the post.

The pound dropped more than a cent and a half against the dollar to $1.9583 - the lowest since last March. It has slid all the way from a level of above $2.10 in the past six months alone. It also came within a whisker of the 75 pence mark against the euro, dropping to a level of 74.91p against the single European currency.

Jim O'Neill, chief economist at Goldman Sachs, said he expected the pound's decline to continue throughout the year. He said: "Last month saw close to the biggest single monthly drop of the pound since the ERM exit days at the start of the 1990s and clearly suggests the world is developing a different view of the UK. This seems pretty justified in my opinion, as there are lots of reasons to be bearish on the Pound.

"The 'Northern Rock' factor has badly dented the UK's reputation for being the world's pre-eminent financial centre," he added, saying sterling could drop as low as 81p against the euro.

PRESIDENT BUSH IS A TRUE FRIEND OF ISRAEL. In contrast to his predecessors, once he recognized the evil and duplicitous nature of Yasser Arafat, he severed relations and effectively marginalized him. He also brought to an end the era of moral equivalency during which Palestinian murderers and Israeli victims were both regarded as equal components of a senseless cycle of violence.

In addition, BUSH ENDORSED ISRAEL'S RIGHT TO DEFENSIBLE BORDERS and became the first Western leader to state that when boundaries are finalized, demographic facts on the ground will need to be taken into account - a clear endorsement for Israeli retention of the major settlement blocs. And at Annapolis, despite all its ambivalences, THE PRESIDENT UNEQUIVOCALLY REITERATED THAT ISRAEL IS A "JEWISH STATE," bluntly contradicting the Palestinians, who vowed that they would never come to terms with a Jewish entity.

Indeed, unless the White House reverses these policies, history will judge President Bush as the most pro-Israeli president to date, a leader who resisted pressures from many of his allies to appease the Palestinians and courageously maintained a principled approach toward the Jewish state. President Bush should be reminded that the Israeli presence in Judea and Samaria is not the by-product of an Israeli invasion but the response to an Arab invasion designed to wipe Israel off the map. Even so, the majority of Israelis would today support the creation of a Palestinian state; but certainly not an extended Hamastan.

OUR PRIME MINISTER MUST SURELY URGE PRESIDENT BUSH TO DEMAND THAT THE PALESTINIANS NOW CONFRONT REALITY. In recent weeks, three young Israelis have been brutally murdered by members of the Fatah militia under the control of Abbas. Surely President Bush will appreciate that if, under such circumstances, Israel continues making unilateral concessions, all the wrong messages will be conveyed to the Palestinians. If there is to be a serious process, President Bush must demand that Abbas now substitute action for his duplicitous words and belatedly dismantle the terrorist militias under his jurisdiction.

The president should also be reminded that VICIOUS INCITEMENT AGAINST ISRAEL CONTINUES UNABATED AT EVERY LEVEL OF PALESTINIAN SOCIETY. And that it is unconscionable to demand that Israel collaborate in creating a state under whose jurisdiction, shaheeds (suicide bombers) will continue to be sanctified and their families compensated with state pensions. NOT TO MENTION AN EDUCATIONAL SYSTEM WHICH ENCOURAGES PALESTINIAN CHILDREN TO ACCEPT MARTYRDOM WHILE KILLING JEWS AS A NOBLE SACRIFICE.

Above all, our prime minister should impress upon President Bush that before Israel considers further concessions in the framework of a final status agreement, THE PALESTINIANS MUST COME TO TERMS WITH ISRAEL AS A JEWISH STATE. So long as the Palestinians persist with their so-called Arab right of return, they are effectively proclaiming that they will never reconcile themselves to coexisting with Jewish sovereignty. THAT REMAINS THE SOURCE OF THE CONFLICT.

PRESIDENT BUSH must now take a public stand. He would demonstrate that he is no lame duck by BLUNTLY TELLING ABBAS THE TRUTH, insisting that if he remains either unwilling or unable to undertake steps to curb terrorism and incitement, HE CAN NO LONGER QUALIFY AS A PEACE PARTNER.

Finally, President Bush should be reminded of his repeated declarations warning that THE APPEASEMENT OF JIHADISM HAS IN EVERY INSTANCE ONLY SERVED TO EMBOLDEN TERRORISTS EVERYWHERE.

Abbas will claim that he is doing the best he can, and respond by demanding that Israel dismantle outposts and freeze settlements. AND NOTHING WILL CHANGE. This sort of pointless, circular maneuvering has, at best, continued for the past 14 years, since the signing of the Oslo principles in 1993. At worst it has degenerated into terrorism and war.

While Israel rejects the legitimacy of the Palestinian claim that "THE SETTLEMENTS MADE ME DO IT," in 2005 Israel attempted to remove this excuse by withdrawing from the Gaza Strip and dismantling all the settlements there, along with a few settlements in Samaria. The result was not more Palestinian compliance but less - MORE TERROR AND RADICALISM FROM PRECISELY THE AREA ISRAEL HAD LEFT.

Yesterday, Bush said the first thing he would ask Abbas is "what are you going to do about the rockets" that are being fired from Gaza into Israel. As much as we appreciate this question, a more salient one might be: "WHY IS YOUR TELEVISION GLORIFYING SUICIDE BOMBERS?" Just last month, PA television, which Abbas brought under his personal authority when he took office, started re-broadcasting a video that ran dozens of times at the height of the suicide bombing campaign against Israel. The video begins with an imagined scene of a woman shot dead in the back by Israeli soldiers. She then rises to an Islamic paradise to join the "72 virgins" who await any suicide bomber. Next a young man swears to avenge the woman, is also killed by Israelis, and is seen joining this group of young women for his eternal reward. THIS IS EDUCATION FOR ANYTHING BUT PEACE.

Then there are the dozens of schools named after suicide bombers. There are the recent textbooks that teach that Palestine was stolen by "Zionist gangs" and deny any Jewish connection to the land. THERE ARE THE OFFICIAL PA MAPS AND EMBLEMS THAT DEPICT PALESTINE NOT AS THE WEST BANK AND GAZA, BUT ALL OF ISRAEL AS WELL. The most important thing Bush can do in Ramallah is to say to the Palestinians that if they want a state they must stop spewing hatred and glorifying terrorism.

"Bush can and must order Israel to halt the construction in all settlements," said one official. "Otherwise, efforts to bring about peace will never succeed. The settlements are the biggest obstacle to peace. We see no difference between a settlement in the West Bank and a Jewish settlement in Jerusalem."

Abbas is also expected to tell Bush that the PA can't stop the rocket attacks on Israel because its forces are no longer in control of the Gaza Strip, a top Abbas aide said. "We will remind President Bush that we are only in control of the West Bank," he said. "We don't have any security presence in the Gaza Strip." Meanwhile, PA SECURITY OFFICIALS EXPRESSED CONCERN OVER GROWING THREATS BY PALESTINIAN GROUPS TO KILL BUSH, and expressed hope the US president won't cancel his visit to Ramallah in their wake.

"Bush is not welcome in Palestine," Hamas representative Mushir al-Masri said in a speech before the demonstrators. OUR PEOPLE HAVE CHOSEN THE PATH OF JIHAD TO LIBERATE PALESTINE AND WE WILL NEVER ABANDON THIS CHOICE." He added that the US WEAPONS that had been given to Fatah were now being USED BY HAMAS TO ATTACK ISRAEL.

Jerusalem police closed the Temple Mount to Jews, telling those who arrived that an ancient Muslim holiday was discovered to be taking place, thereby precluding entrance by Jews. They could not name the holiday when asked, however. "It seems that the Temple Mount, Judaism's holiest site, will be the first thing to be handed to [U.S. President George W.] Bush on a silver platter," read a statement to the media by the Movement to Prepare the Holy Temple.

The statement called for Jews all over the world to fight the possible transfer of control of the site to the Palestinian Authority in upcoming negotiations. "The Jewish nation must oppose in every way the abandonment of the Temple Mount and Jerusalem to foreigners. We must be faithful and act with self-sacrifice against the initiatives of our enemies, both without and within."

Malki visited Slovenia a few days after the country took over the EU's rotating presidency. He said the 27-nation bloc should become a player, and not just a helper, in the recently revived peace process. "We want the EU to be active in actions taken in creating an independent Palestinian state," Malki said in Ljubljana, as reported by the state-run news agency STA. Palestinians are ready "to take all kinds of steps" to promote peace with Israel, STA quoted him as saying.

US President George W. Bush was in Israel on Wednesday, seeking to pull Israelis and the Palestinians toward serious negotiations. He said in Jerusalem that despite ongoing land squabbles and fears of violence, he has hopes that a Mideast peace pact can be achieved before he leaves office at the end of the year.

Slovenian Foreign Minister Dimitrij Rupel, who spoke to reporters together with Malki, said that if Bush's visit fails to facilitate progress, the EU would intensify its efforts, STA reported. However, with €1.5 million (US$2.2 million) in yearly aid for Palestinian institutions, the EU is "already quite a player in the region," Rupel said, according to STA.

Home Secretary Jacqui Smith has made clear she intends to reverse her predecessor David Blunkett's decision in 2004 to downgrade the drug to class C. The Advisory Council on the Misuse of Drugs is due to report within the next few months on whether cannabis should be reclassified but Ms Smith has signalled that she is prepared to overrule the body if necessary. The Home Secretary, whose stance is strongly backed by Gordon Brown, believes the downgrading of cannabis sent the public the message that it was harmless and legal to possess.

She is also concerned about the widespread availability of new superstrength strains or "skunk" often produced in cannabis factories by organised criminal gangs. Since reclassification, the police have taken a "softly, softly" approach which sees those in possession of large amounts of cannabis often let off with a warning and confiscation. But as a class B drug, anyone caught in possession of cannabis could face a five-year jail term and an unlimited fine. The penalty for supplying would remain the same, with a maximum sentence of 14 years in jail.

The change of mind was signalled by Mr Brown in one of his first acts as Prime Minister. He said: "Why I want to upgrade cannabis and make it more a drug that people worry about is that we don't want to send out a message, just like with alcohol, to teenagers that we accept these things."

Wheat flour is a staple foodstuff in Pakistan, where rotis or unleavened bread are eaten with almost every meal. Last week Afghanistan appealed for foreign help to combat a wheat shortage while Bangladesh recently warned it faced a crisis over rice supplies. Global wheat prices are at record highs. Problems have been compounded by crop failures in the northern hemisphere and an increase in demand from developing countries.

Afghan Commerce Minister Mohammad Amin Farhang said wheat shortages could lead to serious problems during the winter. His call came amid rising discontent inside Afghanistan at the spiralling cost of wheat and other basic foods. Afghanistan does not grow enough wheat to feed all its people and is partially dependent on imports.

Initially, flour shortages pushed up the price on the open market in Pakistan to as much as 60 rupees (about $1) per kilogram in some areas. The average day labourer earns only 100 rupees a day. The state-run Utility Stores Corporation has been selling flour at 18 rupees per kilogram, but it does not have enough outlets to serve the population of 160 million.

"We see a new opportunity for peace here in the holy land and for freedom across the region," an optimistic Bush said upon landing in Tel Aviv. Bush is trying to build momentum for stalled Mideast peace talks and clear up confusion about whether the United States is serious about confronting Iran about its suspected nuclear ambitions.

Israeli President Shimon Peres underscored Bush's hopes - considered unrealistic by many in the Mideast - to bridge decades of differences in just one year and reach agreement for the establishment of a Palestinian statement. "The next 12 months will be a moment of truth," Peres told Bush at an airport arrival ceremony complete with red carpets and a military band. "It must not yield just words." Unpopular at home, Bush was greeted here with smiles and warm handshakes.

"You are our strongest and most trusted ally in the battle against terrorism and fundamentalism and a strong supporter of our quest for peace and stability," Prime Minister Ehud Olmert told the president. Bush also stressed the deep U.S.-Israel ties.

"The alliance between our two nations helps guarantee Israel's security as a Jewish state," Bush said. That remark lent support to Israel on one of the core issues in the conflict. The Palestinians oppose calling Israel a Jewish state, saying it rules out the right of Palestinian refugees to return to lost properties in Israel. They say the fate of the refugees is a matter for negotiations. Bush has referred to Israel as a Jewish state in the past but the reference - here in the region - had special significance.

Pledging to stand with Israel against terrorists, Bush said, "We will do more than defend ourselves. We seek lasting peace." Bush's challenge is to convince skeptical governments that, with just a year remaining in his presidency and Americans deep in the process of selecting his successor, he is willing to devote the time and effort necessary to bridge decades of differences in this troubled region.

BLAIR'S SPEECH TO UMP FUELS EU PRESIDENT SPECULATION - FT - The FT reports on Tony Blair's upcoming speech on Saturday to the French ruling UMP party, "thought to be the first time he has formally addressed a party not from Labour's centre-left political family". One member of the French government noted that Nicolas Sarkozy and Blair are now good friends, despite their terms in office only overlapping by seven weeks. "Sarko loves Blair", he concluded. The article notes that "THEIR RAPPORT WILL SUSTAIN SPECULATION MR BLAIR COULD BE MR SARKOZY'S FAVOURITE CANDIDATE FOR THE NEW POST OF PERMANENT PRESIDENT OF THE EUROPEAN UNION NEXT YEAR."

STABILITY OF EUROZONE IS THREATENED BY SOUTHERN STATES' DEBTS - TELEGRAPH - A comment piece in the Telegraph by Ambrose Evans-Pritchard warns that "mounting strains within the eurozone will set off a sharp jump in spreads on Italian, Spanish, Greek, and Portuguese sovereign bonds this year, forcing major changes in government policy across the region," according to a top French bank. He continues, "A spread shock of this order would be greater than anything seen since the launch of the euro. It would amount to a stark reappraisal of the EMU project, raising the risk of a chain reaction as rising debt costs erode budget deficits even further."

EU LEGISLATION DAMAGES ALTERNATIVE MEDICINE INDUSTRY - TELEGRAPH - The Telegraph reports that an EU directive that governs the labelling and marketing of medicinal herbs could seriously dent the herbal medicines industry. Under the terms of the EU Traditional Herbal Medicinal Products Directive, Pukka, a herbal medicine company, will need to pay for licences for each of its herbal remedies. It has about 30 different products and will face an initial fee of £50,000 per product and an additional £10,000 per year.

FORMER FRENCH PM CALLS FOR A "TRUE UNION" BETWEEN THE US AND EU - IHT - The IHT reports that former French PM Edouard Balladur has called for "a new alliance between Europe and America, and even more - a true union." He argues that such a union is the only way to halt the West's decline and decreasing influence in the world. The union would include a permanent Union secretariat to prepare common positions for international meetings, a common trans-Atlantic market, linkage between the dollar and euro, and the creation of a trans-Atlantic executive council of leaders that would convene every three months.

TURKEY TO AMEND CONTROVERSIAL LAW - INDEPENDENT - Turkey's government will propose changes this week to a law that makes it a crime to insult 'Turkishness'. The existence of the law has been seen as a major obstacle to Turkey's bid for EU membership.

Soviet tanks had just rolled into Afghanistan. The Mullahs had seized US hostages in Iran. Pax Americana was on the ropes, and so was capitalism. Inflation had reached 14 per cent in the United States. The final spike in bullion occurred when the Hunt brothers tried to corner the silver market, forcing up gold in tandem through arbitrage links. It collapsed within days.

If you strip out the Hunt anomaly, it is fair to say that gold established a "safe-haven" level of $600 - or $1,500 in today's money - that roughly lasted through the final phase of the Carter malaise, the oil shock, and the collapse of confidence in the monetary order. By this benchmark, last week's jump to $869 looks tame. Yet gold is undoubtedly flashing warning signs. The price has jumped 42 per cent since the US credit markets suffered their heart attack in August. It has tripled since Gordon Brown sold over half Britain's reserves, deeming it a barbarous relic. That conceit has cost taxpayers £3.4bn, after adjusting for returns from dollar, euro, and yen bonds.

The mounting risk that Pakistan's nuclear weapons could fall into the hands of al-Qa'eda is playing a role. So are fears that Western leaders have no credible answer to the banking crisis as it drags on for month after month. Note that gold smashed the 28-year record just days after the European Central Bank launched its monetary "shock and awe", showering half a trillion dollars on the banks, with parallel moves by the Fed, the Bank of England and the Swiss. Clearly, a small army of investors is betting - rightly or wrongly - that our debt-bloated democracies are now too decadent to take their punishment. The elites will opt for the easy path of reflation to postpone the day of reckoning.

In the Middle Ages gold fetched nearly $3,000 an ounce in real terms. The price fell to nearer $550 when Spain flooded the world with Aztec and Inca riches, and there it hovered for three centuries. But the modern era has been an aberration. Supply is exhausted. Perhaps we should now regard the Middle Ages as the proper benchmark price. One thing is certain: gold will outperform paper as long as governments keep increasing the global money supply 15 per cent a year.

"This sunspot is like the first robin of spring," said solar physicist Douglas Biesecker of NOAA's Space Weather Prediction Center. "In this case, it's an early omen of solar storms that will gradually increase over the next few years." A sunspot is an area of highly organized magnetic activity on the surface of the sun. The new 11-year cycle, called Solar Cycle 24, is expected to build gradually, with the number of sunspots and solar storms reaching a maximum by 2011 or 2012, though devastating storms can occur at any time.

During a solar storm, highly charged material ejected from the sun may head toward Earth, where it can bring down power grids, disrupt critical communications, and threaten astronauts with harmful radiation. Storms can also knock out commercial communications satellites and swamp Global Positioning System signals. Routine activities such as talking on a cell phone or getting money from an ATM machine could suddenly halt over a large part of the globe.

"Our growing dependence on highly sophisticated, space-based technologies means we are far more vulnerable to space weather today than in the past," said Vice Admiral Conrad C. Lautenbacher, Jr., under secretary of commerce for oceans and atmosphere and NOAA administrator. "NOAA's space weather monitoring and forecasts are critical for the nation's ability to function smoothly during solar disturbances."