Thursday, the world's banking system went into meltdown. Confidence evaporated. Rock-solid pillars of the financial establishment refused to lend to each other. Stock markets crumbled.

For the unlucky professionals caught away from home, it was a cue to pack away the sun cream and scurry back to the office. "Things are really falling apart," said one panicky hedge fund manager. "People are getting completely crushed."

But the big question this weekend is whether the rest of us need to prepare for the worst, too. Is this the start of a new era of economic uncertainty affecting house prices, jobs and public finances far beyond the City?

The party certainly looks to be over. Our unprecedented era of prosperity has relied heavily on easy borrowing and buoyant markets. Now the tap has been turned off, everything changes.

Defence chiefs reacted with fury after right-wing commentator and adviser Anthony Cordesman weighed into the row over the UK's contribution to the post-Saddam operation with a withering claim that Britain had effectively handed control of its zone to local "mafiosi". More significantly, Cordesman claimed the British "failure" had allowed Iran to gain a toehold, which it was using to increase its influence over its neighbour. The damning accusations, made after a fact-finding visit to Iraq, increase the pressure over the continuing dilemma confronting coalition leaders, amid expectations that Gordon Brown is poised to pull British troops out within the next few months.

In a report completed following his return from Iraq last week, Cordesman, of the Center for Strategic and International Studies (CSIS), said: "British weakness and failure in the south has both encouraged Shi'ite extremism and partially opened the door to Iran.

"The struggle for each major shrine city has become messy and local in the south, and the British defeat in the four provinces in the south-east - particularly Basra - has created the equivalent of rival Shi'ite mafias, whose religious pretensions in no way mean they are not the equivalent of the kind of rival gangs that dominated many American cities during prohibition. Young street thugs wander much of the area, stealing and bullying in the name of God."

But the dismal assessment of the security situation in the British-controlled zone was angrily refuted by British officials and military experts. "This bears no resemblance to what we know to be the case," a senior source at the Ministry of Defence said last night. "If Mr Cordesman had actually been to Basra during his visit, he would have seen that the British forces have a lot more control than he suggests. We have never suggested that every-thing was perfectly peaceful, but this is terribly unfair on the hard work that our armed forces are doing every day."

General Sir Tony Walker, a former deputy chief of defence staff, said Cordesman had ignored the progress the British forces had made towards coalition goals in the south. "This man himself has said that the main goal should be to increase the presence of Iraqi forces on their own streets, securing their own borders, and that's exactly what we have done," he said. "We have improved local services and infrastructure, and we have sustained our fair share of casualties in doing so."

He added: "The Americans wanted to disband the existing security forces and we went along with that. We have suffered terribly since then, because that single move was the most destabilising act in the whole post-war operation."

How are abortion clinics protecting themselves against charges under the partial-birth abortion ban? By ensuring unborn babies are dead by injecting them first with lethal drugs before aborting them. The practice has been adopted by many abortion providers across the U.S. in the wake of the Supreme Court decision upholding the Partial-Birth Abortion Ban Act, reported the Boston Globe.

In order to avoid any chance of a live birth and prosecution, three major Harvard-affiliated hospitals - Massachusetts General, Brigham and Women's, and Beth Israel Deaconess - have made lethal injections in the womb a standard operating procedure for abortions at 20 weeks gestation or later.

Dr. Mark Nichols, professor of obstetrics and gynecology at Oregon Health & Science University, does not give women a choice if their baby is over 20 weeks' gestation - the injection is required. So concerned over possible prosecution is Nichols, he will no longer allow medical and nursing students to observe late-term abortions at his clinic, fearing someone might lodge a criminal complaint.

Some 2,000 British Muslims arrived at London's Alexandra Palace to hear the message from the party's British wing. Hizb ut-Tahrir (HT) has been accused of being a critical player in a so-called "conveyor belt" towards terrorism - that its ideas are part of the problem.

CRITICS SAY YOUNG MEN, PARTICULARLY STUDENTS, ARE RADICALISED IN PRIVATE STUDY CIRCLES TO BELIEVE THAT BEING MUSLIM AND BRITISH ARE INCOMPATIBLE BECAUSE THE PARTY SAYS WESTERN DEMOCRACY GOES AGAINST A GOD-GIVEN SET OF RULES. It's this idea that critics say provides the intellectual foundations upon which violent jihadism has grown.

Hizb ut-Tahrir, which translates as Liberation Party, rejects these criticisms. The party's texts, it says, show that the proposed Islamic model of government would protect religious minorities, liberate women and enshrine justice in decision-making. Crucially, it is a legal organisation.

Neela, a London-born woman now living in Rochdale, was one of those who sympathised. "WHAT YOU WILL FIND WITH MUSLIMS IS THAT WE HAVE A GLOBAL IDENTITY, WE SHARE THE SAME BELIEF. It's not about me being a Muslim in Britain and she's a Muslim in Palestine, she is still my sister. When I see Iraq happening, I feel sad."

There is no one taking account of British and American foreign policy for what it is actually doing to Muslim lands. "WHEN WE LOOK AT THE SOLUTION OF THE CALIPHATE, WE'RE SAYING ENOUGH IS ENOUGH, MUSLIMS IN THE MUSLIM WORLD SHOULD BE ALLOWED TO CHOOSE THEIR OWN POLITICAL DESTINY.

"IF IT'S SHARIA LAW, THAT'S THEIR RIGHT."

The Islamist group Hizb ut-Tahrir - which organised the conference - said it had been the largest gathering of Muslim activists from around the world. However, the group is illegal in many countries and key speakers have been stopped from entering Indonesia.

A caliphate - or single state for Muslims - last existed in 1924.

Hizb ut-Tahrir regards this as the ideal form of government, because it follows what it believes are the laws of God as set out in the Koran, rather than laws designed by man. The groups says it seeks to set up a caliphate by non-violent means - but many experts see it as ideologically close to jihadist groups, and suspect its commitment to peaceful means is purely tactical.

Starting this month in a port neighborhood and then spreading across Shenzhen, a city of 12.4 million people, residency cards fitted with powerful computer chips programmed by the same company will be issued to most citizens.

Data on the chip will include not just the citizen's name and address but also work history, educational background, religion, ethnicity, police record, medical insurance status and landlord's phone number. Even personal reproductive history will be included, for enforcement of China's controversial "one child" policy. Plans are being studied to add credit histories, subway travel payments and small purchases charged to the card.

Security experts describe China's plans as the world's largest effort to meld cutting-edge computer technology with police work to track the activities of a population and fight crime. But they say the technology can be used to violate civil rights. The Chinese government has ordered all large cities to apply technology to police work and to issue high-tech residency cards to 150 million people who have moved to a city but not yet acquired permanent residency.

Both steps are officially aimed at fighting crime and developing better controls on an increasingly mobile population, including the nearly 10 million peasants who move to big cities each year. But they could also help the Communist Party retain power by maintaining tight controls on an increasingly prosperous population at a time when street protests are becoming more common.

"If they do not get the permanent card, they cannot live here, they cannot get government benefits, and that is a way for the government to control the population in the future," said Michael Lin, the vice president for investor relations at China Public Security Technology, the company providing the technology.

All Chinese citizens are required to carry national identity cards with very simple computer chips embedded, providing little more than the citizen's name and date of birth. Since imperial times, a principal technique of social control has been for local government agencies to keep detailed records on every resident.

HAGUE: NEW VERSION OF EU CONSTITUTION "OVERWHELMINGLY" THE SAME
Shadow Foreign Secretary William Hague argued that THE NEW EU TREATY IS "OVERWHELMINGLY THE SAME AS THE EU CONSTITUTION. It is in large measure and predominantly the same thing with the same effect. I think in a way Gordon Brown wants to get this out of the way with as little public attention as possible. Certainly they want to get it through on the quiet."

THE CONSERVATIVE PAMPHLET DRAWS ON OPEN EUROPE'S RESEARCH WHICH FOUND THAT OF THE 250 PROPOSED CHANGES IN THE REVISED EU TREATY, ONLY 10 WERE DIFFERENT TO THOSE IN THE ORIGINAL EU CONSTITUTION.

Hague denied that the Conservatives were returning to an 'old agenda' or playing to the party's right-wing by focusing on Europe. "This cannot be the Conservative Party returning to an old agenda when a referendum was promised in the last Labour manifesto," he said. He added that an EU treaty referendum would be key to the Conservatives' general election campaign if an early poll was called by Brown.
Telegraph Mail BBC

NATIONAL LOBBIES SEEK TO EXPLOIT EU CAR EMISSIONS LAW FOR BENEFIT OF DOMESTIC INDUSTRIES
The Telegraph reports that the European Commission is backing away from its plans for curbs on car emissions, BOWING TO INTENSE PRESSURE FROM BERLIN AND THE GERMAN AUTO INDUSTRY. IT NOTES THAT THE LATEST DRAFT OF THE LEGISLATION HAS DITCHED THE ORIGINAL CEILING OF 130G C02/KM, WHICH WOULD HAVE BEEN UNATTAINABLE FOR GERMAN MANUFACTURERS SUCH AS PORSCHE AND BMW.
However, the article notes that ROME AND PARIS have been lobbying for a strict set of rules in the hope of gaining market share for their industries, WITH SMALLER ITALIAN AND FRENCH MODELS (SUCH AS FIAT AND RENAULT) BEING FAR BETTER PLACED ALREADY TO ACHIEVE THE 130G CEILING. The legislation still has a long way to go, and MEPs have said they will attempt to push for their own changes when the law comes before the European Parliament.
Telegraph

GEORGIA CALLS ON EU TO CONDEMN RUSSIA OVER MISSILE STRIKE
Georgia has called on the EU to send a "strong and clear-cut" message of condemnation to Russia after Georgia accused it of committing an "act of aggression" by firing a guided missile into its territory. Georgia's President Mikhail Saakashvili said, "This is not Georgia's problem. This is a problem for European security and safety".
Euobserver Independent

RIFKIND: ALLOWING MUGABE TO EU-AFRICA SUMMIT WILL DASH ANY PROSPECT OF A MEANINGFUL EUROPEAN FOREIGN POLICY
In the FT Former Foreign Secretary Sir Malcolm Rifkind argues that the EU must not create a fudge deal that would allow Robert Mugabe to attend the EU-African Union summit in Portugal later this year. He says Britain must boycott the summit if he is present, and concludes that "If the EU fudges this we not only betray the brave people of Zimbabwe; we say goodbye to any prospect of a meaningful European foreign policy."
FT

POLISH LEFT RALLIES TO CHALLENGE KACZYNSKIS
The IHT reports that parties of the Polish left are building a coalition to be led by former president Aleksander Kwasniewski to contest the looming elections as tensions grow in the governing coalition between PM Jaroslaw Kaczynski and the Self-Defence Party and League of Polish Families. THE NEW MOVEMENT HAS PLEDGED TO FIGHT CORRUPTION, DISCRIMINATION AND RACISM, AND WANTS POLAND TO ADOPT THE PROPOSED NEW EU TREATY AND JOIN THE EURO. By contrast, the Kaczynski's coalition partners oppose joining the euro and have demanded a referendum on the new treaty. Meanwhile Der Spiegel reports that strife within the ruling coalition continued yesterday, with Andrzej Lepper, leader of the Self-Defence Party, describing Jaroslaw Kaczynski as a "dictator" who had "declared war" on his coalition partners.
IHT Der Spiegel

SARKOZY WINS PRAISE FROM LE PEN
The leader of France's National Front Jean-Marie Le Pen has praised Nicolas Sarkozy's first few months in office, describing his actions as "balanced and well-informed", after Sarkozy welcomed him at the Elysée Palace - something Jacques Chirac always refused to do - to discuss institutional reform.
Libération Welt

TURKEY IN POLITICAL LIMBO
The FT notes that the election results in Turkey appear to "HAVE PROLONGED RATHER THAN RESOLVED TURKEY'S INSTITUTIONAL PARALYSIS", WITH NO GOVERNMENT OR EVEN A CANDIDATE FOR PRESIDENT IN PLACE. Meanwhile Der Spiegel and Die Welt report that Turkish Prime Minister Tayyip Erdogan will not propose Abdullah Gul for the presidency a second time, in an effort to avoid another confrontation with Turkey's secular elite.
FT Der Spiegel Welt

The FT reports that the EU is considering imposing reciprocal security measures on US travellers in response to a controversial new US law.
FT EUobserver AFP

On one of the worst days in recent stock market history almost ?56 billion was wiped off the value of London's leading firms amid worldwide panic. Experts predicted that the turbulence could have knock-on effects for all British households, depressing the housing market, potentially pushing unemployment higher and plunging pension funds into deficit.

They said the British economy's decade-long boom, built for a large part on the success of the City, was facing its sternest test, with many parts of the financial sector in a state of meltdown. The dire predictions came as the benchmark FTSE 100 index of leading shares plunged by 3.7 per cent, the biggest drop in more than four years. In addition to massive losses in London, many hundreds of billions of pounds were lost from other markets worldwide.

Prof Peter Spencer, an economic adviser to the Ernst & Young Item Club, said Britain was arguably more vulnerable to the slump than many other countries because the economy was so reliant on the City to power it ahead.

Prof Spencer said the crisis was in many senses comparable to the Wall Street Crash.

He said: "When historians look back, I would imagine they will compare this credit market slump with the events in 1929."

"I THINK IT MAKES SENSE TO CERTAINLY CONSIDER IT," Army Lt. Gen. Douglas Lute said in an interview with National Public Radio's "All Things Considered."

"And I can tell you, this has always been an option on the table. But ultimately, this is a policy matter between meeting the demands for the nation's security by one means or another," Lute added in his first interview since he was confirmed by the Senate in June.

The military conducted a draft during the Civil War and both world wars and between 1948 and 1973. THE SELECTIVE SERVICE SYSTEM, RE- ESTABLISHED IN 1980, MAINTAINS A REGISTRY OF 18-YEAR-OLD MEN. Rep. Charles Rangel, D-N.Y., has called for reinstating the draft as a way to end the Iraq war.

Bush picked Lute in mid-May as a deputy national security adviser with responsibility for ensuring efforts in Iraq and Afghanistan are coordinated with policymakers in Washington. Lute, an active-duty general, was chosen after several retired generals turned down the job.

In his second encyclical - the most authoritative statement a pope can issue - the pontiff will denounce the use of "tax havens" and offshore bank accounts by wealthy individuals, since this reduces tax revenues for the benefit of society as a whole.

It will focus on humanity's social and economic problems in an era of globalisation. Pope Benedict intends to argue for a world trade and economic system "regulated in such a way as to avoid further injustice and discrimination", Ignazio Ingrao, a Vatican watcher, said yesterday.

The encyclical, drafted during his recent holiday in the mountains of northern Italy, takes its cue from Pope Paul VI's encyclical Populorum Progressio (On the Development of Peoples), issued 40 years ago. In it the pontiff focused on "those peoples who are striving to escape from hunger, misery, endemic diseases and ignorance and are looking for a wider share in the benefits of civilisation". He called on the West to promote an equitable world economic system based on social justice rather than profit.

This week the Italian centre-left Government of Romano Prodi began a concerted crackdown on tax evaders, saying that it would target individuals with second homes and other signs of "conspicuous wealth". If the black economy is included, unpaid taxes amount to 27 per cent of Italy's gross domestic product.

Mr Prodi, a devout Catholic, urged church leaders to speak out on tax evasion, telling the Catholic magazine Famiglia Cristiana that a third of Italians heavily evaded taxes, which were needed to plug Italy's huge budget deficit. "Why, when I go to Mass, is this issue almost never touched upon in homilies?" Mr Prodi asked, adding: "If memory serves, St Paul exhorted the faithful to obey authority."

BOTH THE U.N. SECURITY COUNCIL AND THE INTERNATIONAL ATOMIC ENERGY AGENCY HAVE FOUND IRAN IN BREACH OF ITS OBLIGATIONS UNDER THE NUCLEAR NON-PROLIFERATION TREATY. The IAEA reports that Iran ignored the Security Council's February deadline to stop enriching uranium and has even expanded its nuclear program.

As Iran's Atomic Energy Organization moves toward its announced goal of operating 50,000 uranium enrichment centrifuges in Natanz, THE WORLD BANK IS FUNDING NINE GOVERNMENT PROJECTS IN IRAN TOTALING $1.35 BILLION -- ONE OF WHICH OPERATES IN ISFAHAN, WHERE IRAN'S NUCLEAR PROGRAM IS HEADQUARTERED.

While the World Bank is part of the U.N. family, the bank's board is disconnected from the policies of key U.N. agencies -- especially the Security Council and the IAEA. THE UNITED STATES REMAINS THE TOP INVESTOR IN THE WORLD BANK, CONTRIBUTING $950 MILLION IN 2006 AND $940 MILLION THIS YEAR. IN JUNE THE HOUSE OF REPRESENTATIVES APPROVED ANOTHER $950 MILLION. Meanwhile, the bank will disburse $220 million to Iran this year, with more than $870 million in the pipeline for 2008, 2009 and 2010.

Presidents Carter, Reagan, Bush, Clinton and Bush all certified that Iran is a state sponsor of terrorism. The Treasury Department's Office of Terrorism and Financial Intelligence spends considerable effort locating Iranian assets to freeze.

ONE HAS TO WONDER WHY A COUNTRY THAT EXPORTS 2.6 MILLION BARRELS OF OIL A DAY NEEDS WORLD BANK DEVELOPMENT ASSISTANCE. Iran's oil export revenue nearly doubled between 2003 and 2005, from $23.7 billion to $46.6 billion. That number grew to $50 billion last year. Iran's real gross domestic product grew 4.8 percent in 2004 and 5.6 percent in 2005. Why does Iran need World Bank aid?

Furthermore, the bank's investment in Iran stands in stark contrast to its work in Iraq. IRAQ WAS A FOUNDING MEMBER OF THE WORLD BANK IN 1945, YET IT TOOK THE BANK 2 1/2 YEARS AFTER THE FALL OF SADDAM HUSSEIN TO APPROVE ONE DEVELOPMENT PROJECT. To date, the board has approved only four projects, totaling $399 million, for the new Iraqi government -- and little of that money has been spent.

THE WORLD BANK'S BOARD IS NOT ONLY DISCONNECTED FROM THE SECURITY COUNCIL'S POLICIES BUT IS ALSO AT ODDS WITH THE IRAN POLICIES OF BRITISH PRIME MINISTER GORDON BROWN, FRENCH PRESIDENT NICOLAS SARKOZY AND GERMAN CHANCELLOR ANGELA MERKEL. As the Treasury acts to dry up funding for Tehran, the World Bank is providing support to the Iranian government through 2010.

This summer the bank has gotten a president who works well with allies -- former deputy secretary of state Robert Zoellick. It would be prudent for Zoellick to realign the bank's policies with Security Council resolutions on Iran. AS LONG AS THE SECURITY COUNCIL CONDEMNS THE ACTIONS OF AHMADINEJAD, THE WORLD BANK SHOULD SUSPEND FUNDING FOR HIS GOVERNMENT.

The eminent socialist Gregorio Peces-Barba Martínez, one of the authors of the current Spanish national constitution, made headlines in Spain Wednesday when HE THREATENED THE CATHOLIC CHURCH WITH A "NEW STATUS" IN SPANISH SOCIETY if it didn't stop attacking his new "Education for Citizenship and Human Rights" program for Spanish public schools.

"Education for Citizenship", which purports to instruct students in matters of ethics, IS IN REALITY A VAGUELY-WORDED PROGRAM THAT SEEKS TO INDOCTRINATE CHILDREN WITH THE SEXUAL IDEOLOGY AND SOCIAL AGENDA OF THE SPANISH LEFT, INCLUDING THE ACCEPTANCE OF HOMOSEXUALITY. The program's stated goals include teaching children to reject "existing discrimination for reason of sex, origin, social differences, affective-sexual, or whatever other type" and to exercise a "critical evaluation of the social and sexual division of labor and racist, xenophobic, sexist, and homophobic social prejudices."

The Spanish Catholic bishops have responded with condemnations of the program, including an official statement that says that the program "implies a serious wound to the original and inalienable right of parents and schools, in collaboration with them, to choose the moral formation that they want for their children. This is a right recognized by the Spanish Constitution (article 27.3). The government cannot supplant the society as an educator of the moral conscience." It goes on to state that "the educational centers of the government, losing their obligatory ideological neutrality, will impose on whomever has chosen the Catholic religion and morality another moral formation that hasn't been chosen by them."

The archbishop of Madrid, Antonio Marí¡ Rouco Varela, later clarified that "no one rejects the idea of having an obligatory course on citizenship, which is good," but added that "the concrete form" in which the government has developed the course "IS AN ETHICAL-MORAL EDUCATIONAL PROGRAM THAT NEGATES RELIGION".

The bishops, COMPLAINED PECES-BARBA, "ASSUME A TRADTIONAL ANTI-MODERN AND CLERICAL CULTURE THAT IS OPPOSED TO MANY LEGAL CONCLUSIONS OF THE DEMOCRATIC GOVERNMENT, AND THAT IT INTENDS TO SELL AS THE TRUTH THAT SETS US FREE. NOW IT IS EDUCATION FOR CITIZENSHIP, BEFORE IT WAS DIVORCE, ABORTION, THE TEACHING OF RELIGION, AND HOMOSEXUAL MARRIAGE."

The socialist added that the Catholic Church must back down from criticism of its plan or suffer consequences. "If this new climate is not obtained in the next legislature," he wrote, "it will be necessary TO ADDRESS THE TOPIC OF THE ACTIONS AND SITUATION OF THE CHURCH AND ESTABLISH A NEW STATUS, THAT PUTS THEM IN THEIR PLACE AND THAT RESPECTS THE AUTONOMY OF THE CIVIL AUTHORITY."

The warning, made in the Spanish socialist newspaper "El Pais", followed on the heels of a speech by Spanish President Emelio Zapatero on July 22, who said, in defence of the Education for Citizenship program that, "no faith can impose itself on the law", a statement understood as a reference to the Church, and subsequently cited by Peces-Barba in his article. ACCORDING TO SPANISH MEDIA SOURCES, THE RULING SOCIALISTS ARE EAGER TO MAKE CHANGES TO THE EXISTING LEGAL STATUS OF THE CATHOLIC CHURCH IN THAT COUNTRY.

Nearly two dozen cities already have signed up to participate in a pro-life campaign that will stage prayer vigils outside their abortion businesses 24 hours a day for the 40-day period from Sept. 26 through Nov. 4 - a total of 960 hours of prayer, officials say. And that's from just the first day of the week-long sign-up period.

"God is amazing," said Shawn Carney, a spokesman for the campaign called 40 Days for Life. "That is more communities than we ever originally expected to participate in this ambitious pro-life initiative, and there are still six days left for communities to register. WE CAN'T WAIT TO SEE WHAT GOD HAS IN STORE FOR AMERICA THIS FALL!"

As WND has reported, the 40 Days is an intensive pro-life effort that will focus attention on prayer and fasting, as well as the 40 days of round-the-clock peaceful prayer vigils at abortion facilities, officials said.

There also will be intensive community outreaches designed to draw more people into the effort to defeat ABORTION IN AMERICA, WHICH HAS COST BY MOST ESTIMATES MORE THAN 40 MILLION LIVES SINCE IT WAS LEGALIZED BY THE U.S. SUPREME COURT IN ROE V. WADE IN 1973.

QINGLIAN HE testified before the commission on China's "perception management." China's information control is carried out through controlling editors and reporters. ALL CHINESE MEDIA, including newspapers, periodicals, news agencies, TV stations, broadcasting, the movie industry and art performances, ARE CATEGORIZED AND MANAGED AS "MOUTHPIECES" OF THE RULING COMMUNIST PARTY.

"As part of China's political institutions, information and mind control has been conducted for more than half century since the Chinese Communist Party took power in 1949," said He, a former Chinese government propagandist and now a senior researcher at 'Human Rights in China'. "'Mind control' includes indoctrination from kindergarten to college through officially compiled textbooks, as all teachers are categorized as 'educators of CCP'. These controls are exercised by the Party's Central Department of Propaganda", she said.

THE GOVERNMENT DISINFORMATION THEMES INCLUDE THAT THE UNITED STATES IS A "KEY ENEMY OF CHINA," THAT THE U.S. INTERVENES AND RESTRAINS CHINA AND BACKS INDEPENDENCE FORCES IN TAIWAN AND TIBET, she said. Other disinformation themes include the notion that the U.S. is a world hegemonic power, fears a stronger China and therefore seeks to "contain" China.

"Economic reform and Opening Policy from 1979 have never shaken or changed mechanism of the control," she said. Information control is crucial to communist rule and has been used by Beijing "to mislead the Chinese population from values of human rights and democracy, and from truth as well," she said.

The military said it had lost 26 soldiers and killed around 31 militants in three days of fighting on the volatile island of Jolo. Thursday saw the heaviest toll after militants ambushed a military convoy. The military said the arrival of extra forces would bring to 4,000 the number of troops stationed in the area.

Government troops, backed by US military trainers, have been fighting Islamist militants affiliated to various groups who have been hiding in the island's mountainous terrain for several months. The stakes were raised last month after 14 marines were killed on nearby Basilan island, with 10 of them beheaded.

Militants from Abu Sayyaf and the Moro Islamic Liberation Front (MILF) were suspected of being behind the attacks. The MNLF, which signed a peace deal with the government in 1996, claimed responsibility for Thursday's ambush, saying it was in retaliation for earlier army offensives.

But military officials have also blamed Abu Sayyaf, the group behind the Philippines' worst terror attack - a ferry bombing in 2004 that killed more than 100 people. The US has listed Abu Sayyaf as a terrorist organisation and says it has links to Al-Qaeda, as well as the regional militant group Jemaah Islamiah.