California faces thousands of job cuts and deep spending cuts to state health, education and other services as the nationwide economic slump has reduced tax revenues. On Wednesday, voters soundly defeated ballot measures to bolster the state's finances, leaving Governor Arnold Schwarzenegger and lawmakers facing a budget gap of more than $21 billion.

Early Thursday, US Treasury Secretary Timothy Geithner during testimony before a House of Representatives Appropriations subcommittee, said the Treasury was not able to tap the $700 billion Troubled Asset Relief Program for bank bailouts to help California. Last week Schwarzenegger said the government of the most populous state in the United States faced a shortfall of $15.4 billion for its next fiscal year even if voters approved fiscal ballot measures in Tuesday's special election, underscoring the severe downturn in state revenue amid recession and double-digit unemployment.

With the measures defeated, California now faces a $21.3 billion deficit, according to Schwarzenegger, who with the state's Democrat-led legislature put the measures to voters as part of a February budget compromise to close a nearly $42 billion shortfall through June 2010. "The public is under the delusion that they can have everything - potholes filled, new freeways, a good education system - but they aren't willing to pay for it... A LOT OF CRITICAL SERVICES ARE GOING TO BE CUT AND THERE WILL BE SERIOUS CONSEQUENCES," said Jim Hawley of the Elfenworks Center for the Study of Fiduciary Capitalism at St Mary's College of California.

He also said that "UNTIL THE PRICE OF HOMES FLATTENS OUT WE STILL HAVE A VERY SERIOUS POTENTIAL MORTGAGE CRISIS." Greenspan's comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators' stress tests on the 19 biggest U.S. lenders. Treasury Secretary Timothy Geithner told lawmakers yesterday that banks have issued more than $56 billion in new stock or debt since the tests found 10 firms needed to raise about $75 billion.

A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief, who left the central bank in 2006, said that the continued slump in home prices is putting at risk millions of borrowers.

"WE'RE ON THE EDGE and if this thing doesn't get resolved quickly I'm worried," he said before a meeting with House of Representatives members on financial regulation that was organized by the Washington-based Bipartisan Policy Center.

The men were held on Wednesday night while attempting to carry out a plot to bomb two synagogues in the Bronx and use stinger missiles to shoot down military planes near an Air National Guard base in Newburgh. "The defendants wanted to engage in terrorist attacks. They selected targets and sought the weapons necessary to carry out their plans," Lev Dassin, acting US attorney for the Southern District of New York, said in a statement.

The four men, named by police as James Cromitie, David Williams, Onta Williams and Laguerre Payen, were arrested after buying inactive missiles and inert explosives in a sting operation run by the FBI and other government agencies. They are accused of planning to detonate explosives near a synagogue in the Riverdale section of New York's Bronx borough and to shoot down planes located at New York's Air National Guard base at Stewart airport in Newburgh, New York some 70 miles north of New York City.

All four are charged with one count of conspiracy to use weapons of mass destruction within the United States, which carries a maximum penalty of life in prison, and one count of conspiracy to acquire and use anti-aircraft missiles, which also carries a maximum penalty of life in prison.

CREDIT RATINGS ARE CRUCIAL AS THEY HELP DETERMINE THE COST OF BORROWING. It came as data confirmed that new government borrowing has soared, to a record of almost £8.5bn in April. The Office for National Statistics (ONS) said public sector net borrowing rose to £8.46bn this April compared to £1.84bn in the same month last year.

Government coffers have been hit by higher social benefits payments and lower tax receipts as the economy was hit by the slowdown. The ratings agency said THAT THE UK'S PUBLIC FINANCES WERE DETERIORATING RAPIDLY, "at a faster rate than Standard and Poor's had previously assumed."

Standard and Poor's said the UK's triple-A rating was at risk without a credible plan to put its debts on a "secure downward trajectory" by the next government. S&P said that government debt could reach 100% of GDP by 2013 - a level it said was incompatible, if sustained, with the top credit rating. Currently, public debt is 53% of GDP, according to the latest ONS figures. The new outlook for the UK could lead to higher borrowing costs if it makes international investors less likely to buy UK Treasury bonds.

Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway. "WE LONG WARNED ABOUT THE DAY OF RECKONING FOR THE DOLLAR EMERGING AT THE NEXT ECONOMIC RECOVERY," Mr. Laidi said in a note. Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation.

Concern has been mounting that the increasing U.S. debt load, as well as A POTENTIAL INFLATION TIME BOMB in the form of the quantitative easing, could drag down the greenback. Garnering attention is the risk the UNITED STATES COULD LOSE ITS TRIPLE-A SOVEREIGN CREDIT RATING, which reflects the chance of the borrower defaulting on its debt.

"By many measures, THE U.S. APPEARS JUST A FEW SHORT STEPS AWAY FROM LOSING ITS COVETED TRIPLE-A STATUS, unless the recovery turns out to be considerably stronger than expected and the fiscal repair is faster than commonly expected," said Douglas Porter, deputy chief economist at BMO Capital Markets. "A downgrade could boost the cost of funding U.S. debt at the margin, but underlying inflation and fiscal fundamentals will ultimately be the primary driver."

However, he said a big threat lurked in the country's expanded monetary base, which now stands at about US$1.8-trillion. While the expanded monetary base was needed to feed economic growth and ward off deflation under the Fed's quantitative easing plan, Mr. Ashworth said SUCH HIGH LEVELS COULD FUEL RAMPANT INFLATION ONCE BROADER MONETARY CONDITIONS IMPROVED. He said it remained to be seen how much success the Fed will have when it decides to end its quantitative-easing plan and shrink the monetary base

Ron Dermer spoke to The Associated Press after Netanyahu and his entourage arrived home from Washington. He denied that he meant that the two-state concept itself childish and stupid, as he was quoted earlier as saying in an anonymous briefing to journalists on the plane carrying Netanyahu home. "I told reporters that the focus by the media on the concept of solving the Israel-Palestinian issue through a two-state solution is childish and stupid, but I deny that I described the idea that way," he said.

During his trip to Washington, Netanyahu constantly tried to shift emphasis from Israeli-Palestinian peacemaking toward the threat posed by Iran's nuclear program. He and Obama publicly disagreed about the relative weight of the two issues. Netanyahu argued that reining in Iran would spur peace efforts, while Obama felt that progress toward peace between Israel and the Palestinians would undermine extremist elements, including Iran.

In a brief statement at Israel's airport on his return, Netanyahu again began with Iran, mentioning the Palestinian issue as third on his list. Referring to his talks with Obama, Netanyahu said, "There was an agreement that we need to immediately begin the peace process, I said I am willing to open peace talks with the Palestinians, by the way with the Syrians as well, of course without preconditions, but I made it clear that in any peace agreement there must be a solution to Israel's special security needs."

He also said that Arab nations should be brought into the peacemaking process, "meaning not only does Israel need to contribute and the Palestinians contribute, but Arab states need to make concrete contributions already at the beginning of the process."

Government inspectors failed to stop beatings, rapes and humiliation. John Walsh, of Irish Survivors of Child Abuse, said he felt "cheated and deceived" by the lack of prosecutions. The findings will not be used for criminal prosecutions - in part because THE CHRISTIAN BROTHERS SUCCESSFULLY SUED THE COMMISSION IN 2004 TO KEEP THE IDENTITIES OF ALL OF ITS MEMBERS, DEAD OR ALIVE, UNNAMED IN THE REPORT. No real names, whether of victims or perpetrators, appear in the final document.

More than 1,000 people had told the commission they suffered physical and sexual abuse. The five-volume study concluded that church officials encouraged ritual beatings and consistently shielded their orders' paedophiles from arrest amid a "culture of self-serving secrecy". The commission found that sexual abuse was "endemic" in boys' institutions, AND CHURCH LEADERS KNEW WHAT WAS GOING ON.

His conclusion, published in the British Medical Journal and backed by other experts, is based on a review of 147 studies, involving 464,000 people. However, the Stroke Association warned the drugs could have side-effects. Professor Law, an expert in epidemiology at the Wolfson Institute at Barts and The London School of Medicine, said: "Beyond a certain age, we're saying everyone would benefit from taking drugs that lower blood pressure.

"Beyond a certain age, we all have high blood pressure and we would all benefit from lowering it. What we call 'normal' blood pressure is actually high, and what we call high blood pressure is actually higher." Professor Law said the universal use of blood pressure drugs should be seen as analogous to vaccinating the entire population in the event of a flu pandemic. There was no case for trying to assess who was a top priority, he said, when everybody was potentially at risk.

Mike Rich, of the Blood Pressure Association, said: "Prevention is better than cure, but there are other proven ways to prevent high blood pressure such as healthy eating and regular exercise, which have other health benefits too. "There is a danger that these important lifestyle factors could be overlooked in favour of 'popping a pill'."

Professor Alan Maryon-Davis, president of the Faculty of Public Health, said: "Mass medication turns us all into patients and I don't think it's the best approach. A far healthier way is for us to reduce our risk and increase our wellbeing by consuming less salt and alcohol and taking more regular exercise."

Workers there say an agreement to offer jobs to local workers has been broken. Similar walkouts took place in January after a Lincolnshire refinery gave a £200m contract to an Italian firm. The latest dispute began when workers at the liquefied natural gas terminal in Milford Haven, Pembrokeshire, accused their bosses of breaching an agreement to employ British staff at the South Hook site.

Union shop steward Jason Smith said a contracting firm's decision to only employ Polish labour for a phase of work had got "everybody's backs up". "The only reason we're here is they [the workers] all feel let down. The site agreement has always been local and British labour first," he said. Talks between the workers and contractors have taken place and are expected to continue later in a bid to resolve the row. Meanwhile, sympathy strikes are continuing in other parts of the UK.

"As we work closely with our democratic ally, Israel, we must take into account the risks it will face in any peace agreement," 76 OF THE 100 SENATORS WROTE OBAMA in a letter released to reporters. "Without a doubt, our two governments will agree on some issues and disagree on others, but the United States friendship with Israel requires that we work closely together as we recommit ourselves to our historic role of a trusted friend and active mediator," they wrote.

Democratic Senators Christopher Dodd and Arlen Specter as well as Republican Senators Johnny Isakson and John Thune were the lead authors of the letter, which came one day after Obama met with Israeli Prime Minister Benjamin Netanyahu. "While the obstacles are formidable, we agree with you that every effort should be made to realize that peace," the lawmakers wrote Obama.

"We must also continue to insist on THE ABSOLUTE PALESTINIAN COMMITMENT TO ENDING TERRORIST VIOLENCE and to building the institutions necessary for a viable Palestinian state living side-by-side, in peace with the Jewish state of Israel," they said. "The more capable and responsible Palestinian forces become, the more they demonstrate the ability to govern and to maintain security, the easier it will be for them to reach an accord with Israel," they said, urging Obama to sustain programs of US security assistance and training for the Palestinians.

The senators also urged Obama to "promote far greater involvement and participation by the Arab states both in moving toward normal ties with Israel and in encouraging moderate Palestinian elements. Everyone in the region has a stake in the success of these negotiations and should contribute to a lasting and comprehensive resolution," they wrote.

The announcement will not reassure the U.S. government, coming just two days after President Barack Obama declared a readiness to seek deeper international sanctions against Iran if it shunned U.S. attempts to open negotiations on its nuclear program. Obama said he expected a positive response to his outreach for opening a dialogue with Iran by the end of the year.

"Defense Minister (Mostafa Mohammad Najjar) has informed me that the Sajjil-2 missile, which has very advanced technology, was launched from Semnan and it landed precisely on the target," state radio quoted Ahmadinejad as saying. He spoke during a visit to the city of Semnan, 125 miles east of the capital Tehran, where Iran's space program is centered.

Iran's nuclear and missile programs have alarmed Israel, and the country's new prime minister, Benjamin Netanyahu, pressed Obama to step up pressure on Tehran when the two met in Washington on Monday. Ahmadinejad has repeatedly called for Israel's elimination, and the Jewish state has not ruled out a military strike to deal with the Iranian nuclear threat.

Analysts remain optimistic that China will be the first to make its way out of recession. For those Chinese factory owners who send most of their products abroad, there is little relief in these latest trade figures. Some had hoped the worst was over for exporters, but the 22.6% fall was greater than many analysts had expected. On the other hand, investment in industrial plants and property in cities was 30% higher in the first four months of the year than it had been in the same period of 2008.

In recent months, the government has encouraged banks to lend huge amounts to businesses to help them get through the downturn. That money has being spent on new equipment as well as massive infrastructure projects.

Japan's economy, which depends heavily on exports, has been hit hard by the global downturn. But economists predict a modest growth in the coming months, after a small rise in production in March. The figures from the Cabinet Office show that this is the fourth quarterly fall in gross domestic product (GDP) in a row, after a 3.8% contraction between October and December 2008.

The BBC's Roland Buerk in Tokyo says people around the world are buying fewer of the cars and electronic gadgets that Japan is renowned for. In the first quarter of this year, Japanese exports declined by 26%. "Weakness in the corporate sector is gradually spreading to households," Prime Minister Taro Aso said during a budget hearing to Parliament. "This is a very serious situation, so we need to respond appropriately."

The potential threat is detailed in a study appearing in the journal LANCET INFECTIOUS DISEASES. The researchers, from Emory University School of Medicine in Atlanta, say death rates following infection may be higher than 50%. They warn the emergence of swine flu could intensify the problem, as CA-MRSA appears to strike people who are already ill with flu.

MRSA infections can range from boils to more severe infections of the blood, lungs and sites of surgery. Most occur in healthcare settings, such as hospitals or nursing homes. But the latest study warns that community-acquired cases are beginning to increase. Writing in the journal, the researchers said: "Community-acquired MRSA infections are no longer restricted to certain risk groups or to the geographic areas where outbreaks first occurred. They now occur widely both in the community as well as health care facilities and have been reported on every continent."

Professor Richard James, of the University of Nottingham, said: "The threat from CA-MRSA in the USA is very serious concern, especially if there is a flu epidemic as this could trigger a large number of cases of necrotizing pneumonia, which has a mortality rate of more than 50% in 72 hours. The concern is that this may be the start of an exponential increase as we saw with hospital MRSA infections in the 1990s. It took the UK 13 years to get to grips with hospital-acquired MRSA infections, WE ARE NOT EQUIPPED TO DEAL WITH LARGE NUMBERS OF CA-MRSA INFECTIONS IN THE COMMUNITY."

The Commons Fees Office, which approved the expenses claims that have brought the political system into gross disrepute, will be abolished. Gordon Brown said that Westminster would no longer operate like a gentlemen's club, making its own rules, and said that the moves would change centuries of history for Parliament. MPs' pay is set by the Senior Salaries Review Body and a new body will police expenses and enforce discipline. The Conservatives and Liberal Democrats are backing the plans in principle.

Mr Brown spoke after Mr Martin became the first Speaker in 300 years to be hounded out of office. In a 33- second speech, he said that he would relinquish the post on June 21 and the Commons would elect his successor the next day. A by-election in his seat of Glasgow North East is expected in July. His fate was sealed on Monday when he made a statement about expenses reform without referring to his own future, and was told directly by several MPs that he should quit.

The astonishing scenes destroyed his authority and by evening he had decided to go. A key moment came when Mr Brown went to see him in his office after the Commons debacle. While not telling him to go, it is believed that the Prime Minister said enough to confirm to Mr Martin that he no longer had his personal backing.