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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.”

"All this crossfire shows what I really stand for is our own national interest," she says. Then she is quick to add: "The Russians worry that we are trying to privatize our pipelines by stealth, but that's not the case and would be illegal. We have to reassure them on that."

"There is no doubt we want to join the EU. At least 60 percent of our public opinion favors this option, and we are now closer to this goal than, say, one year ago. This policy must be the essence of all our actions," she says. But, she warns, it cannot succeed by confronting Moscow or ignoring its concerns.

As it struggles to stay afloat, GM has deepened cuts that will include 23,000 job losses by 2011, the closure of 16 of its 47 factories in the US and a 42% drop in the number of dealers selling its vehicles.

GM announced it was shutting its 83-year-old Pontiac marque as it slims its portfolio of brands to focus on just four names in the US: Chevrolet, Cadillac, Buick and GMC. The gas-guzzling Hummer and Sweden's Saab will either be sold or closed by next year but GM made it clear that Britain's Vauxhall brand was not under threat.

Under the company's plan, the US treasury and the United Auto Workers' union would get 89% of the company between them. In return, the government would write off half of the emergency lending extended to GM by US taxpayers.The union's shares would replace the billions of dollars due to be pumped into a trust fund to cover employees' healthcare.

GM has offered a 10% stake to bondholders, who are owed $27bn – a tough proposition to swallow. For each $1,000 of loan notes, bondholders would get 225 shares, worth little more than $550 at today's market price.

The Obama administration insisted that private-sector creditors should get no more than this slim return, demanding that unions and taxpayers receive the lion's share of the company. But in order to proceed, the proposal must be accepted by an overwhelming majority of 90% of bondholders by a deadline of 1 June.

An ad hoc committee representing bondholders last night vigorously objected to the carve-up: "We believe the offer to be a blatant disregard of fairness for the bondholders who have funded this company and amounts to using taxpayer money to show political favouritism of one creditor over another."

Rebecca Lindland, an analyst at IHS Global Insight, said many bondholders were likely to believe they could get a better deal under a bankruptcy arrangement: "The Obama administration may be more pro-union than a bankruptcy judge but it's really a roll of the dice."

GM's smaller rival, Chrysler, has a deadline of Thursday to strike a rescue deal with Italy's Fiat without which the US government has said it will withdraw financial support. Daimler assisted the process last night by in effect writing off its 19.9% stake in Chrysler and $1.9bn in loans.

For GM, the challenge is to shrink to a scale where it can break even with sales of 10m cars in the US annually, rather than the previous rate of 15m to 17m.

Last week, the Economist called for the United States to reduce its aid to Israel if the Netanyahu government continues to reject a two-state solution.  The Boston Globe offered a similar view earlier this week, advising Obama to tell Netanyahu "to take the steps necessary for peace or risk compromising Israel's special relationship with America." A few days ago, Ha’aretz reported that the Obama Administration was preparing Congressional leaders for a possible confrontation with the Netanyahu government.

We already know what it means for the United States to put pressure on the Palestinians, because Washington has done that repeatedly -- and sometimes effectively -- over the past several decades.  During the 1970s, for example, the United States supported King Hussein’s violent crackdown on the PLO cadres who were threatening his rule in Jordan. During the 1980s, the United States refused to recognize the PLO until it accepted Israel’s right to exist.  After the outbreak of the Second Intifada, the Bush administration refused to deal with Yasser Arafat and pushed hard for his replacement. After Arafat's death, we insisted on democratic elections for a new Palestinian assembly and then rejected the results when Hamas won. The United States has also gone after charitable organizations with ties to Hamas and backed Israel’s recent campaign in Gaza.

In short, the United States has rarely hesitated to use its leverage to try to shape Palestinian behavior, even if some of these efforts -- such as the inept attempt to foment a Fatah coup against Hamas in 2007 -- have backfired.

The United States has only rarely put (mild) pressure on Israel in recent decades (and never for very long), even when the Israeli government was engaged in actions (such as building settlements) that the U.S. government opposed.  The question is: if the Netanyahu/Lieberman government remains intransigent, what should Obama do?

4. Downgrade existing arrangements for “strategic cooperation.”  There are now a number of institutionalized arrangements for security cooperation between the Pentagon and the Israel Defense Forces and between U.S. and Israeli intelligence. The Obama administration could postpone or suspend some of these meetings, or start sending lower-grade representatives to them.

2. Change the Rhetoric. The Obama administration could begin by using different language to describe certain Israeli policies.  While reaffirming America’s commitment to Israel’s existence as a Jewish-majority state, it could stop referring to settlement construction as “unhelpful,” a word that makes U.S. diplomats sound timid and mealy-mouthed.  Instead, we could start describing the settlements as “illegal” or as “violations of international law.”

U.S. officials could even describe Israel’s occupation as “contrary to democracy,” “unwise,” “cruel,” or “unjust.”  Altering the rhetoric would send a clear signal to the Israeli government and its citizens that their government’s opposition to a two-state solution was jeopardizing the special relationship.

3. Support a U.N. Resolution Condemning the Occupation.  Since 1972, the United States has vetoed forty-three U.N. Security Council resolutions that were critical of Israel (a number greater than the sum of all vetoes cast by the other permanent members)

If the Obama administration wanted to send a clear signal that it was unhappy with Israel’s actions, it could sponsor a resolution condemning the occupation and calling for a two-state solution.

1. Cut the aid package? If you add it all up, Israel gets over $3 billion in U.S. economic and military aid each year, which works out to about $500 per Israeli citizen. There’s a lot of potential leverage here, but it’s probably not the best stick to use, at least not at first. Trying to trim or cut the aid package will trigger an open and undoubtedly ugly confrontation in Congress (where the influence of AIPAC and other hard-line groups in the Israel lobby is greatest). So that’s not where I’d start.

There is in fact a precedent for this step: after negotiating the original agreements for a “strategic partnership,” the Reagan administration suspended them following Israel’s invasion of Lebanon in 1982. Today, such a step would surely get the attention of Israel’s security establishment.

5. Reduce U.S. purchases of Israeli military equipment. In addition to providing Israel with military assistance (some of which is then used to purchase U.S. arms), the Pentagon also buys millions of dollars of weaponry and other services from Israel’s own defense industry. Obama could instruct Secretary of Defense Robert Gates to slow or decrease these purchases, which would send an unmistakable signal that it was no longer "business-as-usual." Given the battering Israel’s economy has taken in the current global recession, this step would get noticed too.

6. Get tough with private organizations that support settlement activity. As David Ignatius recently noted in the Washington Post, many private donations to charitable organizations operating in Israel are tax-deductible in the United States, including private donations that support settlement activity. This makes no sense: it means the American taxpayer is indirectly subsidizing activities that are contrary to stated U.S. policy and that actually threaten Israel’s long-term future.  Just as the United States has gone after charitable contributions flowing to terrorist organizations, the U.S. Treasury could crack down on charitable organizations (including those of some prominent Christian Zionists) that are supporting these illegal activities. 

7. Place more limits on U.S. loan guarantees. The United States has provided billions of dollars of loan guarantees to Israel on several occasions, which enabled Israel to borrow money from commercial banks at lower interest rates.  Back in 1992, the first Bush administration held up nearly $10 billion in guarantees until Israel agreed to halt settlement construction and attend the Madrid peace conference, and the dispute helped undermine the hard-line Likud government of Yitzhak Shamir and bring Yitzhak Rabin to power, which in turn made the historic Oslo Agreement possible.

8. Encourage other U.S. allies to use their influence too. In the past, the United States has often pressed other states to upgrade their own ties with Israel.  If pressure is needed, however, the United States could try a different tack.  For example, we could quietly encourage the EU not to upgrade its relations with Israel until it had agreed to end the occupation.

most of these measures could be implemented by the Executive Branch alone, thereby outflanking die-hard defenders of the special relationship in Congress.  Indeed, even hinting that it was thinking about some of these measures would probably get Netanyahu to start reconsidering his position.

Most importantly, Obama and his aides will need to reach out to Israel’s supporters in the United States, and make it clear to them that pressing Israel to end the occupation is essential for Israel’s long-term survival.

He will have to work with the more far-sighted elements in the pro-Israel community -- including groups like J Street, the Israel Policy Forum, Brit Tzedek v'Shalom,  and others

In effect, the United States would be giving Israel a choice: it can end its self-defeating occupation of Palestinian lands, actively work for a two-state solution, and thereby remain a cherished American ally.  Or it can continue to expand the occupation and face a progressive loss of American support as well as the costly and corrupting burden of ruling millions of Palestinians by force.

Indeed, that is why many—though of course not all--Israelis would probably welcome a more active and evenhanded U.S. role. It was former Prime Minister Ehud Olmert who said "if the two-state solution collapses, Israel will face a South-Africa style struggle for political rights." And once that happens, he warned, “the state of Israel is finished."

The editor of Ha’aretz, David Landau, conveyed much the same sentiment last September when he told former Secretary of State Condoleezza Rice that the United States should "rape" Israel in order to force a solution. Landau's phrase was shocking and offensive, but it underscored the sense of urgency felt within some segments of the Israeli body politic.

He won re-election in 2006, becoming the first Hungarian premier since the end of communism in 1989 to hold on to power.

But week of riots erupted when he revealed on a leaked tape in September 2006 that he had lied about the nation's poor finances to win re-election.

His popularity fell to record lows due to tax hikes and spending cuts implemented in the last three years, say analysts.

Correspondents say the Communist Party fears that if annual growth slips below 8%, there will be social instability.

He said he was worried, however, about the safety of the huge amount of China's foreign exchange reserves invested in US government bonds. "We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Mr Wen said

Nearly half of China's $2tn in currency reserves is invested in US treasury bills and other government-affiliated notes, the Associated Press news agency said.

"Tibet's peace and stability and Tibet's continuous progress have proven the policies we have adopted are right," Mr Wen said.

Mr Wen also pressed France to clarify its position on Tibet, saying this was necessary to improve relations. French President Nicolas Sarkozy incurred Beijing's wrath when he met the Dalai Lama in December last year. "The problems that have arisen between China and France arose mainly because the French leader met the Dalai Lama in a prominent way, and this not only involved the core interests of China, it also seriously harmed the feelings of the Chinese people," Mr Wen said.

Pakistan objects to missile strikes by pilotless U.S. drones on militants in Pakistan, saying they violate its sovereignty and are counter-productive in fighting terrorism. Pakistan has also been angered by U.S. accusations elements in its military's Inter-Services Intelligence agency had contact with, or even provided support to, militants.

Pakistan for years used Islamists to further objectives in Afghanistan and Kashmir, which both Pakistan and India claim, but it has denied accusations it has maintained support.

Pakistan's Dawn newspaper said recently a condition would be included in the U.S. aid bill requiring Pakistan to stop support to any person or group aiming to hurt India.

Another condition to be included in the U.S. aid bill, Dawn reported, was that Pakistan ensures access to individuals suspected of involvement in nuclear proliferation.