"To be sure, the UK suffers from some of the adverse factors cited by S&P to justify the euro-area downgrades," London-based Citigroup analysts Michael Saunders and Mark Schofield said in a note to clients today. "Nevertheless, in other respects, we think the UK's ability to return to fiscal sustainability is significantly better than most" euro-region governments.

Germany was left with the euro area's only stable AAA rating at S&P after the ratings company cut nine sovereigns on January 13. Citigroup said the UK will retain its rating and "not be placed on negative watch or negative outlook" because of the government's commitment to reducing the budget deficit and the nation's flexible monetary policy.

Citigroup also said the UK faces less risk of having to support euro-area countries and banks ensnared in the region's debt crisis. At the same time, the British government's proposals to protect UK lenders' consumer units will limit its liabilities to backstop them against other losses.

"Nevertheless, of course, the UK's AAA rating would be vulnerable if the economic outlook for 2012-13 proves far worse than we currently expect," the analysts said, adding that the next hurdle will be Chancellor of the Exchequer George Osborne's budget in March.

Numerous Internet companies engaged in a "blackout" protest Wednesday against two anti-piracy bills, SOPA and its counterpart in the Senate, the PROTECT IP Act (PIPA). The bills are supported by the RIAA, MPAA and countless other creative and business organizations. A handful of leading Internet sites are showing that fear is a great motivator. The logo on Google's home page is covered by a black rectangle. Following the link takes the reader to an "End Piracy, Not Liberty" page with information on the bills and an online petition.

At Wikipedia, a black welcome screen asks the visitor to "Imagine a World Without Free Knowledge" and warns that Congress is "considering legislation that could fatally damage the free and open Internet." The page offers a zip code-lookup that returns the contact information of a visitor's local representatives.

Craigslist's home page contains the questionable warning that "News Corp, RIAA, MPAA, Nike, Sony, Comcast, VISA & others" want a world without Craigslist, Wikipedia and Google. A page with information about SOPA contains the dubious charge that neither SOPA nor PIPA contain provisions for judicial oversight or due process.

Other companies taking part in Wednesday's protest are WordPress, Reddit and Mozilla. Some of the bills' opponents - such as Facebook, Twitter, Yahoo! and LinkedIn - decided not to disturb their users' experiences for the sake of the protest. The one-day protest is likely to rally even more opposition to the anti-piracy bills that had previously enjoyed widespread support in both houses of Congress.

According to the Saudi Jidda News, the agreement will seek joint development of "atomic energy for peaceful purposes, which will help to meet the kingdom's rising demand for energy and cut its growing dependence on depleting resources." The agreement was signed by King Abdullah and Chinese Prime Minister Wen Jiabao and followed earlier public remarks by a senior Saudi prince who said the country should develop nuclear weapons to counter rival Iran's nuclear arms.

Former Saudi intelligence chief Prince Turki al-Faisal said December 5 that "our efforts and those of the world have failed to convince Israel to abandon its weapons of mass destruction, as well as Iran... Therefore it is our duty toward our nation and people to consider all possible options, including the possession of these weapons."

The administration's argument against Iran's reason for developing nuclear energy - that Tehran has enough oil to produce electrical power for a century - also would apply to Saudi Arabia. Saudi Arabia holds some of the largest oil reserves in the world and is China's main supplier of crude oil. Saudi Arabia last year held talks with the Obama administration on US nuclear cooperation and reached a deal for nuclear development with South Korea in November.

Israeli defence minister Ehud Barak earlier said in Jerusalem on Wednesday that his country was not even close to deciding to attack Iran and believed that a military option remained "very far away". Lavrov warned of the "severest" consequences of an attack that he warned would spark a regional refugee crisis and incite inter-communal tensions in the region. "I have no doubt in the fact that it only add fuel to the fire of the still-simmering Sunni-Shiite conflict. And I do not know where the subsequent chain reaction will end."

He added that punitive sanctions aimed at winning more transparency from Iran had "exhausted" themselves and only hurt the chances of peace. "Additional unilateral sanctions against Iran have nothing to do with a desire to ensure the regime's commitment to nuclear non-proliferation," Lavrov told reporters at an annual briefing outlining Russia's foreign policy views. "It is seriously aimed at suffocating the Iranian economy and the well-being of its people, probably in the hope of inciting discontent."

His comments came as EU diplomats closed in on a July date for a full oil embargo that would suit nations such as Italy with a strong reliance on Iranian supplies.

Tehran likely would employ a mixed game plan against the US military consisting of "advanced technology" and "guerilla tactics," according to a research organization with close ties to the Pentagon. Before that, Iran would first lean hard on weaker Middle Eastern nations to convince those states to deny Washington access to bases on their soil, it states.

Some of the report's grimmer scenarios predict Iranian ballistic missile launches on Gulf cities in an attempt to convince other nations to resist providing support to an American military operation. The report also forecasts efforts by Tehran to use Shiite Muslim "proxy groups" to attack US allies in the region. Similar groups plagued the US-led war effort in Iraq for years, and some officials and experts said some acted with Tehran's backing.

Anthony Cordesman, a Pentagon adviser, acknowledged Iranian officials might give some kind of support to extremist groups in a place like Yemen. But he cast doubt on the likelihood that Iran would fire missiles at Gulf cities, or if its missiles would even work. "Iran is much more likely to look at this and realize when you see this type of exchange, you ignore the fact that there are no rules as to how the US and others would respond," said Cordesman, a senior analyst at the Center for Strategic and International Studies.

The violent rallies began last week over a highly unpopular health bill which has since been withdrawn. Night and day, people come to scream their defiance. Biting austerity and a feeling the government is not listening have spilled over into anger, even violence.

Meanwhile, the government is shrugging off responsibility, saying international economic conditions are to blame for the country's woes. "Let's not forget that we're in the eye of a storm, of an economic European storm. All around us, unfortunately, is a mighty tempest with economic consequences that inevitably affect us too," laments the country's Prime Minister, Emil Boc. "Not good enough," say the opposition, who argue, of course, that they could do better. "Every day this corrupt, inefficient government stays in power is a day lost for Romania. Our duty is to shorten that period as much as we can and as fast as we can by fair elections," rages Victor Ponta from the opposition Social Democratic party.

Protesters in Bucharest know that economic woes are the foundation of their problem. Pile on top of that corruption, the government's perceived eagerness for harsh austerity, and the widespread feeling that their president views democracy with contempt, and you can see why Romanians want to tear it all down and start again.

Hungarian Prime Minister Viktor Orban only needed a few years. In that short time he managed to turn his country inside out. Civil liberties and press freedoms were reined in, the democratic separation of powers annulled, and a constitution passed in the spirit of the country's former authoritarian-nationalistic leader Miklos Horthy. Hungary is politically isolated in the European Union, and on the verge of national insolvency. And now the European Commission has launched legal action against the country. Brussels sees Orban's constitutional reform as a violation of EU law, and is threatening to deny economic aid to the heavily indebted country.

It's a remarkable development for a country once seen as a model for reform to be emulated by other countries in the region. Orban himself, formerly a much-admired politician, now seems like a dubious mix of Vladimir Putin and Hugo Chavez. But the diminutive politician from the tiny northwestern Hungarian village of Alcsutdoboz is by no means a special case. Orban and his Hungary represent a political movement that is sweeping across central and southern Europe.

A dangerous storm is brewing in the shadow of the euro crisis. The devastating consequences of the 2008 global financial crisis were never fully overcome in Eastern Europe, and more countries in the region are falling into financial and economic imbalance, battling sprawling debt, high budget deficits, recessions and unemployment. But it's not just the fragile economies that are at risk. Many central and southern European societies also lack political and social stability. These regions have two decades of uninterrupted reforms and tough austerity policies behind them. Many people there are exhausted, and democracy fatigue, euroskepticism, and aversion towards the once deified West are on the rise.

"In many respects, it's a process similar to the disillusionment in Eastern Europe with socialism in the 1970s and 1980s," says Hungarian economic scholar and publicist Laszlo Lengyel. "The danger of this is that entire social classes or regions like those in eastern Poland, Slovakia and Hungary fall victim to hopelessness and extremism."

Polls reveal a climate of hate spawned by the right-wing nationalist and extremist discourse of the last few years. For example, nearly two-thirds of Hungarians believe that the influence of Jews is too great in their economy, and that the Roma have a genetic predisposition towards criminality.

The European Commission said on Tuesday it was launching legal action against Hungary for violating EU laws with new legislation that curbs the independence of the national central bank, the data protection agency and the judiciary. Legal proceedings against a member state's laws are rare in the EU, and the Commission's move reflects mounting international concern at the authoritarian policies of the right-wing government of Prime Minister Viktor Orban, and could delay negotiations on an international aid package for Hungary.

"We had hoped that Hungary would have made the necessary changes. This has not been the case so far," said Commission President Jose Manuel Barroso. Hungary has introduced legislation permitting a cabinet minister to participate in meetings of the central bank's monetary council, requiring the council to send the government the agenda of its meetings in advance, and forcing the central bank governor and council members to take an oath of loyalty to the country.

The government has also lowered the retirement age of judges to 62 from 70, in addition to making other changes to the organization of courts. The move has raised suspicions that the government wants to get rid of troublesome judges and state prosecutors. The Commission also said Hungary had breached its rules on the independence of data protection agencies by creating a new National Agency for Data Protection and introducing legislation permitting the government to dismiss the data supervisor.

The launch of what the Commission called "accelerated infringement proceedings" means Hungary must amend the laws in question or be taken before the European Court of Justice.

We find ourselves, said Brok, after rating agency Standard & Poor's recently downgraded the credit rating of nine euro-zone countries late last week, in a conflict akin to a "currency war." The agencies, he went on, are pursuing "Anglo-American political interests." Gysi took things a tiny step further. For him, the "war" against the "European people" has already begun.

But before we all grab for our rifles and helmets to beat down the evil Americans, it makes sense to take a quick look at reality. What actually happened? S&P changed its opinion on the creditworthiness of some euro-zone states and also on the temporary euro bailout fund, the European Financial Stability Facility or EFSF. That France will repay its debt is, according to these analysts, no longer an extremely safe bet. It is merely a pretty safe bet. When it comes to Italy, their doubts are slightly greater and S&P sees Portuguese sovereign bonds as a speculative investment.

Even the criticism over the timing of the downgrades is nonsensical. "Now, of all times!" grumble critics of the ratings agencies, just at a moment when the euro crisis seemed to be slackening. When else, though, should S&P have published its findings? At a point when the financial markets were once again in panic? Had that happened, rating agencies would have been blasted for aggravating an already difficult situation. There is no good time for bad news. It is always unwelcome. And it's also human nature not to want to hear it.

But why are so many people cloaking their fear of bad news in such absurd talk of an Anglo-American conspiracy? It is so simple to lay the blame for Europe's plight on the other side of the Atlantic. The anti-American reflex is still largely intact in large parts of the German population - and can even be used to attract votes.

Many investors were also forced to sell Portuguese bonds after Standard & Poor's downgraded the country to junk on Friday. Other funds sold Portuguese debt after Lisbon was removed from Citigroup's European Bond Index, which these investors track, because of its fall to junk status. All three main credit rating agencies, S&P, Moody's, and Fitch, rate Portugal as junk, below investment grade. In the eurozone, only Greece is also rated junk by all the agencies.

The markets are pricing in a 65 per cent chance that Portugal will default over the next five years, according to credit default swaps as these instruments, which protect investors from default, leapt to record highs this week. Portuguese bond prices have slumped to levels considered by many investors to be in default territory. Bond prices for benchmark 10-year debt were trading at 52 per cent of par, recovering from levels below 50 per cent on Monday.

Elisabeth Afseth, fixed-income analyst at Investec Capital Markets, said: "The growing worry that Greece will default is now hitting Portugal because of contagion fears. If Greece defaults, then the worry is so will Portugal. We have seen how quickly this crisis can spread." Fitch, the rating agency, warned on Tuesday that Greece was likely to default in March when Athens is due to pay 14.5 billion euros in bonds.

The Fitch comments come after Moritz Kraemer, head of Standard & Poor's rating agency's European sovereign ratings unit, said on Monday Greece would default shortly on its debt obligations. Parker said that Fitch believed that even a voluntary agreement by private investors to take a haircut on Greek debt would constitute a default.

"We have said for a long time that we don't think this PSI is the way to go and we would treat it as a default. It clearly is a default, however they try to spin it," he said. Parker said the worst result would would be a disorderly default. "That, would be, for us, the really damaging situation, but one which we are certainly not expecting to happen because, clearly, in a rational situation you would think Greek politicians and European policy makers would ensure that it doesn't happen."

In an interview with the Germany daily Die Welt, Brok said that "the downgrade is a targeted attack on Europe by the American rating agency." Insisting that there were no "plausible grounds" for the downgrades, Brok continued, "Consequently, the S&P downgrade is a matter of interests. They have declared a currency war on us."

Asked whether he meant that the United States is "waging financial war" on Europe, Brok specified, "Certain forces in the USA, in particular in the world of finance. It is evident that their one and only aim is in this way to promote Anglo-Saxon interests at Europe's cost. They want to shatter the eurozone, in order to make money," he added.

A member of the European Parliament since 1980, Brok is presently the foreign affairs spokesperson of the parliamentary group of the European People's Party (EPP). The EPP, which includes the German Christian Democrats, has the largest group of deputies in the parliament. Brok was previously, from 1999 to 2007, chair of the parliament's foreign affairs committee. According to EUobserver, he is expected to reclaim the latter post when committee chairs are reshuffled next week. The editors of Die Welt emphasize that he "is known as an excellent connoisseur of the USA."

The bills, the Stop Online Piracy Act in the House and the Protect IP Act in the Senate, are backed by major media companies and are mostly intended to curtail the illegal downloading and streaming of TV shows and movies online. But the tech industry fears that, among other things, they will give media companies too much power to shut down sites that they say are abusing copyrights. The legislation has jolted technology leaders, venture capitalists and entrepreneurs, who are not accustomed to having their free-wheeling online world come under attack.

One response is Wednesday's protest, which will direct anyone visiting Google and many other Web sites to pages detailing the tech industry's opposition to the bills. Wikipedia, run by a nonprofit organization, is going further than most sites by actually taking material offline - no doubt causing panic among countless students who have a paper due. It said the move was meant to spark greater public opposition to the bills, which could restrict its freedom to publish.

"Escalation of the crisis would spare no-one," the report's author warned. Referring to the eurozone crisis and its potential to impact growth in rich and poor countries, Andrew Burns said: "Developed and developing-country growth rates could fall by as much or more than in 2008/09. Developing world needs to prepare for global economic slowdown says World Bank. The importance of contingency planning cannot be stressed enough."

Andrew Walker, BBC World Service Economics correspondent comments: "The World Bank has a warning for the developing world: prepare for the worst. In its Global Economic Prospects, the bank does forecast continued growth, but warns there is a risk of a worse outcome: of another crisis as bad as what followed Lehman in 2008. So could the developing countries cope? After all, they weathered the previous global recession relatively well. The Bank's view is that they, for the most part, are in better in shape than the rich nations.

Some have scope to boost government spending and should identify now what would most help development and the poor. But others don't have that room for manoeuvre and will need to make cuts if there is a prolonged downturn."

Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living. American households "have been spending recently in a way that did not seem in line with income growth. So somehow they've been doing that through perhaps additional credit card usage," Chicago Federal Reserve President Charles Evans said on Friday. "If they saw future income and employment increasing strongly then that would be reasonable. But I don't see that. So I've been puzzled by this," he said.

After a few years of relative frugality, the amount of money that Americans are saving has fallen back to its lowest level since December 2007 when the recession began. The personal saving rate dipped in November to 3.5 percent, down from 5.1 percent a year earlier, according to the US Commerce Department. Jeff Fielkow, an executive vice president at a recycling company in Milwaukee, Wisconsin, contributed less to retirement savings and significantly cut back on dining in restaurants and taking vacations in order to keep college savings on track for his two children. "We would love to save more," he said, "but we're doing the best we can."

"Americans are still coming to terms with fact they're not going to earn as much income as they once thought and they are not going to have as much wealth," said Vitner at Wells Fargo. "They are now trying to work out how they are going to have to adjust their lifestyle to fit that."