NOW ONE RESEARCH SHOP IS PREDICTING THOSE LOSSES WILL GET A LOT WORSE. Real Estate Econometrics, a New York-based consulting and analytics firm, predicted Tuesday that delinquencies among commercial real estate mortgages held by banks will surge to 4% by the end of this year. That's after doubling to 3.4% in the third quarter compared with the same period in 2008, the firm said in a report.

THAT COULD PUSH EVEN MORE BANKS TO, OR OVER, THE BRINK. The FDIC disclosed last week that there are 552 lenders on its confidential list of troubled banks, and many of them are there because they're being ravaged by losses on loans to builders that can't fill, or even complete, big commercial real estate (CRE) projects. And here's Bair describing the threat in testimony before Congress in October: "The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending." Indeed, she said, at community banks, CRE MORTGAGES ACCOUNT FOR 43% OF ALL LOANS ON AVERAGE.

UNSURPRISINGLY, IT'S THE MORTGAGES THAT ORIGINATED IN 2006 AND 2007, JUST AS THE REAL ESTATE BUBBLE was beginning to deflate, that are showing the greatest signs of stress, Real Estate Econometrics' report said. But if the firm's snapshot of present conditions in the CRE world is sobering for financial executives, investors and customers, the outlook over the next couple of years must be like a bucket of ice water in the face. REAL ESTATE ECONOMETRICS PREDICTS CRE DELINQUENCIES WON'T PEAK UNTIL 2011, meaning Bair and Bernanke's top threat to banks won't be going away anytime soon. And that could be the catalyst that PUSHES REGULATORS TO SEIZE MORE OF THOSE 552 BANKS ON THE BRINK - or push that number even higher.

Israeli daily Haaretz on Tuesday (1 December) published a leaked copy of a draft statement on Israel to be adopted by EU foreign ministers next week. The text - which is likely to undergo changes during internal EU discussions in the run-up to the ministerial meeting - said that peace talks should lead to: "an independent, democratic, contiguous and viable state of Palestine, comprising the West Bank and Gaza AND WITH EAST JERUSALEM AS ITS CAPITAL."

"THE EUROPEAN UNION WILL NOT RECOGNISE ANY CHANGES TO THE PRE-1967 BORDERS," it added, in reference to Israel's occupation of East Jerusalem and parts of the West Bank following the so-called Six Day War.

The draft statement comes amid ongoing expansion of Israeli settlements on occupied Palestinian land under the current right-wing government of Benjamin Nentanyahu, in a process creating facts on the ground which are likely to complicate a two-state solution.

Open Europe's Lorraine Mullally is quoted in the Express saying, "As of today, there is virtually no area of policy the EU cannot now touch. UNACCOUNTABLE, UNELECTED EU POLITICIANS AND JUDGES HAVE SWEEPING NEW ­POWERS over everything from our criminal justice systems to asylum ­policy."

Jo Leinen, a senior German Social Democrat MEP said the day was a "DAY OF JOY" FOR THOSE WHO WANTED TO BUILD A FEDERAL UNITED STATES OF EUROPE. "The Lisbon Treaty is better than reported, with it Europe is going forward towards political union," he said. However, German daily Die Welt questions whether the Treaty will make the EU more democratic and efficient. The text of the Treaty is described as being: "cold, technical, curt and only comprehensible to experts". The article notes that the increase in qualified majority voting will mean that member states have less opportunity to block measures they do not want.

El Mundo's Brussels correspondent María Ramírez reports that the introduction of the Treaty saw the staff of the EU institutions react with "disenchantment, discretion and a certain confusion." In an opinion piece in El País columnist Andreu Missé notes that the Lisbon Treaty includes about 95% of the content of the original Constitution rejected in 2005. THE MAIN DIFFERENCE IS THAT THE TEXT OF THE LISBON TREATY IS "PRACTICALLY UNINTELLIGIBLE."

Comments made yesterday by Nicolas Sarkozy have added to fears that the proposed architecture, in combination with the appointment of French protectionist Michel Barnier as the next Internal Market Commissioner, will damage the City of London. Sarkozy said yesterday: "Do you know what it means for me to see for the first time in 50 years A FRENCH EUROPEAN COMMISSIONER IN CHARGE OF THE INTERNAL MARKET, including financial services, INCLUDING THE CITY [OF LONDON]? I want the world to see the victory of the European model, which has nothing to do with the excesses of financial capitalism".

Dutch daily NRC reports that "the British are so angry about Sarkozy's triumphalism that they are blocking negotiations on EU banking supervision... The atmosphere has been so poisoned that the British, who think that supervision damages their City, have stormed out of the negotiations, according to an eye witness".

Writing in the Times, Alistair Darling argues, "We must resist measures, however superficially alluring, that could undermine the effective functioning of our cherished single market. National supervisors, such as the FSA, must remain responsible for supervising individual companies. Making companies directly accountable to more than one authority is a recipe for confusion."

Under the Lisbon Treaty, which came into force today, (1st December) it acquires "legal personality", which GIVES IT THE RIGHT TO SIGN ACCORDS AND TREAT WITH OTHER STATES. Nor is this right simply theoretical: the EU now has a foreign minister, a diplomatic corps (the European External Action Service) and 160 overseas embassies.

The EU could not annex additional policy areas without a new treaty, which needed to be ratified by all its constituent nations. Now, it has the so-called "passerelle" clause, or self-amending mechanism. PARLIAMENT, IN OTHER WORDS, NO LONGER HAS THE FINAL SAY ON EXTENSIONS OF EU JURISDICTION. The EU derives its authority, not from its 27 members, but from its own foundational texts.

UNTIL THE END OF NOVEMBER, BRITAIN COULD SIMPLY HAVE WALKED OUT of the EU by abrogating the Treaty of Rome and repealing the 1972 European Communities Act. Henceforth, it will have to go through the secession procedure laid down in Lisbon. In other words – in the minds of Euro-lawyers, at any rate, if not of British constitutionalists – the EU gets to settle the terms on which its members are allowed to leave. FORMAL SOVEREIGNTY HAS BEEN SHIFTED FROM THE NATIONAL CAPITALS TO BRUSSELS.

It is appalling, demeaning, disgraceful that such a thing should have been done WITHOUT POPULAR CONSENT, AND IN THE ABSENCE OF THE REFERENDUM that all three parties had promised.

MANY OF THE FIRM'S 30 EMPLOYEES ARE NOT YET 25. They were hired straight from college to ensure their thinking and work habits are untainted. Now they're making Wall Street's latest fortune, a fraction of a penny at a time. HIGH-FREQUENCY TRADING NOW ACCOUNTS FOR 60 PERCENT OF TOTAL US EQUITY VOLUME, and is spreading overseas and into other markets. These traders stand ready to buy and sell shares at all times, providing the liquidity that keeps markets moving. As a result, trading is now cheaper and easier than ever.

Yet critics worry fast trading may undermine the integrity of the US equity market, a bastion of capitalism and corporate America, AND COULD EVEN SPARK ANOTHER FINANCIAL CRISIS. They also complain about the money high-frequency firms are making - and how they are making it. During last year's plunge, many high-frequency traders earned 10 times their usual profits, executives at several of the proprietary firms told Reuters.

Lotus Capital Management LP of New York earlier this year realized that a competitor was beating it to a trade it had programed by exactly 3 MICROSECONDS, day after day. The loss meant Lotus was forfeiting about $1,000 in daily revenue on that particular trading strategy. They invested and tinkered, eventually shaving 5 MICROSECONDS from the router and 2 MICROSECONDS from the execution server.

The head trader of a European money manager with more than $100 billion in assets said high-frequency traders profit through pattern recognition software to anticipate a trade. "IT'S A CERTAIN KNOWLEDGE OF WHAT'S COMING. It's not like they're guessing what's going to happen, they're not speculating," said the trader, who spoke on the condition of anonymity. And he added emphatically: "THEY KNOW."

RISING COMBAT DEATHS AND MILITARY COSTS HAVE SAPPED US PUBLIC SUPPORT FOR THE 8-YEAR-OLD WAR and Obama's 30,000-strong troop increase plan has prompted protests from left-leaning leaders of his Democratic Party ahead of next year's congressional elections. Speaking to his commanders by videophone, McChrystal promised a dramatic change in strategy, faster training of Afghan troops and renewed emphasis on winning public support for the Afghan government.

In his televised speech on Tuesday, Obama said the goal of raising US troop levels to nearly 100,000 was to step up the battle against the Taliban, secure key centres and train Afghan forces so they can take over, allowing for a US withdrawal. Allies were also expected to send more soldiers, with Obama saying "THE COMMON SECURITY OF THE WORLD" WAS AT STAKE.

Key congressional committees scheduled back-to-back hearings on Wednesday and Thursday to review Obama's revised war strategy, ESTIMATED TO COST $30 BILLION (18 billion pounds) this fiscal year. As commander-in-chief, Obama has the authority to send the soldiers but Congress must approve the cost. Mounting war costs have taken centre stage because of unease about the US national debt of nearly $12 trillion and DEMANDS ON THE GOVERNMENT FROM HELP FOR THE STRUGGLING ECONOMY and a proposed healthcare overhaul.

"The cost of this is astronomical," said Republican Representative Walter Jones. Representative Dave Obey, who chairs the House committee in charge of approving government spending, said a long-term commitment to the Afghan war could cost $500 billion to $900 billion over the next decade, WHICH COULD "DEVOUR OUR ABILITY TO PAY FOR THE ACTIONS NECESSARY TO REBUILD OUR OWN ECONOMY."

Inhofe said the recent disclosure of emails between several prominent climatologists reveal "POSSIBLE DECEITFUL MANIPULATION OF IMPORTANT DATA and research used by the US Global Change Research Program" and the UN's Intergovernmental Panel on Climate Change."

He suggested "A POSSIBLE CONSPIRACY BY SCIENTISTS, some of whom receive or have received US taxpayer funds, to stifle open, transparent debate on the most pressing issues of climate science." Inhofe also noted that there appeared to be "A CAMPAIGN TO VILIFY SCIENTISTS WHO QUESTION GLOBAL WARMING ALARMISM."

The controversy "could have far-reaching policy implications," Inhofe wrote, "affecting everything from (to name a few) cap-and-trade legislation, state and regional climate change programs," and the Section 202 (a) of the EPA's Clean Air Act – policies that "WILL LEAD TO A TORRENT OF NEW FEDERAL REGULATIONS THAT WILL DESTROY THOUSANDS OF JOBS and make ELECTRICITY AND GASOLINE MORE EXPENSIVE for consumers and small businesses."

In August, a blaze which became known as the Station Fire burned more than 650 sq km (250 square miles) of the Angeles National Forest. Two fire fighters were killed and 89 homes were destroyed. The fire, the biggest in Los Angeles County history, took over a month to fully contain. "A fire is a force of nature that most people can't comprehend," says retired firefighter Captain Jim Wilkins. "The sheer energy that's coming at you, the heat, and the sound - the sound alone is terrifying."

Traditionally, the California fire season has occurred in the final few months of the year. Vegetation is dry after the long hot summer and fast-moving, hot winds, known as Santa Ana winds, blow through the canyons from the Great Basin to the Pacific. BUT IN RECENT YEARS THE SEASON HAS BECOME A YEAR-ROUND PHENOMENON.

The wildfires are fuelled by a build up of highly flammable vegetation which is critically low in moisture after a decade of drought. The prevailing conditions generate a perfect storm. WILDFIRES COST CALIFORNIA IN EXCESS OF A $1BN (£600M) EVERY YEAR. The escalating cost of the firefighting effort comes at a time when THE STATE IS TACKLING A HUGE FISCAL CRISIS, with many public sector workers being laid off.

The vote came a day after the opposition Liberal Party ousted leader Malcolm Turnbull, who had promised to back the bill. Deputy PM Julia Gillard said the bill would be resubmitted next year. Prime Minister Kevin Rudd had hoped to have the legislation passed by next week's Copenhagen summit on climate change.

The Liberals went on to oppose the bill and it was voted down by 41 votes to 33 in the Senate. Analysts had suggested Mr Rudd could use the rejection of the bill as a legal trigger for a snap election - after which the bill could be passed at a special joint session of parliament.

The ETS is part of a package aimed at reducing Australia's carbon emissions by up to 25% below 2000 levels by 2020. Australia has the highest per-capita carbon emissions among developed nations and coal is its biggest export. But some lawmakers QUESTION THE SCIENTIFIC CASE FOR GLOBAL WARMING and say that the ETS WILL DAMAGE AUSTRALIA'S ECONOMY.

He said national regulators such as the UK's Financial Services Authority must retain their supervisory roles. A debate on the extent of EU regulation comes as FRANCE'S MICHEL BARNIER STARTS AS SINGLE MARKET COMMISSIONER. In a speech on Tuesday, French President Nicolas SARKOZY SUGGESTED MR BARNIER'S APPOINTMENT HERALDS THE VICTORY OF THE EUROPEAN MODEL.

Mr Darling is expected to warn other EU finance ministers HE WILL NOT ACCEPT NEW POWERS FOR EUROPEAN AUTHORITIES to take decisions on future bail-outs for which British taxpayers might have to pick up the bill. In the Times he writes: "Regulatory reform throughout the world is imperative, and Europe, home to the world's largest single market in financial services, has a particular responsibility."

He said: "We must resist measures, however superficially alluring, that could undermine the effective functioning of our cherished single market. National supervisors, such as the FSA, must remain responsible for supervising individual companies. Making companies directly accountable to more than one authority is a recipe for confusion."

Under the First Click Free programme, PUBLISHERS CAN NOW PREVENT UNRESTRICTED ACCESS TO SUBSCRIPTION WEBSITES. Users who click on more than five articles in a day may be routed to payment or registration pages. "Previously, each click from a user would be treated as free," Google senior business product manager Josh Cohen said in a blog post.

"NOW, WE'VE UPDATED THE PROGRAMME SO THAT PUBLISHERS CAN LIMIT USERS TO NO MORE THAN FIVE PAGES PER DAY without registering or subscribing." Media tycoon Rupert Murdoch had earlier accused firms such as Google of profiting from journalism by generating advertising revenue by linking readers to newspaper articles.

BBC technology correspondent Rory Cellan-Jones said the concession was relatively minor but Mr Murdoch might see it as vindication of his decision to take on Google. Google users may start seeing registration pages appear when they click for a sixth time on any given day at websites of publishers using the program, according to Mr Cohen.

Sceptics claim the e-mails, leaked after a UEA server was hacked into, showed data was being manipulated. The hacking of the computer is being investigated by Norfolk Police. The files stolen from the computer include documents, detailed data and private e-mails exchanged between leading climate scientists.

Professor Jones said he would stand aside as director until the completion of the independent review. It is being conducted in the wake of the allegations by climate "sceptics". The material was taken from servers at the world-renowned research centre before it was published on websites run by climate change sceptics.

Many watching the high-stakes roll of the dice shudder at the thought that nearly 5,900 rooms in three hotels will be awaiting guests when CityCenter's crown jewel - the 4,004-room Aria Resort & Casino - opens December 16. That will increase Las Vegas' already saturated inventory by more than 4 percent at a time when fewer visitors are coming and room prices have fallen 25 percent from last year.

CityCenter's debut might pull rates even lower, but state leaders hope the complex leads Nevada out of two years of economic misery that has hit the state with record unemployment, foreclosures and bankruptcies. A record 39.2 million visitors came to Sin City in 2007, but that dropped to 37.5 million last year as the recession kept many people away.

Sin City's rapid growth came to a halt, crippling casinos and construction, the state's two largest industries. Nevada's unemployment hit a record 13.3 percent in September. MGM MIRAGE AND DUBAI WORLD each have billions in debt, and Dubai World last week asked creditors for a six-month break from payments on the $60 billion it owes creditors.

The result is 18 million square feet in six soaring glass towers and a retail promenade, all built to give visitors a sense of its enormous scale. MGM Mirage and Dubai World hired 12,000 workers from a pool of 175,000 applicants, calling it the largest employment opportunity in the US this year. However, the end of construction at CityCenter will mean about 10,000 laborers must find other projects - something nearly impossible in Las Vegas these days.

The photo, taken in Kandahar, provides more evidence to claims that unidentified drones are flying over Afghanistan, to go along with well-known models - such as the Predator UAV - long acknowledged by the Pentagon. A vexing question remains, though: What's it being used for?

UAVs, once an esoteric military weapon, have grown in use and prominence in recent years, particularly in the CIA's expanded "drone war" in Pakistan. Confirmation of this new, secret UAV, however, raises the intriguing question of WHETHER THE PUBLIC IS STILL ENTIRELY IN THE DARK ABOUT SOME ASPECTS OF THIS MILITARY STRATEGY.

While earlier reports speculated the mystery aircraft could be an armed drone, the new photographic evidence seems to point to a stealthy spy plane with surveillance and communications equipment. But that still leaves other questions. "WHY USE A STEALTH AIRCRAFT AGAINST AN ADVERSARY THAT DOESN'T HAVE RADAR?" Sweetman asks. It may take the Pentagon to provide those final answers.