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Earlier this month, figures showed that China's manufacturing sector grew in March for the first time in six months. The purchasing managers index from the state-sanctioned China Federation of Logistics and Purchasing rose to 52.4 from February's figure of 49. Any figure above 50 indicates an expansion in the manufacturing sector.

Manufacturing accounts for about 40% of China's economy and has been hit hard by falling demand for its goods in recession-hit western economies. In fact, Chinese exports plunged by more than a quarter in February from a year ago. Exports dropped by 25.7% to $64.9bn (£47.3bn) compared with the same month a year earlier.

In the final three months of last year, China's economy expanded by 6.8% from a year earlier - below the 8% that officials view as the level needed to keep unemployment in check and avoid social unrest. Overall growth in 2008 stood at 9% - the first time since 2002 that the economy has expanded at a single-digit pace.

Mr Wen has announced a target of 8% growth for China's economy in 2009, but many analysts believe the figure will be closer to 5%. In fact, his comments on positive signs of recovery do not chime with the views of some analysts, who believe China will continue to struggle during the global economic slowdown.

The commission expects inflation to fall well below the European Central Bank's target of 2%. It projects inflation to slow to 0.4% this year from 3.3% in 2008, and to rise to only 1.2% in 2010.

Germany, Europe's biggest economy, is expected to contract 5.4% this year, while the UK and Italy are expected to shrink by between 4% and 4.5%. However the once-booming Irish economy will see a 9% drop and Latvia will shrink by 13.1%, the commission said.

The original statement caused a storm in Israel and Europe after it was released last Monday. According to the statement, the Commission believes Israel's settlement policy is strangling the Palestinian economy and makes the Palestinian government more dependent on foreign aid – the burden of which falls on the European taxpayer. The European Union is one of the largest donors to the Palestinian Authorit

According to the EU, expropriation of fertile land for Israeli settlements, roads that serve only settlers, and West Bank checkpoints help constrain Palestinian economic growth and make the Palestinian government more dependent on aid.

Defense Minister Ehud Barak called the Commission out for ignoring a recent World Bank report indicating an improvement in the Palestinian economy. "The Mideast Quartet (US, Russia, EU and the UN) welcomed Israel's plans to improve the Palestinian economy, and recognizes Israel's right to security," the Defense Ministry said.   "Thanks to the cooperation between Israel and the Palestinian Authority, 140 (West Bank) roadblocks have been removed over the past few months. These measures may double the growth rate of the Palestinian economy from 5 to 10%. Unfortunately, all of these details were omitted from the European Commission's statement."

But while the confrontation on the European front has abated – the US on Wednesday reiterated its demand to see a complete freeze on settlement construction.   State Department spokesman Ian Kelly dismissed a report on Wednesday that it had agreed to let Israel build about 2,500 housing units already under construction in West Bank settlements.   "That report in that Israeli media outlet is inaccurate," said after the Maariv newspaper reported that Minister Barak and US envoy George Mitchell had struck such a deal.

Under the arrangement reached in London on Monday, Maariv reported, Israel would be allowed to continue work on about 700 buildings already under construction on the occupied West Bank, or about 2,500 units.

But Kelly said "the bottom line" for US President Barack Obama's administration has not changed, "that all parties in the region have to honor their obligations.   "And you know what our position is regarding settlements... This activity has to stop. This is laid out in the roadmap. So the reports are inaccurate," Kelly said.

He characterizes Greece's banking sector as being "basically sound" and "in considerably better condition" than those in other EU countries and in the United States. He notes that Greece was the first EU country to provide a government guarantee for personal savings up to a total of €100,000.

now the European Commission has instigated disciplinary proceedings, because Athens has exceeded the euro zone budget deficit limit of 3 percent for the third time in a row. The results of audits carried out by Brussels look very different from the information in Livadas's glossy brochures. In EU statistics, Greek government debt is listed as amounting to 94 percent of the country's gross domestic product. Italy is the only other euro zone country which has a higher level of government debt. Greece also has the lowest credit rating of all the euro zone countries. It has to finance its government debt under terms which are worse than for any other euro zone country, with the exception of Malta.

He explains that in 2008 his country's economy expanded by 3.2 percent, "one of the highest growth rates in the euro zone." Over the past four years, he says, economic growth in Greece has been twice as high as the overall average in the currency union countries.

Georgios Provopoulos, the governor of the Bank of Greece, the nation's central bank, warned his countrymen against "self-satisfaction" and spoke of a looming danger of national bankruptcy. And Greece has still to feel the full effects of the global recession.

"The negative factors you see here are all leftovers from the past," says one EU diplomat, adding that most of them are homegrown. Economic experts are anxiously waiting to see what's going to happen this summer. They fear there could be a decline in the tourism sector, one of the most important pillars of growth in the Greek economy, accounting for 17 percent of gross domestic product. The volume of tourist bookings from the United States is reported to have dropped by up to 50 percent. The number of British vacationers, some 3 million annually in the past, alongside 2.3 million Germans, is expected to shrink by up to 30 percent.

The situation of banks that invested in Eastern Europe and in the Balkans is uncertain. Greek financial institutions invested billions of euros in bank takeovers or in setting up their own branches in Romania, Bulgaria, and Serbia. Given that the value of the national currencies in some of those countries has fallen dramatically, what were originally seen as attractive investments in developing economies could well turn out to be huge losses.

That's what the crisis looks like in Greece. "Nobody wants to see it, but everybody is afraid of it," says Kalliope Amyg, a young political scientist. "The country is dancing on a volcano."

Stiglitz: The banks that survived 80 years ago continued to lend money. Today many banks aren't lending money anymore, above all the large investment banks. This will deepen the crisis.

SPIEGEL: The US government's emergency plan is supposed to prevent this, though. The banks receive money from the state so they can continue to give loans. Stiglitz: That's the idea, but it doesn't work. We're just throwing money at them and they pay billions of it out in bonuses and dividends. We taxpayers are being robbed for all intents and purposes in order to reduce the losses that some wealthy people bear. This has to be changed.

SPIEGEL: … and let them go bankrupt? Stiglitz: No, they have to be saved, because the consequences to the monetary system would be incalculable. But as a countermeasure, these institutions have to be nationalized, which even Alan Greenspan is now demanding. Then the government can close those business segments that have nothing to do with lending and make sure that the banks no longer organize esoteric stock deals that they themselves do not understand.

SPIEGEL: Washington sees it that way, too. In particular, it wants countries with strong exports, like Germany, to offer further economic stimulus packages. Do you think that's justified?

Absolutely. Export surpluses are counterproductive in times of economic crisis. They have to be reduced through economic stimulus programs, for example.

I propose that countries with a positive trade balance should stream part of their surplus to the International Monetary Fund. This can then stimulate the economy in developing countries or prevent the economy from collapsing in Eastern Europe.

The Americans have always been masters at changing a supposed regulation measure into further deregulation.

Vague low-carbon language and climate change negotiations in Copenhagen in December were relegated to two paragraphs at the communique's end.

Some critics also pointed out that the summit failed to produce a co-ordinated plan to purge the global banking system of billions of dollars of toxic assets, and suggested that regulation of the financial industry should have gone further.

Brown said that the existing agreed fiscal stimulus will amount to $5tn by 2010, and the measures will raise world output by 4% by the end of next year.

The prime minister also won agreement from other G20 world leaders that the International Monetary Fund will monitor the existing stimulus,

Overall, the resources of the IMF will be trebled from $250bn to $700bn, following the lifting by the US of years of opposition. In a sign of the shift in world power, China agreed to provide $40bn of the new loans given to the IMF, with more to come from Saudi Arabia.

At the centre of the deal was a six-point plan:• Reform of the global banking system, with controls on hedge funds, better accounting standards, tighter rules for credit rating agencies, and immediate naming-and-shaming of tax havens that fail to share information.• A global common approach to dealing with toxic assets that impair the ability of banks to lend.• A $1.1tn package to supplement the $5tn stimulus to the global economy by individual countries. The $1.1tn will allow the IMF, the World Bank and others to increase lending to vulnerable countries. There will be a tenfold increase to $250bn in the IMF's facility allowing members to borrow from other countries' foreign currency reserves.• More power for leading developing countries within the IMF and World Bank, to end the stranglehold of the US and Europe on their top jobs.• $200bn of trade finance over two years to help reverse the steepest decline in world trade since 1945, with cash from a range of public and private sources.• A pledge that the fiscal stimulus, including the sale of gold by the IMF due to raise $6bn, will give help to the poorest nations and create green jobs.

Nicolas Sarkozy said the summit meant that the era of secrecy by banks was over; "great progress" had been made, he said, and the page had been turned on the economic model which had dominated since Bretton Woods in 1944 created the world's institutional framework."Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model. It's not my place to criticise it, it has its advantages [but] clearly today a page has been turned," he said.

The summit's biggest loser may have been the fight against climate change. Diplomatic sources said China led the opposition to green language in the final communique. David Norman, the WWF campaigns director, claimed that the summit had been "a huge missed opportunity".

China's communist rulers have said they are prepared to offer more stimulus spending in order to achieve the 8% growth target. But the bank said this may not be the right approach and the government should nurture reserves in case growth falls further.

According to the latest World Bank global forecasts, published in December, the world economy is set to expand at a weak annual rate of 0.9% in 2009, with a 0.1% contraction in developed economies offset by growth in developing countries of 4.5%. A Chinese government think tank this month forecast first-quarter growth would slow to 6.5%, from a 6.8% pace in the fourth quarter last year.

The issue is not less growth, but the right kind of growth. Either our children will pay a very high price, because they will have run out of fish and the rainforests will be gone, or we are prepared not to ignore the costs today and accept somewhat higher prices. This is really the issue at the climate protection talks. Although the heading is climate protection, there is an unofficial agenda that reflects the economic interests of those living today and the economic interests of those want to live better lives tomorrow. We have to begin talking about this openly instead of covering it up.

SPIEGEL: Have you thought about how your ministry could be restructured in the future? Gabriel: I think a Ministry of Climate, Energy and the Environment would be the right thing. Energy and environmental policy belong together, under one roof.

Mr. Obama will meet with leaders from the region this weekend. They will discuss the economic crisis, including a plan to replenish the Inter-American Development Bank, a Washington-based pillar of clout that has suffered losses from the financial crisis.

Meanwhile, China is rapidly increasing its lending in Latin America as it pursues not only long-term access to commodities like soybeans and iron ore, but also an alternative to investing in United States Treasury notes.

One of China’s new deals in Latin America, the $10 billion arrangement with Argentina, would allow Argentina reliable access to Chinese currency to help pay for imports from China. It may also help lead the way to China’s currency to eventually be used as an alternate reserve currency. The deal follows similar ones China has struck with countries like South Korea, Indonesia and Belarus.

As the financial crisis began to whipsaw international markets last year, the Federal Reserve made its own currency arrangements with central banks around the world, allocating $30 billion each to Brazil and Mexico. (Brazil has opted not to tap it for now.) But smaller economies in the region, including Argentina, which has been trying to dispel doubts about its ability to meet its international debt payments, were left out of those agreements.

Details of the Chinese deal with Argentina are still being ironed out, but an official at Argentina’s central bank said it would allow Argentina to avoid using scarce dollars for all its international transactions. The takeover of billions of dollars in private pension funds, among other moves, led Argentines to pull the equivalent of nearly $23 billion, much of it in dollars, out of the country last year.

China is also seizing opportunities in Latin America when traditional lenders over which the United States holds some sway, like the Inter-American Development Bank, are pushing up against their limits.

Just one of China’s planned loans, the $10 billion for Brazil’s national oil company, is almost as much as the $11.2 billion in all approved financing by the Inter-American Bank in 2008. Brazil is expected to use the loan for offshore exploration, while agreeing to export as much as 100,000 barrels of oil a day to China, according to the oil company.

The Inter-American bank, in which the United States has de facto veto power in some matters, is trying to triple its capital and increase lending to $18 billion this year. But the replenishment involves delicate negotiations among member nations, made all the more difficult after the bank lost almost $1 billion last year. China will also have a role in these talks, having become a member of the bank this year.

In February, China’s vice president, Xi Jinping, traveled to Caracas to meet with President Hugo Chávez. The two men announced that a Chinese-backed development fund based here would grow to $12 billion from $6 billion, giving Venezuela access to hard currency while agreeing to increase oil shipments to China to one million barrels a day from a level of about 380,000 barrels

Mr. Chávez’s government contends the Chinese aid differs from other multilateral loans because it comes without strings attached, like scrutiny of internal finances. But the Chinese fund has generated criticism among his opponents, who view it as an affront to Venezuela’s sovereignty. “The fund is a swindle to the nation,” said Luis Díaz, a lawmaker who claims that China locked in low prices for the oil Venezuela is using as repayment.

“This is China playing the long game,” said Gregory Chin, a political scientist at York University in Toronto. “If this ultimately translates into political influence, then that is how the game is played.”

Announcing the GDP figure, the National Bureau of Statistics (NBS) said that export demand had dropped sharply, cutting into company profits, reducing government revenues and raising unemployment.

China experienced double-digit growth from 2003 to 2007, and recorded 9% growth in 2008. Analysts said the first-quarter drop in growth was in line with expectations.

But other data offered by the government suggested a tentative recovery may already be under way. "Government figures suggest China's economic performance will continue to improve during the remaining months of this year," said the BBC's Michael Bristow in Beijing.

Industrial output expanded 5.1% in the first quarter. It was up 8.3% year-on-year in March, against 3.8% in January and February. Fixed asset investment on items such as new factories and equipment was up 28.6% in March from 26.5% in February. Spending on property development grew by 4.1% in the first quarter, and retail sales remained strong with a 14.7% growth during March.

"Most of the indicators are better than earlier market expectations, although the annual GDP growth in the first quarter is a historical low," said Xing Zhqiang, analyst at China International Capital Corporation in Beijing.

"We expect that the most difficult time for China's economy has passed, as the surge in investment has partly offset the negative impact from declining exports."

China has started to implement a 4 trillion yuan ($585bn, £390bn) stimulus package to counter the impact of the global slowdown, and this package has been seen as helping to spur lending in the first three months of the year.

"The overall national economy showed positive changes, with better performance than expected," the NBS said. It said that urban per-capita incomes were up 11.2% from a year earlier in real terms and that rural per-capita incomes were up 8.6%. The consumer price index (CPI), China's main gauge of inflation, fell 0.6% in the first quarter of 2009 from a year earlier, according to the bureau.

Iran is not simply a medium-sized regional power that can be ordered around at will. Ironically, America's disastrous war in Iraq has allowed its fierce adversaries in Tehran to benefit from a massive shift of power in the Middle East.

Before his ascent to the office of president, not even diplomats stationed in Tehran and familiar with all of the ins and outs of Iranian politics were familiar with this short man with the sparse beard and piercing eyes. The fiery revolutionary, hardworking to the point of exhaustion and filled with contempt for earthly wealth, rose to power from humble beginnings and became the hope of all "Mostasafin," the disenfranchised millions without whom the Islamic Republic probably would not exist today and for whom Ahmadinejad has fashioned himself into an Iranian Robin Hood.

This places the Americans before the virtually impossible task of joining forces with Iran to resolve the classic Middle East conflict and its 30-year conflict with Tehran itself. For this reason, the Iraq question is also becoming increasingly urgent for Washington.

Obama knows that the United States could derive substantial benefits from cooperation with Tehran. Without Iran, for example, it will be almost impossible to bring peace to Afghanistan in the long term. In Afghanistan and Pakistan -- the center of conflict that Washington describes in its new strategic concept as a single unit known as "AfPak" -- the Americans and Shiite Iran have many interests in common. Tehran's rulers battled the Sunni Taliban radicals, whom they have always seen as dangerous neighbors and ideological foes, before the Americans did.

And Tehran, with the world's second-largest natural gas reserves and its third-largest oil reserves, has the capacity to do a great deal of damage to the international economy -- or help it overcome the global economic crisis.

Conversely, rapprochement with the United States and Europe would also bring enormous benefits to the Iranians. Without know-how from the West, the country will hardly manage to achieve the modernization it needs so urgently. With inflation approaching 30 percent and real unemployment exceeding 20 percent (12 percent, according to official figures), and more than a million drug addicts -- a distressing world record of addiction -- the country faces practically insurmountable problems.

Whether the internally divided Palestinians will manage to come to terms and form a unified government for the Gaza Strip and the West Bank is no longer in the hands of the inconsequential negotiators in Cairo, but will be decided instead by Hamas's patrons in Tehran. Tehran also decides whether the Lebanese Hezbollah or Hamas's extremists use primarily words to express their hostility toward Israel or, as is currently the case, resume their bloody terrorist attacks instead.

Ahmadinejad feels obligated to the permanently downtrodden members of society. As if he were one of them, he campaigned for president four years ago in Tehran's massive poor neighborhoods, traveled to the country's most remote places and promised the underprivileged their share of Iran's riches. He told them that he would fill their empty plates with the proceeds from the sale of oil, and that he would declare war on corruption and nepotism. The "era of oppression, hegemonic regimes, tyranny and injustice has reached its end," Ahmadinejad told supporters after his election.

But the political achievements of President Ahmadinejad have been more miserable than stellar. In addition to isolating his country even further in the world, he has ruined its economy with his chaotic economic policies. In the devastating assessment of Ali Larijani, the president of the Iranian parliament and Ahmadinejad's biggest domestic rival, whom he previously removed from his position as Iran's chief nuclear negotiator with the West: "The confusion is the result of the government arbitrarily dissolving offices and dismissing experts, ignoring parliamentary resolutions and stubbornly going its own way."

Nevertheless, it is quite possible that this man, who has probably done more damage to his country than any other president in the 30-year history of the Islamic Republic, will enter a second term this summer -- simply because he lacks a convincing and courageous opponent.

Moussavi is of a significantly more robust nature than Khatami. As prime minister during the years of the Iraq war, he successfully managed the country's wartime economy. Critics note, however, that Moussavi's tenure was marked by a sharp rise in arrests and repression. He has not held any public office in 20 years and is virtually unknown among younger Iranians, who make up about 60 percent of the population.

On the surface, the elegant Moussavi would undoubtedly represent Iran more effectively on the international stage than Ahmadinejad. He appears to be more open to negotiations with the Americans. And yet, when it comes to the central nuclear conflict, the new candidate is just as obstinate as the current president. At a press conference in Tehran just last Monday, he noted that he too would not back down on the issue.

Which candidate the powerful religious leader Khamenei ends up supporting will likely be the decisive question. When Ahmadinejad came into office, he kissed Khamenei's hand. The two men were long considered extremely close ideologically, although since then Khamenei has more or less openly criticized Ahmadinejad's economic policies. Only recently, however, the religious leader spoke so positively about the president that many interpreted his words as an endorsement of his candidacy. Many observers of Iranian politics believe Ahmadinejad, because of his lasting popularity in rural areas, will be elected to a second term.

There are no questions that the Iranian president does not answer with questions of his own. He insists, most of all, on a few core concepts. One of them is justice, but he defines what justice is. Another is respect. He claims that he and his country are not afforded sufficient respect. This desire for recognition seems almost insatiable.

In Ahmadinejad's view, "hagh chordan," or the act of trampling on the rights of the Iranians, is a pattern that constantly repeats itself and comes from all sides, leading to a potentially dangerous mix of a superiority and an inferiority complex -- but not the irrationality of which the president is so often accused, especially by the Israelis.

Kavi Chongkittavorn, a columnist and editor at The Nation, an English-language newspaper, said that despite the numbers in the streets, Mr. Thaksin’s challenge was fading in strength.

Wearing the red shirts of Thaksin loyalists, the demonstrators streamed into Bangkok throughout the day from his political strongholds in the rural north and northeast and by early evening the police estimated the crowds at 100,000.

The protests were reminiscent of the political paralysis that gripped Thailand last year. Those demonstrations, which were sometimes violent, forced the previous government to abandon Government House, paralyzed the workings of the administration and eventually shut down Bangkok’s two major airports. The protests were led by the “yellow shirts” of the People’s Alliance for Democracy.

The protests ended in December when — with the airports blockaded, tourism crippled and the economy at a virtual standstill — the Constitutional Court found the governing party guilty of election fraud. The court ruling led eventually to Mr. Abhisit’s selection as prime minister by Parliament in December.

The dismal state of the Thai economy has been another cause of anger among protesters. Just this week the World Bank revised its growth prospects downward: The bank now expects a 2.7 percent decline in Thailand’s gross domestic product in 2009, the country’s first contraction in more than a decade.