Angela Merkel will make her sharpest political U-turn since becoming German Chancellor this week when her government unveils a €50bn (£44bn) package of tax cuts and incentives to protect Europe's biggest economy from deepening recession.

The "Pact for Germany" programme contains a battery of tax cuts, health insurance reductions and special government funds designed to stimulate an economy forecast to contract by 3 per cent this year.

The measures, expected to be agreed at a crisis cabinet meeting tomorrow, will be announced only weeks after Mrs Merkel's grand coalition government heaped scorn on Britain for "tossing around billions" in its efforts to tackle the credit crunch.

An intriguing mystery was unfolding at a luxury Alpine resort this weekend after speculation started to take wing that a chalet in the upmarket Swiss skiing town of Gstaad was destroyed by a fire that was aimed at its occupant - an Eastern European leader who is at loggerheads with Vladimir Putin's regime in Moscow.

As police investigated the cause of a blaze that destroyed a holiday home in the village of Kalberhöni, rumours persisted that among eight people who fled the inferno was Viktor Yushchenko, President of Ukraine and for the past month or so embroiled in a bitter row with Moscow over the price it pays for Russian gas. One local familiar with the chalet owned by Janos Lux said everybody in the village knew the fire had happened, but nobody knew the circumstances around it, as there had been a "diplomatic silence". "Theirs is a different world to ours," she said of Mr Lux and his paying guests.

Heat is due to start flowing back into tens of thousands of freezing homes in Europe under a deal clinched yesterday to resume gas deliveries from Russia.

The agreement marks an unexpected coup for the Czech government which, as the current holder of the EU presidency, had come under huge pressure to break the deadlock that triggered crippling energy shortages across a dozen countries in central Europe and the Balkans in a week of blisteringly cold weather.

Diplomats in Brussels had fretted that the small, former Soviet-bloc state lacked the diplomatic clout to act as a mediator in the fraught negotiations between Kiev and Moscow after the dispute over payments that began on 1 January spiralled into a full-scale international emergency. Last Wednesday, Russia's gas giant Gazprom, the EU's largest foreign provider of gas, halted all deliveries to European countries transiting through Ukraine, forcing the Czechs to step into the breach.

Workplace bullying by President Nicolas Sarkozy was the real reason why the French justice minister returned to work five days after having a baby, the former presidential candidate, Ségolène Royal, said yesterday.

Mme Royal - who has four children and was the first French minister to give birth while in office - jumped to the support of her bitter political enemy, Rachida Dati, whose rapid resumption of her duties has been criticised by women's groups.

Tony Blair, the former UK prime minister, is re-emerging as a possible choice to be the European Union's first full-time president after four momentous crises reinforced the argument for having a high-profile international personality in the job.

In one sense, the discussions are premature. The full-time president will take office next year only if the EU's Lisbon institutional reform treaty, which creates the position, is ratified by all member-states - notably, Ireland, which is expected to hold a second referendum on the treaty between September and December.

But the sheer scale of the challenges facing the EU - from last August's Russia-Georgia war and the global financial meltdown to the Gaza conflict and the shutdown of Russian gas deliveries to Europe - is redefining the debate.

Whereas last year Germany and other countries looked favourably on candidates such as Jean-Claude Juncker, the long-serving prime minister of Luxembourg, more policymakers now feel the EU presidency demands an occupant from a much bigger member-state.

Dmitry Medvedev, the Russian president, on Sunday took another apparent swipe at Vladimir Putin, rebuking the prime minister's government for moving too slowly to alleviate the country's economic crisis.

Mr Medvedev said only 30 per cent of the government's anti-crisis programme drafted last October had been fulfilled.

"We have to acknowledge that at the present moment planned measures are being fulfilled more slowly than expected and, most important, more slowly than the current situation demands," Mr Medvedev said at a meeting at the Salyut engine plant outside Moscow.

The Finnish Tax Administration has expressed surprise at the amount of tax paid in by businesses this month. Last January corporate taxes amounted to 535 million euros, compared to a mere 83 million euros gathered this month.

During the second half of last year, businesses already noted that their returns were much smaller than expected. Ilkka Karjalainen, Senior Inspector with the Tax Administration said that the current situation is exceptional."The gains made in 2008 have been rapidly reduced or altogether wiped out," he noted.

(i.e. will not be accepted by Slovenia)

Israeli forces yesterday pounded dozens of targets in the Gaza Strip and dropped leaflets warning of an escalation in attacks, as southern Israel came under renewed Palestinian rocket fire. Last night, as flames and smoke rose over Gaza City, speculation grew that Israel was about to launch the so-called third stage of its offensive: the forcible entry into Gaza City by thousands of troops.

In response, Hamas said that the Gaza offensive had "killed the last chance for settlement and negotiation with Israel". Earlier yesterday, Israeli aircraft attacked more than 40 targets throughout Gaza, striking 10 rocket-launching sites, weapons-storage facilities, smuggling tunnels, an anti-aircraft missile launcher and gunmen. And civilians.

As they took their leave of the Saudi Arabian supertanker, they were "full of joy" at having pulled off the biggest coup in Somalian piracy.

After sailing hundreds of miles from their pirate base, they had seized a ship the size of an aircraft carrier carrying $100m of crude oil, faced down an international fleet for two months and extracted a reported $3m ransom for the release of the Sirius Star and its crew, including two Brits.

But yesterday came the news that some of the dozens of pirates involved had, in the words of one victim, "got their comeuppance". As they celebrated the success of the audacious operation, one heavily laden boat capsized and six of the 14 on board drowned.

At least in this great country of theirs (as they like to call it) the inauguration of a president is relatively swift, because we know how interminable everything else about the process is: the primaries, the election campaign, the transition.

And for some of those enjoying the pomp, circumstance and traffic that will engulf Washington DC on 20 January, the moments of real thrill will be briefer still. It may be the instant Barack Obama is sworn in, his hand on the same Bible used at the inauguration of Abraham Lincoln, or when he utters that one line in his speech from the steps of the Capitol that all of our grandchildren may or may not always remember.

Near the old civil-war front line in the centre of Beirut stands a large digital clock with blood-red numbers. It has almost reached the neat, round figure of 1,500 and represents the days since Rafiq Hariri was murdered. You still hear people in Lebanon asking for "haqiqa" - "the truth"; my driver Abed even has a slim, black sticker tied to the mirror of our car with the word in Arabic script. The trouble is that as that figure on the digital clock goes on climbing, a lot of Lebanese are beginning to doubt they will ever know who murdered the billionaire and former prime minister - along with 21 others - on the Beirut Corniche on 14 February 2005. This St Valentine's Day massacre was caused by an estimated 1,700kg of explosives, but despite a massive United Nations inquiry involving Irish police officers, judges from Germany, Belgium and Canada, and the setting up of an entire tribunal headquarters in The Hague, no one has been charged.

A Royal Marine was killed by an explosion today in Helmand Province, southern Afghanistan, the Ministry of Defence said.

The Marine, from UK Landing Force Command Support Group (UKLF CSG), operating as part of 45 Commando Royal Marines, was killed in the Kajaki area, a spokeswoman said. Next of kin have been informed.

JAKARTA, Jan 11 (Reuters ) - An Indonesian ferry carrying 250 passengers capsized and sank after being battered by a large wave in storms in the country's east on Sunday, officials said, adding bad weather and nightfall made rescue efforts difficult.

Rustam Pakaya, head of the health ministry's crisis center, said six deaths had been confirmed in the accident, which occurred early on Sunday morning.

Eighteen people including one of the crew had been rescued, said Bambang Ervan, a spokesman for the Transport Ministry.

"We still don't know the fate of the missing people, whether they had lifejackets on when the ship was hit, and it happened at dawn so most people were probably asleep," Ervan said.

SYDNEY (Reuters) - Australian special forces have killed a Taliban commander involved in recruiting suicide bombers and foreign fighters in Afghanistan, Australia's Defense Ministry said on Sunday.

The Taliban launched scores of suicide bombings across Afghanistan last year, mostly aimed at the 65,000 foreign troops in the country as well as Afghan forces. Most of the victims of the attacks are civilian passers-by, security experts say.

Mullah Abdul Rasheed was a "primary" facilitator of attacks using improvised bombs against foreign forces in the southern province of Uruzgan, the ministry said in a statement.

Barack Obama will mark a radical break in American foreign policy this week by unveiling a team of diplomats tasked with ushering in a new era of dialogue with enemies abroad.

As Hillary Clinton prepares for Senate confirmation hearings this week, she will head a group of advisers who are virtual opposites to the appointees made by President George W Bush. While Bush favoured aggressive neoconservative ideologues, Obama has selected people whose doveish credentials seem impeccable.

They will be responsible for reversing the political unilateralism of the Bush years and opening direct negotiations with hostile states, potentially ranging from Syria to Cuba and Venezuela and maybe including Iran and even Islamic militant group Hamas.

The Lebanese Shiite movement Hezbollah and the Lebanese Army went on full alert Sunday, Jan. 11, after unknown gunmen in Syria opened fire on a group of Israeli military engineers in the Israeli-occupied Golan Heights.

According to an eyewitness in the Bekaa Valley, Hezbollah militants were seen taking their positions in the mountainous Knessineh area overlooking the Israeli-Lebanese border shortly after the Golan incident took place.

 

However, no one was hurt and it was not immediately clear who was responsible, an Israeli military spokesman said.

Foreigners in Sudan could be targeted by "outlaws" if the International Criminal Court pursues a case against Sudan's president, a top official says.

The ICC is widely expected to issue an arrest warrant for President Omar al-Bashir on charges that he masterminded a genocide in Darfur.

It is the most specific warning yet that foreigners could bear the brunt of public anger if a warrant is issued.

Diplomatic efforts by Khartoum to get the case deferred have so far failed.

Rescuers are intensifying their searches in highland areas of central Costa Rica after a powerful earthquake that left at least 19 people dead.

The 6.1-magnitude quake on Thursday at Poas Volcano National Park north of the capital, San Jose, caused landslides to block roads and damage buildings.

Red Cross officials now say 19 people have died, with others still believed to buried by landslides.

At least 40 people are still missing, and hundreds have sought refuge.

Temporary shelters have been set up in the region for those affected by the quake.

Officials have warned that the number of dead and injured is likely to rise as rescuers reach remote areas.

Votes have been held in Thailand for 29 parliamentary seats, seen as the first test of support for the new coalition government of PM Abhisit Vejjajiva.

His Democrat Party-led coalition came to power in December and only has a narrow majority in parliament.

The previous leadership was forced out by a court ruling and months of anti-government protests.

The court ruling also banned 29 MPs from politics, triggering by-elections across 22 states.

The previous governing party, allied to former prime minister Thaksin Shinawatra, is hoping to pick up enough seats to weaken the new government's hold on power.

Officials from China's southern Guangdong province are reported to have gambled away more than $3m (£2m) of public money in recent years.

Chinese