The New Nation - Internet Edition

Reuters, Chicago

A London businessman may have to put off his wedding. A Hong Kong housewife is too worried to make investments. A student in Slovenia sees an automobile loan fall out of reach. And a real estate agent in Chicago says she's just plain scared.

The worst financial crisis since the 1930s was stark reality for millions on Wednesday as retirement savings evaporated, jobs disappeared, stock market values slipped again and a dramatic international cut in interest rates by central banks did little to stem three weeks of near panic. The Dow Jones Industrial Average sank another 2 percent on Wednesday, closing 189 points lower at 9,258. Over the past 12 months, more than $12.4 trillion of global stock market wealth has been wiped out, as measured by the MSCI main world equity index. More than a third of that loss -- about $4.6 trillion -- has come in just the past three weeks as credit market turmoil deepened after the bankruptcy of giant U.S. investment bank Lehman Brothers.

What the International Monetary Fund termed a major downturn for the world economy was already evident to many.

"I'm scared, really scared," said Chicago real estate agent Cathy Ivcich, 45. "People have stopped buying houses. I've got a lot of buyers who have secure jobs or who have money, and I'm sure I could get them a loan. But they're just scared. Their feet are stuck."

She's stopped going out to dinner and "all those canned goods in the pantry, we're trying to find a way to use them."

In London, 39-year-old Neil Taylor worried that the money from his scaffolding business might not be safe in the bank. In the meantime he's cut back spending and is "thinking about putting off my wedding." In Hong Kong, 40-year-old housewife Cat Lee joined a crowd glued to screens at a brokerage, but said she was in no mood for buying. "It's a question of confidence now. Before, people were always scared of losing out on a rebound, but nobody dares enter the market now," she said. Buenos Aires businessman Nelson Lampert, 25, has put off a trip to Cuba for the technology company where he works, fearing global uncertainty and the impact of running up dollar-based credit card debt during travel. At a bakery shop in Paris, Latifa Mohsni, 56, said some people are cutting back on their purchases already and though "we're doing fine here t I've heard plenty of customers say they're worried about what all this crisis talk really means. I think it will hit us eventually."

For Jost Ivancic, a 22-year-old student in Ljubljana, Slovenia, the situation makes it "even more improbable I could get a bank loan to buy a house or a car. I have no money to speak of right now."

In Iceland, where Adam Stempinski, 38, found construction work after leaving his native Poland, "It's getting more difficult to make ends meet. But I believe the country will pull through. I'm staying here, I'm still better off here than in Poland."

Taxi driver Joe Green in Washington, D.C., said he had fewer customers, fewer tips and a 40 percent cut in earnings after 20 years behind the wheel.

"I am struggling to pay everything. The other day I wanted to go buy shoes but first I had to get gas and $20 doesn't go very far any more t I used to take my wife out and go to Atlantic City. I can't do that no more," he said.

Emily Chamberlin, 39, an events manager at a Smithsonian museum in Washington, said her real estate agent husband has not sold a house in three or four months, so the couple has cut down on entertainment and put summer travel plans on hold.

"But here I am holding a $4 Starbucks coffee. I love my Starbucks," she said.

Deborah Taylor, 37, a stay-at-home mother in Cincinnati, said she and her husband are considering switching their retirement investments "maybe to commodities t I don't know much about investing and he doesn't either."

In the U.S. heartland, where 39-year-old Jackie McMahon and her husband run three candy stores in the Kansas City, Missouri, area, sales are off, and costs are up.

"It's just getting by day to day. It's a feeling of total insecurity," she said.

AFP, London

Governments rushed out new emergency measures in a desperate bid to stop the haemmorhaging of confidence on Thursday, bringing some calm to shell-shocked markets as the US treasury secretary warned more banks could go to the wall.

Iceland, battling national bankrutpcy, took over the country's biggest bank, the US Federal Reserve pumped another 38 billion dollars into insurance giant AIG while central banks in Asia followed a US and European lead by cutting interest rates. But although the measures brought some calm to the markets, the International Monetary Fund forecast that the world economy was now entering a major downturn.

Iceland's government nationalised Kaupthing, completing a state takeover of the top three banks after Landsbanki and Glitnir were saved over the past week.

As the the financial sector dominates the Atlantic nation's economy -- weighing in eight or nine times Iceland's gross domestic product -- the crisis threatens the entire economy and Prime Minister Geir Haarde has warned a recovery will take "years".

Iceland will begin negotiations next week with Russia for a four billion euro emergency loan. Despite a staggering 700-billion-dollar US bank bailout that cleared Congress last Friday, US Treasury Secretary Henry Paulson warned more US banks were expected to go under in the United States.

"One thing we must recognise -- even with the new Treasury authorities, some financial institutions will fail," he said, adding that the financial chaos had "seriously impacted" the economy.

The Fed meanwhile announced it had authorized a new 37.8-billion-dollar cash infusion into American Insurance Group, after an 85-billion-dollar loan made available last month had been virtually used up.

The day after the US Federal Reserve, European Central Bank and other western central banks cut interest rates by half a percentage point, it was the turn of Asia to follow their lead.

Hong Kong slashed its key rate by a half percentage point, while Taiwan and South Korea also announced cuts.

The crisis measures prompted an initial market rebound, with the Tokyo Stock Exchange's benchmark Nikkei-225 index rising into positive territory for the first time in a week before closing down 0.5 percent.

Hong Kong's Hang Seng Index rose 2.65 percent in afternoon trade, recovering some of its recent losses.

Early reaction on the markets in Europe was also positive with London's stock market rebounding 1.48 percent at the start of trading, French stocks rising 2.09 percent and Frankfurt's DAX opening 0.81 percent higher.

Justin Urquhart-Stewart, marketing director at Seven Investment Management, said the rate cuts were "exactly what we needed, and reinforces the message this is a coordinated international response to a very dangerous situation".

"Now that we've reached Defcon One in the banking system, thank heavens we're getting the right reaction, because the alternative is unthinkable," he added. Defcon One is the US military's highest level of alert.

Wall Street on Wednesday dropped 2.01 percent after a highly volatile session. The Dow Jones Industrial Average has now shed 14.7 percent over the past six trading days.

In another bid to keep cash flowing through the financial pipeline, the European Central Bank said it would pump 100 billion dollars (74 billion euros) back into interbank money markets in one-day loans, raising the daily amount by another 30 billion dollars.

The operation has become a daily event but the increased sum, which followed a raise of 20 billion on Wednesday, suggested tension remained at very high levels in the eurozone markets.

Speaking on French television, European Central Bank chief Jean-Claude Trichet said "excessive pessimism is ill-advised".

"We all together call upon the market participants who are in this state of intense turbulence, we tell them to collect themselves," he said. "There are elements of confidence out there."

With the world's top economic policy makers headed to Washington for the annual meetings of the International Monetary Fund and World Bank on Monday, Trichet said: "It is very important that we coordinate as closely as possible".

Reuters, Islamabad

A suicide bomber attacked police headquarters in Islamabad and warplanes bombed Islamist fighters, killing at least 20, in a northwest valley on Thursday as Pakistan's war with militants intensified.

Officials reported wounded but no fatalities in the attack on the police complex housing an anti-terrorist squad on the outskirts of the capital.

"I am at the site of the blast. I have seen several people wounded, eight or nine," police official Khalid Mehmood told Reuters. Interior Secretary Kamal Shah said a handful of people had been wounded, but there were no deaths reported so far.

Police chief Asghar Raza Garbazi said the attacker entered the police building carrying two baskets of sweets and presented one of them to a policeman. "The moment he gave basket to the policeman, an explosion took place." He said three policemen were wounded.

"There was no loss of life, with the Grace of God."

The blast ripped the corner walls off a three-storey building in the complex.

The explosion occurred as Pakistan's newly appointed intelligence chief briefed lawmakers on the internal security threat for a second day in a special, closed joint-session of parliament.

The bomber struck a target in a high security zone, though the city has been on high alert in the wake of a suicide truck bomb that killed 55 people and destroyed the Marriott hotel on September 20.

Few policemen were in the barracks in the headquarters at the time because they were on duty guarding the parliament.

There have been fears of more bomb attacks in reaction to an army offensive against Islamist militant strongholds in the tribal areas bordering Afghanistan.

A military official said jet fighters carried out two airstrikes on a hideout and a training facility used by fighters loyal to militant commander Mullah Fazlullah, who emerged at the head of a revolt in the northwest valley of Swat late last year.

"Twenty militants, including important commanders were killed but Fazlullah escaped. He was present there," the official said.

The targets of the airstrikes were around 10 km northwest of Mingora, the main town in Swat.

President Asif Ali Zardari and Prime Minister Yousaf Raza Gilani immediately issued a statement saying the attack "would not deter the government from fighting the scourge of terrorism." (Additional reporting by Kamran Haider; Writing by Simon Cameron-Moore; Editing by Sanjeev Miglani.

AFP, Baghdad

Iraq said on Wednesday it was ready to take over security responsibilities from US security forces in Baghdad as both countries say they are nearing a deal on a contested military pact.

Interior ministry spokesman Major General Abdel Karim Khalaf said Iraqi police are capable of handling security duties across the capital, a responsibility now held by US troops.

"We have the ability to take over the internal security responsibility in Baghdad if American forces pull out of the city," he said in a statement. "The interior ministry is able to take responsibility for protecting Baghdad." His remarks came a day after Foreign Minister Hoshyar Zebari said Washington and Baghdad are now "very close" to an agreement on the presence of American troops in the country beyond this year. "There have been new ideas and new language that could be acceptable, but no final decision has been made. This needs some bold political decisions now," Zebari said on Tuesday.

Zebari was speaking at a press conference with visiting US Deputy Secretary of State John Negroponte shortly after two bombs went off just outside the Green Zone, leaving at least seven people, including an Iraqi soldier, injured. At a press conference in the Iraqi capital, Baghdad commander General Jeffery Hammond, who commands 28,700 US-led foreign troops said the improvement in security in the city of six million was dramatic but dangers remained.

"Security has improved, let there be no doubt," said Hammond, noting that Baghdad is now averaging four attacks a day, which according to US statistics was 89 percent less than in 2006 and 83 percent lower than in 2007. "We have been successful in creating the conditions for sustainable security for the eventual transfer to Iraq security forces but let there be no doubt that challenges remain."

The interior ministry said there had been an increase in the number of car bombs and roadside blasts in Baghdad since the start of the Muslim fasting month of Ramadan but said this did not mean a breakdown of security.

"An increase in car bomb attacks and IED (improvised explosive device) attacks, particularly since Ramadan (last month) does not mean that security forces failed," the statement said.

Khalaf said Iraqi security services lacked explosive detectors to prevent car bombs but otherwise had been effective in reducing the overall level of violence in the country, which is said to be at a four-year low.

The ministry "is seeking (financial help from) some provincial councils to import such devices and technologies to cover all areas of Baghdad and other provinces," he said.

The US military has handed over security responsibility in 11 of the 18 provinces in Iraq since June 2006. The process started with the Shiite southern province of Muthanna, which borders Saudi Arabia.

Much of Iraq's improved security has been credited to the recruitment of Sunni tribesmen and former rebels by the US military to fight against al-Qaeda.

Reuters, Barcelona

Environmental damage such as desertification or flooding caused by climate change could force millions of peoples from their homes in the next few decades, experts said on Wednesday.

"All indicators show we are dealing with a major emerging global problem," said Janos Bogardi, director of the U.N. University's Institute on the Environment and Human Security in Bonn, Germany.

"Experts estimate that by 2050 some 200 million people will be displaced by environmental problems, a number of people roughly equal to two-thirds of the United States today," the University said in a statement. Bogardi said present the number of environmental migrants could be between 25 million and 27 million. Unlike political refugees fleeing their country, many seek a new home in their own country.

He said it was important to work out ways of tracking the numbers of people forced to leave their homes for reasons such as repeated crop failures caused by global warming, so that governments and aid groups could work out how to help. "The main step towards helping is recognition," Bogardi told Reuters. In the past, many such people would be listed as economic migrants. However economic migrants, for example, were often young men looking for work. "Environmentally-motivated migration is expected to feature poorer people, more women, children and elderly, from more desperate environmental situations," it said.

Experts from almost 80 countries will meet in Bonn from Oct. 9 to 11 to discuss how to help environmental migrants. A study of 22 developing countries by Bogardi's institute and several other European research institutes into reasons for migration showed worries that human trafficking networks could gain from damage to the environment.

In Bangladesh, "women with children, whose husbands either died at sea during cyclone Sidr or are away as temporary labour migrants, are easy prey for traffickers and end up in prostitution networks or in forced labour in India", it said.

Similar patterns were found in at least one more national study. "Exploitation of people on the move by smugglers is reported more and more as the flow of informal or illegal migrants swells," it added.

AP, Beijing

More than 10,000 children remain hospitalized after being sickened in China's tainted milk scandal, officials said Wednesday, as the government released its first rules on allowable levels of the chemical blamed in the ailments.

The Health Ministry said in a statement on its Web site that eight of the 10,666 children were in serious condition after drinking milk powder contaminated with the industrial chemical melamine, which can lead to kidney stones and possibly life-threatening kidney failure.

No new deaths have been recorded, it said. The scandal has so far been blamed for the deaths of four babies and the sickening of more than 54,000 others. But the effects of the scandal continue to be felt, forcing the government to deal with festering health and public relations issues. China's food exports have increasingly suffered, with more nations issuing import bans.

Dairy suppliers have been accused of adding melamine - used in products including plastics, paint and adhesives - to watered-down milk to make the product appear rich in protein and fool quality control tests. There had been no previous standards.

Under Health Ministry guidelines released Wednesday, melamine is limited to one part per million for infant formula and 2.5 parts per million for liquid milk, milk powder and food products that contain more than 15 percent milk.

Wang Xuening, a Health Ministry official, said any items containing higher levels will be "prohibited from sale."

Wang acknowledged that small amounts of melamine can leech from the environment and packaging into milk and other foods, but said that deliberate tainting is explicitly forbidden.

"Melamine cannot be used as an ingredient or additive in food products," Wang said. "For those who add melamine into food products, their legal responsibility will be investigated."

Chen Junshi, a researcher for China's Center for Disease Control and Prevention, said the new guidelines will help officials assess whether melamine had been intentionally added or existed in the environment.

"If the amount exceeds one (part per million), we have reasons to believe it was intentionally added," Chen said. "If the amount is below one, it's very likely that it is because it existed in the environment."

Levels of melamine discovered in batches of milk powder recently registered as much as 6,196 parts per million.

Guidelines in Hong Kong and New Zealand say melamine in food products is considered safe at 2.5 parts per million or less, though Hong Kong has lowered the level for children under 3 and pregnant or lactating women to one part per million.

In the U.S., the Food and Drug Administration says its experts have concluded that eating 2.5 parts per million of melamine - a minuscule amount - would not raise health risks, even if a person ate food every day that was laced with it.

Reuters, Budapest

The United States will appeal to NATO allies on Thursday to send more troops to fight Taliban insurgents in Afghanistan, despite the prospect of spending cuts because of the global financial crisis.

Defense ministers of the 26-nation alliance hold a two-day meeting in Budapest against a backdrop of a rise in violence in Afghanistan even though there has been a big increase in the size of the NATO-led international force in the past two years.

Commanders of the 50,700-strong force are seeking up to 12,000 more troops, but Washington's European allies have been reluctant to commit additional numbers. NATO is also seeking to plug shortfalls in equipment such as helicopters and to resolve differences among member countries over U.S. calls for a more aggressive fight against the drugs trade that fuels the Taliban insurgency.

On Tuesday, German Chancellor Angela Merkel's cabinet agreed to allow for a boosting of German troop numbers in Afghanistan by 1,000 to up to 4,500. But Berlin has resisted Washington's calls to station troops in the insurgent-troubled south.

Washington has urged countries in southeastern Europe, including aspiring NATO members, to send more troops.

The United States plans to increase its troop strength in Afghanistan from the present 33,000, which include 13,000 under NATO command, but U.S. officials are concerned allies will see this as an excuse not to meet pledges.

"I want to make sure that everybody understands that the increases in U.S. forces are not seen as replacements for NATO contributions. They're reinforcement," U.S. Defense Secretary Robert Gates told reporters traveling with him to Budapest.

U.S. officials said this week Washington had asked Japan and NATO allies that have refused to send troops to help pay the estimated $17 billion needed to build the Afghan army to a target strength of 134,000.

NATO says its mission is to help stabilize Afghanistan and allow Afghan forces to take over, but concedes this is a long-term task and that allies must be engaged for many years.

Seven years after U.S.-led forces overthrew the then Taliban government following the September 11, 2001 attacks on the United States, Britain's military commander and ambassador in Afghanistan gave a gloomy assessment of the Western effort and said they thought the war against the Taliban could not be won.

Gates dismissed such comments as defeatist but said part of the solution in Afghanistan would be negotiating with members of the Taliban willing to work with the government in Kabul.

NATO officials acknowledge members face a growing list of demands, including modernizing forces and meeting spending targets, without a clear idea of what funds will be available as big sums are diverted to tackling the global financial crisis.

A new challenge is a resurgent Russia and ministers will discuss what can be done to help NATO hopeful Georgia rebuild its military, which was shattered by Moscow's August invasion.

NATO's U.S. military commander wants plans drawn up to protect newer alliance nations, some of which were part of the former Soviet bloc, that feel threatened by Russia's resurgence.

U.S. officials say this faces resistance from countries like Germany and France which are worried about Moscow's response.

AP, Islamabad

Pakistan's incoming spy chief showed lawmakers video and photos of militants killing people at a rare closed briefing Wednesday on the government's fight against Taliban and al-Qaida extremists, attendees said.

The fledgling civilian government called the special session of parliament as it sought political unity to stabilize the key U.S. ally in the war on terror.

Military officials showed the lawmakers footage of militants in the act of killing people, said two people who attended. They requested anonymity because they had been sworn to secrecy.

One of the attendees said they were also given statistics but declined to divulge them other than to say some appeared to have already been made public.

Suicide attacks have killed nearly 1,200 people since July 2007, most of them civilians, military data released last month showed. The date showed 1,368 security force personnel had been killed since late 2001, when Pakistan's former military ruler Pervez Musharraf allied with Washington in the war on terror.

The U.S. says the militants use Pakistan as a staging ground for attacks in Afghanistan. But American officials have praised a two-month-old Pakistani offensive in the Bajur tribal region that the Pakistani military claims has killed more than 1,000 insurgents.

At least 20 suspected militants were killed in fresh strikes there Wednesday, authorities said. Eight were believed to be foreigners.

Many in Pakistan blame that alliance with the U.S. for the rise in violence here. American missile strikes on militant hideouts in Pakistani territory along the Afghan border, where Osama bin Laden is rumored to be hiding, have further angered the population.

The briefing lasted about three hours and was to resume Thursday morning.

Officials said the session was an effort to include opposition parties in a discussion aimed at forging a national anti-terror plan.

"It was essential that those who are responsible for law making and who are representing the people should get insight about what actually going on in the country," Information Minister Sherry Rehman said.

Security was tight around the parliament building, with concrete barriers and barbed wire ringing a large perimeter outside the facility. The media was not allowed in.

Reuters, Seoul

North Korea has deployed more than 10 missiles on its west coast for what appears to be an imminent launch, a South Korean newspaper said on Thursday, two days after the North fired two short-range missiles into the Yellow Sea.

It would be an unprecedented test if the North fired all of the surface-to-ship and ship-to-ship missiles, but intelligence sources quoted by the Chosun Ilbo paper said they thought the North may launch five to seven of them.

The North has forbidden ships to sail in an area in the Yellow Sea until October 15 in preparation for the launch, an intelligence source told the paper.

The North fired two missiles on Tuesday in routine military drills, South Korea's defense minister said on Wednesday.

"If the North fires a large number of missiles, it would be difficult to see it as routine exercise," the source was quoted as saying.

A South Korean defense ministry official declined to comment on the report but said the government had no indications of unusual activities in the North.

A senior U.S. nuclear envoy visited the North Korean capital last week in a bid to convince the state to return to a disarmament-for-aid deal and halt plans to restart an aging nuclear plant that makes bomb-grade plutonium.

AFP, Washington

US President George W. Bush on Wednesday signed legislation to enact a landmark US-India civilian nuclear agreement, celebrating "the growing ties between the world's two largest democracies."

"This agreement sends a signal to the world: Nations that follow the path to democracy and responsible behavior will find a friend in the United States of America," Bush said at a lavish White House signing ceremony.

Indian External Affairs Minister Pranab Mukherjee will visit Washington Friday to Washington so that he and US Secretary of State Condoleezza Rice can formally sign the accord itself, the US State Department announced. Bush and Indian Prime Minister Manmohan Singh signed the deal in July 2005, touching off a difficult battle with wary lawmakers on either side and critics who warn it undermines global efforts to curb the spread of nuclear know-how.

Evidently savoring the resulting diplomatic victory in the twilight of his term, the US president welcomed "the honor of signing legislation that builds on the growing ties between the world's two largest democracies."

The agreement offers India access to sophisticated US technology and cheap atomic energy in return for allowing UN inspections of some of its civilian nuclear facilities-but not military nuclear sites.

Washington imposed a ban on US-Indian civilian nuclear trade after India's first nuclear test in 1974, but US officials have said a new approach is needed to help the world's largest democracy meet its booming energy needs at a time of skyrocketing oil prices and global warming fears.

US lawmakers attached safeguards on preventing the spread of nuclear weapons technology before passing it overwhelmingly last week and handing the increasingly unpopular Bush administration a foreign policy victory.

But critics say it still undermines global efforts to curb the spread of nuclear weapons, because India has refused to sign the international non-proliferation treaty (NPT).

Bush said the accord meant India would be able to satisfy its booming economy's thirst for energy while curbing its dependence on fossil fuels linked to climate change, while the United States would gain access to India's lucrative nuclear market.

"The American people are proud of our strong relationship with India. And I am confident that the friendship between our two nations will grow even closer in the years ahead," he said.

Vice President Dick Cheney, US Secretary of State Condoleezza Rice, Energy Secretary Samuel Bodman, key US lawmakers who backed the agreement, and India's ambassador to Washington, Ronen Sen, attended the ceremony.

Neither Democratic White House hopeful Barack Obama nor Republican rival John McCain were invited "because of their busy campaign schedules," White House spokesman Carlton Carroll said in a statement.

Bush acknowledged that US relations with India, which steered an independent course from Washington during the Cold War-era, had been "strained" but said both countries were now "natural partners as we head into the 21st century."

Rice and others had to lobby hard to win approval for the deal from the International Atomic Energy Agency (IAEA), the UN nuclear watchdog, and the Nuclear Suppliers Group (NSG), which controls global atomic trade.

She also pushed hard for the agreement to be approved by both Houses of Congress.

Singh also had a rough ride over the deal at home: The main opposition Hindu nationalists and the Communists have both slammed it as curbing India's military options and bringing the country's foreign policy too much under US influence.

AFP, London

The government's massive bank rescue plan was broadly welcomed Thursday, as Prime Minister Gordon Brown urged European counterparts to follow suit to help begin thawing the global credit freeze.

The government announced an 500-billion-pound package Wednesday that involved a possible part-nationalisation of several of Britain's main banks and a guarantee of inter-bank lending, and provided short-term funds for banks. At the same time Brown wrote to other European Union (EU) leaders -- who will meet for a regular summit in Brussels next week -- suggesting that if it were implemented in a coordinated way it could unblock frozen credit markets. "This is an issue which affects us all. A concerted approach with national schemes t would address this problem," he wrote in a letter to French President Nicolas Sarkozy, who currently holds the EU presidency.

Britain's opposition parties have backed the plan, with the Conservatives offering "constructive support for the package" while the Liberal Democrats said they were behind the government's proposals.

The plan was also welcomed by the country's newspapers despite its "eye-wateringly expensive" price tag, with the right-of-centre Times hailing it as an "intelligent and measured response to the financial crisis" while the right-wing Daily Telegraph said it put the government "on the front foot".

While the part-nationalisation implied by the government share-purchase proposal was hard to swallow, the Telegraph said "desperate times require desperate measures. When a blaze in your home is extinguished, it is churlish to complain about water damage".

London's FTSE 100 index of leading shares opened 1.48 percent higher Wednesday, after shedding over five percent a day earlier as traders brushed off co-ordinated interest rate cuts by major central banks around the world.

As part of the package, the government is making 50 billion pounds available to buy preference shares in banks, along with 200 billion pounds in short-term loans and another 250 billion to guarantee lending between banks.

The reluctance of banks to lend to each other is at the centre of the current global crisis.

In his letter to Sarkozy, copied to other EU leaders and the European Commission, Brown urged his counterparts to follow Britain's example, arguing that a "concerted international approach" was needed.

"The market for medium term funding is currently frozen across the globe, with potentially serious economic consequences," Brown wrote in the letter, obtained by French newspaper Le Monde and seen by AFP.

"Our scheme aims to restart the market by restoring confidence that loans to financial institutions will be repaid."

AFP, Washington

After a lackluster debate, John McCain now has less than four weeks to turn the race for the White House around, as observers began to wonder aloud whether the Republican who once dubbed himself the comeback kid can win.

One day after McCain faced off in the second of three debates against Barack Obama, political observers said the exchange failed to up-end the front-runner status of his Democratic rival, as the contest ticks down to the November 4 vote. "Despite John McCain's best efforts, the Arizona senator didn't knock Mr Obama from his cool evasion or even do much to rebut the Democrat's talking points," the conservative Wall Street Journal wrote the morning after the debate.

"This isn't enough to change the dynamics of the race."

Snap polls by US television networks awarded the debate -- the second of a trio of presidential clashes -- to Obama.

Democrats now are optimistic that -- with two of three rhetorical contests over and both won by Obama according to opinion polls -- the Illinois senator is an increasingly good bet to clinch the November 4 election.

"The race is over," crowed Howard Wolfson, a former spokesman for Senator Hillary Clinton, one of several Democratic rivals vanquished by Obama en route to the sealing the nomination.

Longtime Washington pundit Roger Simon pronounced neither McCain nor Obama the winner, saying that, from his vantage point, both failed in "delivering a knockout punch."

"The trouble for John McCain, however, is that he needed one," wrote Simon, a writer for The Politico daily newspaper.

The day after Tuesday's outing, Obama continued to sound an upbeat note on the stump in the midwestern state of Indiana, promising Americans "better days ahead" despite plummeting global stock markets , rising job losses and dark clouds of economic gloom.

In an interview with ABC News, Obama bemoaned the "irrational despair" afflicting tumbling stock markets, and said President Georg W. Bush was too weak to mend the crisis.

"I do think that the administration is hampered by the fact that people don't have a lot of confidence in the president," he said, and by extension threw doubt on a McCain administration that promises more of the same economic policy.

Obama's running mate Joe Biden accused his Republican rivals of "injecting fear and loathing" into the campaign, including stoking rumors that Obama has terrorist ties.

Speaking on CBS television, Senator Biden dismissed as "malarkey" Republican allegations of unsavory ties between Obama and William Ayers, former leader of "The Weathermen," a domestic terror group. He was reacting to Palin's comments last week that Obama had been "pallin" around with terrorists."

McCain, at a rally along with running mate Sarah Palin in the battleground state of Pennsylvania, reined in his aggressive campaign, admonishing a local Republican activist's repeated reference to "Barack Hussein Obama" -- a deliberate invocation of a given name the Democrat shares with late Iraqi dictator Saddam Hussein.

"We do not condone this inappropriate rhetoric, which distract from the real questions of judgement, character and experience that voters will base their decisions on," said McCain spokesman Paul Lindsay.

Meanwhile, despite the generally civil exchanges of Tuesday's encounter, observers continued to remark upon the markedly nasty tone between the two candidates.

The New York Times excoriated McCain and Governor Palin of Alaska for the tone of the Arizona senator's campaign.

"Ninety minutes of forced cordiality did not erase the dismal ugliness of his campaign in recent weeks, nor did it leave us with much hope that he would not just return to the same dismal ugliness on Wednesday," it lamented.

"We certainly expected better from Mr McCain, who once showed withering contempt for win-at-any-cost politics," it said.

A CNN national poll after the debate found that 54 percent of those asked thought Obama won and 30 percent said McCain was victorious.

A CBS survey also gave the debate to Obama -- 40 percent to 26 percent.

Gallup's daily tracking poll Tuesday reflected the high stakes for McCain, giving Obama a nine point lead nationally, while the Democratic nominee is also widening his edge in key battleground states.

AFP, Male

The first-ever democratic presidential election in the Maldives looked set to go into a second round after Asia's longest-serving leader apparently failed to deliver a knock-out blow to his rivals.

Official results based on roughly two-thirds of ballots cast showed incumbent President Maumoon Abdul Gayoom -- who has run the Indian Ocean archipelago unchallenged for 30 years -- in the lead but short of a majority needed to avoid a tough run-off. The president had just under 40 percent support, the election commission said, with his most outspoken critic -- former political prisoner Mohamed "Anni" Nasheed -- in second place with around 26 percent. If the counting trend holds, the two will fight head-to-head within 10 days.

Analysts say Gayoom will have a tough time fighting Nasheed in a run-off if supporters of the other opposition candidates rally behind the one-time Amnesty International "prisoner of conscience."

"If there is a second round, that would be a big blow to Gayoom. He was so sure of winning in the first round," said an official from Nasheed's Maldivian Democratic Party (MDP), which had accused Gayoom of trying to rig the polls.

The landmark presidential vote held Wednesday was the first time Asia's longest-serving leader has allowed any competition.

The polls also marked the climax of an effort to bring political freedoms to the Muslim nation of 300,000 people in the wake of pro-democracy protests and international pressure.

Rival political parties were only allowed to be formed two years ago.

Many Maldivians are eager to see a fresh face in charge of their atoll nation -- which despite its image as a beach paradise is beset by problems including a critical housing shortage, rising crime and drug abuse.

Political tensions have also been mounting.

In January, one islander tried to stab Gayoom with a kitchen knife, and a year ago several tourists were injured in the Maldives' first-ever terrorist attack, which was blamed on Islamic militants and followed by a tough crackdown.

"I want change. Thirty years of Gayoom is long enough. He's been filling his pockets and denying our rights for long enough," said Hamza, a 20-year-old student who queued for five hours to cast his ballot.

While the cramped island capital Male is seen as an opposition stronghold, Gayoom -- with his conservative Muslim platform and father figure persona -- appears to be more popular on outlying islands.

Gayoom can also lay claim to having built South Asia's richest nation per capita, thanks to the opening of dozens of resorts on white sand beaches and crystal clear waters -- where some rooms cost up to 15,000 dollars a night.

"I feel I must be at the helm to see through the reform programme," Gayoom told reporters before the vote, positioning himself as a committed democrat rather than the Robert Mugabe-type politician his opponents paint him as.

And the president has also taken legal action against two opposition politicians who accused him of stealing 40 million dollars of tsunami aid and stashing away tens of millions more in a foreign bank account.

AFP, Kuala Lumpur

Malaysia's Prime Minister Abdullah Ahmad Badawi said on Wednesday that he will step down next March and hand power to his deputy, ending months of uncertainty since disastrous general elections.

Abdullah has been under intense pressure to quit since leading the Barisan Nasional coalition to its worst polls performance in half a century, losing a third of parliamentary seats and five states to the opposition.

The premier said he expected his United Malays National Organisation (UMNO), which leads the multi-racial coalition, to select Deputy Prime Minister Najib Razak for the top job in a leadership vote next March. "I will hand over power tot Najib after he wins the election at the general assembly. I am sure he will win," Abdullah told a press conference, calling on the party to halt months of destructive bickering.

"It is not the time for us to indulge in infighting or engage in narrow politics, it is now time for us to strengthen our unity and co-operate among ourselves and place the interests of the country above all."

The president of UMNO-which has dominated Malaysian politics since independence from Britain in 1957 -- by tradition automatically becomes prime minister of the country.

Abdullah, 68, originally wanted to hand over to Najib in mid-2010 but was forced to review his departure date as he lost support from the ruling party's grassroots, which was stunned by the March election results.

He also faced a challenge from opposition leader Anwar Ibrahim, who says he has enough support from defecting lawmakers to topple the government, but is being blocked from forming a new administration.

Abdullah came to power in 2003 and was initially buoyed by a groundswell of support for his promises of reform after two decades of hardline rule under veteran premier Mahathir Mohamad.

However, he was quickly seen as weak and ineffective after failing to tackle corruption, high crime rates and inefficient bureaucracy which he had vowed to address.

Abdullah insisted Wednesday he still intended to fulfil his promises, and pledged to give more power to the anti-corruption body and create a new commission to appoint judges who are currently picked by the premier.

The political vacuum since the elections has paralysed foreign investment and suppressed trade on the stock exchange, in a malaise which is now being worsened by the global economic crisis.

UMNO vice-president Mohamad Ali Rustam, a possible contender for the newly vacated deputy premier's post, said the announcement would revitalise the party which has been in disarray since the elections.

"This will unite UMNO and Barisan Nasional so that we can win the next election. I hope all UMNO members will support Najib," he said. "Najib has to regain public confidence for the Barisan Nasional."

UMNO represents the interests of the country's Muslim Malay majority, and its coalition partners representing ethnic Chinese and Indians were wiped out in the elections which saw minorities flock to Anwar's opposition.

"Barisan Nasional's challenge is to see how it can concretely carry out reforms. BN needs rebranding. It has to change its attitude and approach," said Koh Tsu Koon, chief of the Chinese-based Gerakan party.

"The next general elections is not going to be easy unless we really, really reform," he added.

Political observers said Najib faced a massive task to revitalise the government which is seen as out of touch and riddled with corruption and cronyism.