Barroso is talking to Downing Street about a replacement now. It's not Hoon, and not Hewitt but it will be a woman. If Beckett is going back to the cabinet, I am rather left scratching my head.

UPDATE 10:45AM: The other women at cabinet level at the moment are Hazel Blears, Jacqui Smith, Yvette Cooper and Baroness Ashton. Outside the cabinet, Baroness Vadera is very close to Brown and has a strong business background. Any other thoughts?

UPDATE: 01:00PM: Baroness Ashton is confirmed as Mandelson's replacement.

Politicians from Germany's governing parties said bank managers should be held responsible if their institution gets into trouble. Meanwhile, Berlin called for a solution after the collapse of Hypo Real Estate's bailout.

"In the US, managers are held liable with their private assets. We should also do that in Germany," Andrea Nahles, deputy chairwoman for the Social Democratic Part, told the Bild am Sonntag newspaper on Sunday, Oct. 5.

Hans-Peter Friedrich from the Christian Social Union -- sister party to Chancellor Angela Merkel's CDU -- also said managers should be taken to task, but added that personal liability should be limited to twice the annual salary.

"It can't be that managers, of banks for example, are only rarely held liable for damage they cause," he said.

German Foreign Minister Frank-Walter Steinmeier said further reforms were necessary to put Turkey on the path to European Union membership. He also urged the country to do more to resolve conflicts in the Middle East.

Steinmeier on Saturday, Oct. 4, said Turkey had achieved much in modernizing the country, "but perhaps still not enough to warrant a final decision for accession." The country needed to make progress in ensuring freedom of expression and the rights of women and children.

He was speaking in Hanover on Hannah Arendt Day, a commemoration of the Jewish philosopher born in the city in 1906. The event this year posed the question: Where is Turkey going?

The Spanish government has approved four decrees aimed at recognizing the suffering of the leftist victims of the 1936-39 civil war and the subsequent dictatorship of General Francisco Franco.

Those jailed, tortured or forced to work in labor camps, their relatives, or relatives of executed people will be able to apply for a document which gives them no monetary rights, but constitutes the first official recognition of their status as victims.

In addition, certain families which have not already received any economic damages under other laws can also seek a compensation of 135,000 euros ($185,000).

Public rail and urban transport in Brussels will be on strike for 24 hours starting Sunday 5 October, 10 pm. Thalys, Eurostar, Belgian railways and Brussels local transport are affected by the nationwide industrial action in Belgium.

NADARBAZEVI, Georgia: Russian troops began dismantling positions Sunday in the so-called security zones inside Georgia they have occupied since August's brief but intense war, a Georgian Interior Ministry official said.

The moves came as Russia faced a Friday deadline for pulling back its troops under terms of a deal brokered by French President Nicolas Sarkozy on behalf of the European Union. Hundreds of EU observers began monitoring Russia's compliance with the pact last week.

Russia and Georgia went to war in early August after Georgia launched a massive barrage on the capital of South Ossetia, one of two Georgian separatist regions where Russia has troops stationed as peacekeepers. Russian forces then declared what it called a security zone roughly seven kilometers (four miles) deep inside Georgia south of South Ossetia and the other separatist region, Abkhazia.

The EU-brokered agreement obliges Russia to pull its troops out of the zones by Friday, but Russia says it plans to keep thousands of troops inside Abkhazia and South Ossetia. Russia recognized the independence of both regions after the fighting, a moved denounced by Georgia and the West; only Nicaragua and the Hamas government in Gaza have followed suit with recognition so far.

But sackings and mandatory medical checks may not be enough to change a culture of calling in sick and moonlighting

A revolution is under way in Italy: civil servants are turning up for work.

Silvio Berlusconi's minister for public administration, Renato Brunetta, a professor of labour economics sometimes described as the only Thatcherite in Italy, was crowing on radio last week about his success in persuading the "millions" of civil servants he claims are fannulloni, literally "do-nothings", to mend their ways.

"In the past few months there has been a drop of nearly 50 per cent in absence from work on account of sickness [among public employees]," he claimed. And, referring to the southern Italian saint celebrated for healing the incurably sick, he boasted: "I'm better than Padre Pio."

The son of a poor Venetian pedlar, Mr Brunetta, who is even shorter than Mr Berlusconi, is one of the more impressive performers in the media mogul's Cabinet, and made a blistering start earlier this year when he launched a campaign to cure chronic skiving among Italy's 3.65 million state employees.

Gordon Brown's reshuffle measures up neither to the demands of the hour nor the challenge posed by the Conservative Party

Gordon Brown was hailed as the great strategist but Peter Mandelson's recall reveals the Prime Minister as simply tricksy. The Government is bereft of policy substance - outflanked for the second conference season running by George Osborne, who again identified an unpopular tax and announced a plan to which Alistair Darling will have to respond. So Brown resorted to personnel changes as a way of delivering a shock to expectations. I suspect that it will end in tears, but not for the reasons that dominated the early reaction of journalists unable quite to believe their luck in having the Prince's tail to tweak again.

Peter Mandelson is far from the scheming and manipulative politician of popular caricature. I defer to no one in my respect for his ability as a minister. He was admired and even loved by civil servants: clever, direct, hard-working and fun to work for. As European Commissioner he has proved himself a tireless negotiator and a fine advocate of free and fair markets. The Doha trade liberalisation talks failed despite his efforts, not because of them.

No, the downsides of Mandelson's appointment do not arise out of who he is but of who Brown is. The Prime Minister thinks he has done something clever. Gordon Brown knows that Mandelson's reputation with the media and the general public is unflattering. He knows that he has offended the Daily Mail. He knows that most voters will regard Mandelson's return with bafflement tinged with hostility. But he thinks that this is a price worth paying for the advantages. Of course, those advantages include Mandelson's experience as a player on the global economic stage. But Brown also thinks that he is buying off the Blairites in the Government.

DIWANIYAH, Iraq - Poland turned over control of an area south of Baghdad to American troops on Saturday, making it the latest in a string of countries to leave the dwindling U.S.-led coalition.

But even as Polish troops head home from Iraq, their government is boosting troop levels in Afghanistan and preparing for a U.S. missile defense base in Poland.

As a band played Poland's anthem, Polish soldiers hoisted their nation's red and white flag on a parade field at their main base, Camp Echo, just outside of Diwaniyah.

Maj. Gen. Andrzej Malinowski, the top Polish commander in Iraq, then knelt on the gravel-covered field and ceremoniously kissed a sky blue banner with the words "Operation Iraqi Freedom" and the image of a dove.

BERLIN: For more than a year, European data privacy officials have been battling with U.S. Internet search engines, trying to get them to conform to European restrictions on the storage of personal information gleaned from the Web.

Now, as the U.S. titans Google, Microsoft and Yahoo continue to retain personal data beyond the six-month time limit established this year by the European Commission, regulators say their patience is running thin.

"For the moment, Google refuses to submit to European data protection law," said Alex Türk, the French data protection chief, who is also the chairman of a European Commission working group on the issue. "Despite some progress, significant work must still be carried out to guarantee the rights of Internet users and to ensure the respect of their privacy."

The dispute centers on the search engines' practice of collecting demographic details from users, which the Internet companies argue is needed to fine-tune searches, guard against fraud and aim relevant advertising at Web surfers.

BERLIN (AFP) -- Germany extended a blanket guarantee to all private bank deposits Sunday as Chancellor Angela Merkel said her government was scrambling to salvage a rescue plan for the country's fourth biggest bank.
Finance ministry spokesman Torsten Albig told AFP that the unlimited guarantee would cover all Germans' personal deposits as Berlin moved to shore up confidence amid a spreading financial crisis.
Merkel told reporters earlier the government was "pulling out all the stops" to save stricken Hypo Real Estate (HRE) after a banking consortium withdrew from a 35-billion-euro (48-billion-dollar) rescue plan late Saturday.
"The government says today that we will not allow an institution's crisis to become a crisis for the entire system," the conservative leader said.
But hitting back at accusations that the government is preparing to bail out fat cats at average citizens' expense, Merkel warned that "those who did irresponsible business will be held accountable".
"We owe that to the taxpayers in Germany," she said.
In a bid to head off panic withdrawals, Finance Minister Peer Steinbrueck assured that German bank account holders need not worry about losing a "single euro" in the crisis.
"That is an important message intended to create calm and not reactions that would be disproportional and make the current crisis management and crisis prevention even more difficult," he said, flanked by Merkel at the chancellery.
Business daily Handelsblatt said in an advance copy of its Monday issue that the value of the guaranteed savings and checking accounts would total 568 billion euros.

BNP Paribas SA, France's biggest bank, agreed to take control of Fortis in Belgium and Luxembourg for 14.5 billion euros ($19.8 billion), completing a breakup of the lender after a government rescue failed.

BNP Paribas will pay 9 billion euros in stock and 5.5 billion euros in cash for 75 percent of Fortis Bank Belgium, all of the Belgian insurance operations, and 67 percent of Fortis's bank in Luxembourg, the Paris-based bank said in a e-mailed statement today.

Members of the International Atomic Energy Agency have called on Middle Eastern nations to take steps towards establishing a region free of nuclear weapons.

Delegates at the nuclear watchdog's annual general conference in Vienna on Saturday, Oct. 4, adopted a resolution calling on all states in the region to accept IAEA inspections, and to accede and adhere to  the Nuclear Non-Proliferation Treaty (NPT), which bans the development of nuclear arms.

After two days of contentious discussions between Arab and Western countries over the wording of the resolution, 82 nations voted in favor, none against and 13 -- including the United States and Israel -- abstained.

Pending the establishment of a zone free of nuclear weapons, countries should not "develop, produce, test or otherwise acquire nuclear weapons," the resolution said.

U.S. Secretary of State Condoleezza Rice said on Saturday a landmark nuclear trade with India had been completed but she was unable to sign the pact during a visit to New Delhi because of bureaucratic delays back home.

The deal allowing India access to U.S. nuclear fuel, reactors and technology was effectively sealed by the U.S. Congress when the Senate passed it on Wednesday.

It overturned a three-decade ban on nuclear trade with India imposed after it first tested nuclear weapons in 1974. U.S. officials had hoped Rice could sign the accord during her whirlwind one-day trip to India celebrating the pact, which was a top foreign policy priority of President Bush's second term.

But Rice, speaking after talks with her Indian counterpart Pranab Mukherjee, suggested administrative procedures on Capitol Hill had delayed the enabling legislation from getting to Bush for him to sign.

Along with some of Wall Street's most storied firms, a certain vision of capitalism has collapsed. How we restore faith in our brand.

The implosion of America's most storied investment banks. The vanishing of more than a trillion dollars in stock-market wealth in a day. A $700 billion tab for U.S. taxpayers. The scale of the Wall Street crackup could scarcely be more gargantuan. Yet even as Americans ask why they're having to pay such mind-bending sums to prevent the economy from imploding, few are discussing a more intangible, yet potentially much greater cost to the United States--the damage that the financial meltdown is doing to America's "brand."

Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s, when Ronald Reagan was elected president. The first was a certain vision of capitalism--one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth. Reaganism reversed a century-long trend toward ever-larger government. Deregulation became the order of the day not just in the United States but around the world.

WASHINGTON: When Afghan security forces found an enormous cache of heroin hidden beneath concrete blocks in a tractor-trailer outside Kandahar in 2004, the local Afghan commander quickly impounded the truck and notified his boss.

Before long, the commander, Habibullah Jan, received a telephone call from Ahmed Wali Karzai, the brother of President Hamid Karzai, asking him to release the vehicle and the drugs, Jan later told American investigators, according to notes from the debriefing obtained by The New York Times, of which the International Herald Tribune is the global edition. He said he complied after getting a phone call from an aide to President Karzai directing him to release the truck.

Two years later, American and Afghan counternarcotics forces stopped another truck, this time near Kabul, finding more than 50 kilograms, or 110 pounds, of heroin. Soon after the seizure, U.S. investigators told other American officials that they had discovered links between the drug shipment and a bodyguard believed to be an intermediary for Ahmed Wali Karzai, according to a participant in the briefing.

The assertions about the involvement of the president's brother in the incidents were never investigated, according to American and Afghan officials, even though allegations that he has benefited from narcotics trafficking have circulated widely in Afghanistan.

How Risk Models Failed Wall St. and Washington

Thursday, October 2, 2008; Page A23

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The problem is that Wall Street and regulators relied on complex mathematical models that told financial institutions how much risk they were taking at any given time. Since the 1990s, risk management on Wall Street has been dominated by a model called "value at risk" (VaR). VaR attributes risk factors to every security and aggregates these factors across an entire portfolio, identifying those risks that cancel out. What's left is "net" risk that is then considered in light of historical patterns. The model predicts with 99 percent probability that institutions cannot lose more than a certain amount of money. Institutions compare this "worst case" with their actual capital and, if the amount of capital is greater, sleep soundly at night. Regulators, knowing that the institutions used these models, also slept soundly. As long as capital was greater than the value at risk, institutions were considered sound -- and there was no need for hands-on regulation.

Lurking behind the models, however, was a colossal conceptual error: the belief that risk is randomly distributed and that each event has no bearing on the next event in a sequence. This is typically explained with a coin-toss analogy. If you flip a coin and get "heads" and then do it again, the first heads has no bearing on whether the second toss will be heads or tails. It's a common fallacy that if you get three heads in a row, there's a better-than-even chance that the next toss will be tails. That's simply not true. Each toss has a 50-50 chance of being heads or tails. Such systems are represented in the bell curve, which makes clear that events of the type we have witnessed lately are so statistically improbable as to be practically impossible. This is why markets are taken by surprise when they occur.

But what if markets are not like coin tosses? What if risk is not shaped like a bell curve? What if new events are profoundly affected by what went before?

Both natural and man-made systems are full of the kind of complexity in which minute changes at the start result in divergent and unpredictable outcomes. These systems are sometimes referred to as "chaotic," but that's a misnomer; chaos theory permits an understanding of dynamic processes. Chaotic systems can be steered toward more regular behavior by affecting a small number of variables. But beyond chaos lies complexity that truly is unpredictable and cannot be modeled with even the most powerful computers. Capital markets are an example of such complex dynamic systems.

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The more enlightened among the value-at-risk practitioners understand that extreme events occur more frequently than their models predict. So they embellish their models with "fat tails" (upward bends on the wings of the bell curve) and model these tails on historical extremes such as the post-Sept. 11 market reaction. But complex systems are not confined to historical experience. Events of any size are possible, and limited only by the scale of the system itself. Since we have scaled the system to unprecedented size, we should expect catastrophes of unprecedented size as well. We're in the middle of one such catastrophe, and complexity theory says it will get much worse.

The writer was general counsel of Long-Term Capital Management from 1994 to 1999. He works for Omnis Inc., a McLean consultant on national security and capital markets. (My bold.)