In a 224-page quarterly report to Congress, Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program acknowledged that TARP had stabilized the financial system. But he said that it has so far failed to restore consumer and business lending and to significantly prevent home foreclosure.

And in a slap at Congress and the Obama Administration, Barofsky said that "it is hard to see how any of the fundamental problems in the system have been addressed to date." He said the bailout "will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years' time."

Hackers have demonstrated that they can infiltrate utility computer control systems, leaving behind coding that would allow them to take control of the system at a later time.

The survey, released Thursday, offers a rare view at the damage cybercriminals can inflict on critical institutions such as power grids, water and sewage systems, and oil and gas facilities. Manipulating these vital systems can cause significant consequences, such as power outages, floods, sewage spills and oil leaks. 54 percent of the survey's respondents said they had experienced a large-scale "denial-of-service" attack, in which a network was taken out of service as a result of being flooded with phony internet traffic.

If state sponsored hackers can achieve this access, just imagine what a well-funded and diligent terrorist organization might be able to do? How long could you survive without electricity or gas? How would you communicate? Would you have food to eat and if so for how long? What if the country was thrust into the infrastructure of the 1800s overnight? Are you prepared for a catastrophic event?

Foreign Minister Yang Jiechi was the latest and most senior official to denounce the arms sale plan Washington announced on Friday. The Obama administration has defended the package worth about $6.4 billion as necessary to boost regional security. The United States should "truly respect China's core interests and major concerns, and immediately rescind the mistaken decision ... in order to avoid damaging broader China-US relations," Yang said. He said the US move had "damaged China's national security and great task of reunification (with Taiwan)."

Beijing planned to postpone or partially halt some military cooperation, including a series of visits planned for this year, among them US Defense Secretary Robert Gates' planned trip to China, meetings between top military commanders, and mutual visits by naval ships, Xinhua reported. "Especially at a time when the world has yet to escape the financial crisis, and also faces global problems such as climate change, food security and nuclear non-proliferation, it is not in US interests for China-US relations to experience setbacks," the state news agency said.

US officials sought to downplay the dispute on Saturday. "We regret that the Chinese government has announced that it plans to curtail military-to-military and other security-related exchanges and take action against US firms," said P J Crowley, the State Department's chief spokesman. "We believe our policy contributes to stability and security in the region," he said.

Since 1949 when Nationalist forces fled to Taiwan after losing the mainland to Communist rebels, Beijing has demanded Taiwan accept unification, threatening to use force if necessary. Andrew Yang, Deputy Minister of Taiwan's Ministry of National Defense, described the sale as defensive weapons that could help prevent cross-Strait hostilities. "This is very much about enhancing Taiwan's self-defense to fend off any attack from Beijing. Beijing will think twice. That's why they are opposing US arms sales," he told Reuters.

The newspaper said the budget would include $25 billion for struggling states and provide funding increases for programs at the Energy Department, National Institute of Health, National Science Foundation and the Census Bureau. An administration official confirmed to Reuters that the budget would include a 6 percent increase in civilian research programs.

The budget would also provide more funds for military programs, including the Pentagon's Special Operations forces, the US Army's Black Hawk and Chinook helicopters, and the F-35 Joint Strike Fighter. Other programs and agencies would face cuts. Space agency NASA's mission to fly back to the moon would be scrapped, the paper said, and some public works projects by the Army Corps of Engineers would also lose funding.

The president has previously said he would propose a three-year spending freeze on some domestic programs that would save $250 billion by 2020. Spending at the agencies facing cuts would be kept at $447 billion annually through 2013, the New York Times said, leading to a savings of $10 billion in the coming fiscal year.

As the Obama administration edges toward imposing tougher sanctions on Iran, it has begun upgrading its approach to defending its Persian Gulf allies against potential Iranian missile strikes, officials said Saturday. The United States has quietly increased the capability of land-based Patriot defensive missiles in several Gulf Arab nations, and one military official said the Navy is beefing up the presence of ships capable of knocking down hostile missiles in flight.

The officials discussed aspects of the defensive strategy on condition of anonymity because some elements are classified. The moves have been in the works for months and are part of a broader adjustment in the US approach to missile defense, including in Europe and Asia. Details have not been publicly announced, in part because of diplomatic sensitivities in Gulf countries which worry about Iranian military capabilities but are cautious about acknowledging US protection.

One military official said the adjustments in the Gulf should be seen as prudent defensive measures designed to deter Iran from taking aggressive action in the region, more than as a signal that Washington expects Iran to retaliate for any additional sanctions.

Despite the deaths of up to 700,000 Iraqis and 179 British troops, Mr Blair said he felt 'responsibility but not a regret' as he concluded his six hours of evidence to the Chilcot inquiry. There was uproar and shouts of 'liar' and ' murderer' as bereaved relatives in the public gallery of the QEII conference centre in Westminster realised they were not going to receive the apology for which they had waited all day. There was no hint of remorse. Indeed, Mr Blair even suggested the world should be grateful to him.

As he began his evidence, he looked uncharacteristically nervous, with his hands shaking. But he soon got into in his stride, joking about the recent TV interview with Fern Britton in which he suggested that if he had known Saddam had no WMD, he would simply have found a different argument for toppling him. He denied this meant he had been committed to regime change at all costs, and tried to laugh off the comments, saying that 'with all my experience' of interviews, he still had 'something to learn'.

Mr Blair went on to take a defiant stance on Iraq, which has come to define his premiership and left Britain deeply divided. Mr Blair insisted: 'This isn't about a lie or a conspiracy or a deceit or a deception. It's a decision. The decision I took - and frankly would take again - was if there was any possibility that he could develop weapons of mass destruction we should stop him.'

The Vatican's announcement last year shocked the Church of England and was widely seen as an act of aggression, designed to poach Anglican clergy. Dr Rowan Williams, the Archbishop of Canterbury, said that at the time that it had been viewed as "a dawn raid on the Anglican communion". The Queen, who is the Church's Supreme Governor, was not warned of the move, which has paved the way for priests to enter into full communion with the Holy See.

The Archbishop reassured Lord Peel that Pope Benedict had only issued the decree in response to the requests of traditionalist Anglicans disillusioned with the liberal direction of their Church. He stressed that it had not been intended as a hostile act or to in any way destabilise the Church of England, which has been engulfed in rows over women bishops and gay clergy.

Senior sources fear though that the move threatens to cast a shadow over the Pope's visit to Britain in September. It had been believed that the pontiff would stay at Buckingham Palace, but following the offer to traditionalists it was decided that he would not, nor would he have a palace banquet during his state visit.

The Obama administration also plans to spend a further 3.1 billion pounds over the next five years on nuclear security. The announcement comes despite the American President declaring nuclear weapons were the 'greatest danger' to US people during his State of the Union address on Wednesday.

And it flies in the face of Obama's Nobel Peace Prize, awarded to him in October for 'his extraordinary efforts to strengthen international diplomacy and cooperation between peoples'. The Nobel committee was attacked at the time for bestowing the accolade on a new president whose initiatives are yet to bear fruit - which included reducing the world stock of nuclear arms.

The budget is higher than that allocated by George Bush - who was seen by many as a warmongering president in the wake of the Iraq invasion in 2003 - during his premiership. During his 70-minute State of the Union speech on Wednesday, which marked his first year in office, Obama said: 'I have embraced the vision of John F Kennedy and Ronald Reagan through a strategy that reverses the spread of these weapons, and seeks a world without them.'

The Russians made a "top-level approach" to the Chinese "that together they might sell big chunks of their GSE holdings to force the US to use its emergency authorities to prop up these companies," Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said.

Russia's five-day war with US ally Georgia started on August 8, the same day as the opening ceremonies of the Beijing Games. Prime Minister Vladimir Putin told US President George W Bush during those ceremonies that "war has started," according to Dmitry Peskov, Putin's spokesman. "The report was deeply troubling - heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets," Paulson wrote. "I waited till I was back home and in a secure environment to inform the president."

Russia sold all of its Fannie and Freddie debt in 2008, after holding $65.6 billion of the notes at the start of that year, according to central bank data. Fannie and Freddie were seized by regulators on September 6, 2008, amid the worst US housing slump since the Great Depression.

MEND has demanded that residents be given a greater share in profits from oil resources and land. It warned oil companies to prepare for what it called an all-out onslaught against installations and personnel.

In a statement announcing the end of the ceasefire, Mend said that the decision had been taken "after careful consideration and extensive consultation. All companies related to the oil industry in the Niger Delta should prepare for an all-out onslaught," it went on. "Nothing will be spared," it added. Militants have carried out a series of attacks which have cost Nigeria millions in lost revenue over the years.

Ties are already strained by rows over trade and internet censorship. Taiwan and China have been ruled by separate governments since the end of a civil war in 1949. Beijing has hundreds of missiles pointed at the island and has threatened to use force to bring it under its control if Taiwan moved towards formal independence.

Mr He said the arms deal would have "repercussions that neither side wishes to see". "The United States' announcement of the planned weapons sales to Taiwan will have a seriously negative impact on many important areas of exchanges and co-operation between the two countries," Mr He said in a statement published on the foreign ministry website. The statement came after China summoned US Ambassador Jon Huntsman to give a warning about the consequences of the deal and to urge its immediate cancellation.

The Pentagon earlier notified the US Congress of the proposed arms sale, which forms part of a package first pledged by the Bush administration. Friday's notification to Congress by the Defense Security Co-operation Agency (DSCA) was required by law. It does not mean the sale has been concluded. US lawmakers have 30 days to comment on the proposed sale, Associated Press reported. If there are no objections, it would proceed.

Beijing has previously warned the US not to go ahead with arms sales to Taiwan. Ties between China and the US are already strained by rows over trade and internet censorship. The US is the leading arms supplier to Taiwan, despite switching diplomatic recognition from Taipei to Beijing in 1979. Washington regards it as an obligation to provide Taiwan with defensive arms.

Toyota is now witnessing the realization of those fears, caught in a mushrooming recall debacle affecting as many as 8 million cars - a development many say underscores the difficulty of maintaining top-notch quality in a hasty expansion. It may also be the manifestation of the "big-company disease" that Toyota President Akio Toyoda has vowed to quash since taking the helm last June, aiming to restore the company's solid foundation that he said was lost during a decade of rapid global growth.

Toyoda has not commented publicly on the faulty accelerators and floor mats since expressing regret for the deaths of four people in a crash linked to the problems in August last year. "Toyota is the new GM in terms of experiencing quality glitches, over-expansion and the proliferation of new product models," said Dennis Virag, president of Automotive Consulting Group. "Toyota has been too aggressive and perhaps complacent in terms of focus on quality. They can't concentrate on the details with so many models."

The level of attention on Toyota's woes - from consumer groups, media and the government - is also the manifestation of another major fear that Toyota has harbored: that public opinion could be unkind to those at the top. In addition to the recall, Toyota has shut down sales of its best-selling vehicles in North America under pressure from the Obama administration to address the product safety issue, in an almost unheard-of intervention.

"It's quite clear that economic policies are not just a matter of national concern but European concern," Jose Manuel Barroso, European Commission president, told reporters in Brussels. According to high-level EU officials, Greece would in the last resort receive emergency support in an operation involving eurozone governments and the Commission but not the International Monetary Fund.

Eurozone countries and EU authorities are reluctant to spell out how they would assist Greece, for fear that it would relax pressure on Athens to attack its problems and unsettle rattled financial markets. The immediate priority is for Athens to demonstrate that it is serious about cutting public expenditure, improving tax collection, publishing reliable financial statistics and tackling corruption, the officials said. "Greece has to sort this out itself. That is the issue," a French official said.

His message was echoed by Jose Luis Rodriguez Zapatero, Spain's prime minister, who said: "The euro club is a strong club with strong ties and reciprocal support. Let no one be mistaken about that."

Heavy debts will weigh on governments and households in the US and Europe for some time, while hopes for global growth will continue to rest on fast-developing countries such as India and China, predicted participants at the meeting's opening debate on the economy.

As many expected, the debate on regulating big banks also stoked passions. The push for more stringent regulation has accelerated in Europe and around the world since last week, when US President Barack Obama's administration proposed a plan to tax and curb activities of big banks.

The annual gathering of much of the world financial elite in Davos offers a chance to gauge the mood of business, regulators and analysts about the year ahead. Wednesday's debate suggested that while the global economy is growing again, it isn't out of the woods yet.

The world faces a long, slow recovery "ending in subpar growth," with the risk of a renewed recession along the way, said Nouriel Roubini, an economics professor at New York University who accurately predicted the financial crisis in Davos three years ago.

He suggested the nation could once again face north-south conflict and said other areas like Darfur would try to follow the south to independence. Southern Sudanese are due to vote in an independence referendum next year. The vote was agreed as part of a 2005 peace deal which ended a 22-year war between north and south. The BBC's James Copnall, in Khartoum, says it is rare for such a senior official to be so outspoken.

Although the war between north and south ended officially in 2005, tensions and mistrust continue. Some 2,000 people died in ethnic clashes in the south last year - more than in Darfur's low-level conflict. The civil war between the mainly Muslim north and the Christian and animist south claimed the lives of some 1.5 million people.