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Mogul's former deputy tells how bankers planned real estate transactions to revalue $64m in property at $3.2bn

Allen Stanford used fake accounting to prop up his offshore bank in its waning days as withdrawal requests from investors poured in, Stanford's former top deputy has said.

Faced with a worrying number of withdrawals in 2008, Stanford came up with a plan to make a $600m capital infusion into the bank, said James Davis, Stanford's former chief financial officer and the US government's top witness.

Stanford is on trial in federal court in Houston charged with running a $7bn Ponzi scheme from his bank in Antigua. Prosecutors allege Stanford, who has pleaded not guilty, sold fraudulent certificates of deposit and used the proceeds to buy jets, luxury homes and Caribbean real estate.

In the spring of 2008 Stanford's accountants inflated the value of about 1,500 undeveloped acres in Antigua that Stanford had bought for $64m. The accountants planned a series of property transfers to put the real estate back on the bank's books with a value of more then $3.2bn, Davis told the court.
"No actual cash or assets were going into the bank?" William Stellmach, a federal prosecutor, asked Davis. "No, sir," Davis replied.

The transaction was meant to fill a hole left by Stanford's spending, which became apparent as investors took their money out of the bank, Davis said.
But by the end of December 2008 Stanford International Bank had only $88m in cash, far less than the $1bn it claimed to hold, according to documents Stellmach showed to jurors. The US Securities and Exchange Commission seized Stanford's businesses and assets in February 2009.

Davis, 63, said stress related to keeping the scheme going eventually took a toll on his health, causing him both physical and mental problems. "The fraud that I was participating in was killing me," Davis told the jury.

Stanford, the largest private landowner in Antigua and a onetime 20-20 cricket mogul, was known as "Sir Allen" after being knighted by the island's former prime minister.

Stanford was once considered one of the United States' wealthiest people, with an estimated net worth of more than $2 billion. He's been jailed without bond since being indicted in 2009.

He is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.

Stellmach asked Davis why, after realizing there was fraud, he continued working for the financier.

"I wanted to please Mr. Stanford. I was a coward. I was embarrassed and he signed my paycheck," said Davis, who told jurors he made $14m in salary and bonuses during his employment.

Davis pleaded guilty in 2009 to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. The plea is part of a deal Davis made with the US justice department in exchange for a possible reduced sentence.

Leading doctors voice concerns that reforms will suffocate GPs and jeopardise promised freedom to commission care

Two prominent backers of the coalition's NHS shake-up have joined the growing chorus of critics by claiming that GPs will be "suffocated rather than liberated" by the planned changes.

Dr Charles Alessi and Dr Michael Dixon have helped Andrew Lansley claim credibility for his plans among doctors over the past 18 months by strongly supporting his radical restructuring. They are leading lights in the NHS Alliance and the National Association of Primary Care, two key pro-reform organisations.

But they now fear that the new consortiums of local doctors, which will start commissioning healthcare for patients in England from next year, will not have the freedom that the health secretary has repeatedly pledged. Lansley has attempted to persuade sceptics that his reorganisation will put family doctors in charge of healthcare.

NHS primary care trusts (PCTs) and strategic health authorities (SHAs) are due to be abolished next year.

But the doctors are worried that the GP-led clinical commissioning groups (CCGs), which will replace PCTs, will find themselves unexpectedly under the control of another organisation, the NHA National Commissioning Board (NCB).

In July the NHS chief executive, Sir David Nicholson, said "CCGs will be the engine of the new system" and that the reformed NHS "gives pride of place to clinical leaders". But the reality is that primary care doctors and clinical commissioners will not have the promised ability to make key decisions because the current bureaucracy is simply being replaced by another that is growing up around the NCB, the pair claim.

The Department of Health's latest document about the design of the new board involves "layers of bureaucracy and management, with complex guidelines. The old 'footprint' [of the PCTs and SHAs], ie 50 local offices, remains there, plus four sector outposts, all using a single operating model," the two organisations said in a joint statement .

The fact that many of the staff of the new NCB will simply be staff who have joined from PCTs and SHAs "adds to clinical commissioners' concerns and perceptions that they will be suffocated, instead of liberated, which in our view is fundamental to the success of clinically-led commissioning", they added.

"What we are hearing and seeing are the same old messages and the same old structures, albeit with new nomenclatures", said Alessi, a key figure in a CCG in south-west London.

"If we put the same ingredients into the mix, the likelihood is that we shall deliver the same inefficient environment and outcomes. This is insupportable in an economy of tight financial restraint."

Most CCGs now see the new board as the greatest threat to their effective functioning, added Dixon, a GP in Devon and chair of the NHS Alliance.

The pair's comments are another blow to the health secretary as his health and social care bill prepares to undergo its report stage in the House of Lords, when peers will seek to force the government to accept further amendments to its plans. Labour seized on the men's remarks as further evidence of the growing concerns the bill is causing.

"Things are going from bad to worse for Andrew Lansley. In the last fortnight there has been a deepening crisis of professional confidence in the government's health bill, but until now the health secretary could rely on the support of the NHS Alliance and the National Association of Primary Care," said Andy Burnham, the shadow health secretary.

"Yet the bill's biggest cheerleaders are now lambasting the increasing layers of bureaucracy. Even the health bill's greatest supporters are now concerned that Lansley's plans are so complex and full of worrying uncertainties that they risk thwarting the principle of true clinician-led commissioning."

The British Medical Association also fears CCGs' freedom will be curtailed. "There are significant concerns that CCGs will not have genuine freedoms and sufficient independence to make locally sensitive, locally accountable, patient-focussed decisions," it said.

In a briefing to peers ahead of the report stage it says that, despite ministers agreeing to amend several aspects of the bill, the legislation should still be dropped because it involves too much use of "market forces", and could also affect doctors' relationship with their patients through financial incentives for CCGs.

The Department of Health said: "By handing power and responsibility for choosing and purchasing services to doctors and nurses on the ground, we are shifting the decision making closer to patients and building on the trusted role that GPs and other front line professionals already play throughout the NHS.

"The NHS commissioning Board will provide national standards, but doctors and nurses will have the freedom to make decisions about their patients and their organisations."

Emil Boc says he is quitting to 'release tension' after weeks of protests over austerity measures and alleged corruption

The Romanian prime minister and his cabinet have resigned after weeks of sometimes violent protests over widespread corruption and austerity measures.

Emil Boc said on Monday he was quitting "to release the tension in the country's political and social situation".

During his three-year rule, salaries of state employees were cut by a quarter and VAT increased by five percentage points, while the European debt crisis hit Romania's exports hard.

It was a toxic combination in a country that was already the second poorest in the EU, better off only than Bulgaria, which also joined the union in 2007.

The collapse of Boc's cabinet marks the fall of yet another EU government since the euro crisis started to bite. Since 2009, governments in Slovakia, Slovenia, Greece, Italy, Latvia, Ireland and the Czech Republic have imploded before scheduled elections, with economic woes playing a significant role in each demise. Voters in Hungary, Spain and Portugal also signalled their unhappiness with the fiscal policies of their governments, plumping for new leaders at the ballot box.

President Traian Basescu asked foreign intelligence service head Mihai-Razvan Ungureanu to form a new cabinet. Ungureanu quickly pledged to continue the unpopular economic reforms and his appointment may do little to assuage popular anger.

Basescu named justice minister Catalin Predoiu as interim prime minister until Ungureanu puts his team and plans up for parliament's approval, a vote that will probably come next week.

He will be in charge until the new government is formed over the coming weeks and could potentially hold on to the position until the next general election, in November.

Opposition politicians celebrated Boc's departure and called for early parliamentary elections. "This is a victory for those that demonstrated on the streets," said Crin Antonescu, who heads the opposition Liberal party. The "most corrupt, incompetent and lying government" since the 1989 fall of Ceausescu had gone, he said.

Shortly before his resignation, Boc's approval ratings had dipped below 20%, with thousands of Romanians braving freezing temperatures and heavy snow to protest in towns around the country.

They are angry about low living standards and what they say is widespread corruption in a country where the average wage is less than €350 (£290) a month and some villages and even parts of Bucharest have no running water or electricity.

Septimius Parvu, deputy director of the Pro Democracy Association, an NGO based in Bucharest, said Boc's resignation showed a "slow evolution" in Romanian politics. "The change in government shows that politicians are starting to realise they cannot govern without the people," he said. "They were taken by surprise by the protests, which, even if they were not on the scale of those in Russia, for example, took place all over the country and were the biggest seen in Romania for perhaps 20 years."

But one protester, PhD student Stefan Guga, 26, said it was wrong to characterise Boc's departure simply as a victory for the demonstrators. It also showed very pragmatic political and electoral calculations on the part of both governing and opposition parties, he said.

"Boc has been made a scapegoat," he said in a phone interview from Bucharest. "It's not that his party, the Democrat Liberals [PDL], wanted to get rid of him – but they found it very convenient to push for the prime minister's resignation and attribute much of the government's failures over the past years to his personal incompetence."

Guga, who attended many of the protests in Bucharest's University Square, said Boc's leaving was a distraction from the key demands of protesters, which, as well as a respite from painful austerity measures, were for real democracy and an end to corruption. "For the Democrat Liberals Boc's resignation can be seen as a last-minute solution to save a bit of face before the upcoming local and parliamentary elections," he said.

The reality, he said, was that the PDL will now regroup and hope that they can avoid early elections so that come November, they have a better chance of winning back the electorate. The PDL and its allies currently have a slim parliamentary majority.Guga said that if the protesters wanted to see any politician fall on his sword, it was Basescu, the president, a gruff former sea captain who despite holding a position that is theoretically ceremonial has made many policy announcements himself. "He is seen as the man who really pulls the strings in Romania," said Guga. "The image of Boc was just as Basescu's puppet."

Boc, who became prime minister in 2008, urged Romania's feuding politicians to be mature and rapidly vote for a new government. He defended his record, saying he had taken "difficult decisions thinking about the future of Romania, not because I wanted to, but because I had to".

Explaining his resignation in a televised speech, Boc said: "I took this decision to release the tension in the country's political and social situation, but also in order not to lose what Romanians have won.

"I know that I made difficult decisions, but the fruits have begun to appear. The most important thing is the economic stability of the country. In times of crisis, the government is not in a popularity contest, but is saving the country."

He added that the International Monetary Fund (IMF) has forecast growth of up to 2% this year lower than expected, but higher than the EU average.

Committed at some stage to adopting the euro under the terms of its accession to the EU in 2007, Romania is still struggling with the economic legacy of communist state control.

While not suffering the difficulties that the euro created for leaders in the likes of neighbouring Greece, Romania's government also struggled to finance itself without external support and found itself forced to make brutal cuts that enraged ordinary citizens.

In 2009 it was forced to sign up for a €20bn (£16.6bn) loan with the IMF, the EU and the World Bank to help pay salaries and pensions after the economy shrank by more than 7%. The aid was seen as essential to maintain investor confidence, prevent a run on the currency and keep borrowing costs at sustainable levels, even though its public debt to GDP ratio was the fourth lowest in the EU.

In 2010, the government increased sales tax from 19% to 24% and cut public workers' salaries by a quarter.

The IMF mission chief in Bucharest, Jeffrey Franks, told Reuters: "I see no reason necessarily for this to have a material effect on the aid agreement. We have every expectation the agreement will continue."

Paul Ivan, research assistant at the Centre for European Policy Studies, said the resignation was not a surprise. "There had been repeated calls for this," he said in a phone interview from Brussels. "The population had become increasingly unhappy with the austerity policies of the government."

But Ivan said Romania's economic problems were not just caused by domestic policies but external ones too. "Romania's economy is very reliant on the fortunes of the rest of the European Union. So when growth in other countries practically stopped, exports decreased and firms here started to lay off staff," he said.

Romania's textile and car industries have been particularly hard-hit, he said. French carmaker Renault has a big Romanian plant which produces the Logan under the badge of its Romanian subsidiary, Dacia.

Most of Romania's banks are also foreign-owned, said Ivan, meaning that when the debt crisis dug in, they were ever more reluctant to issue loans and mortgages.

Neuroscience breakthroughs could be harnessed by military and law enforcers, says Royal Society report

Soldiers could have their minds plugged directly into weapons systems, undergo brain scans during recruitment and take courses of neural stimulation to boost their learning, if the armed forces embrace the latest developments in neuroscience to hone the performance of their troops.

These scenarios are described in a report into the military and law enforcement uses of neuroscience, published on Tuesday, which also highlights a raft of legal and ethical concerns that innovations in the field may bring.

The report by the Royal Society, the UK's national academy of science, says that while the rapid advance of neuroscience is expected to benefit society and improve treatments for brain disease and mental illness, it also has substantial security applications that should be carefully analysed.

The report's authors also anticipate new designer drugs that boost performance, make captives more talkative and make enemy troops fall asleep.

"Neuroscience will have more of an impact in the future," said Rod Flower, chair of the report's working group.

"People can see a lot of possibilities, but so far very few have made their way through to actual use.

"All leaps forward start out this way. You have a groundswell of ideas and suddenly you get a step change."

The authors argue that while hostile uses of neuroscience and related technologies are ever more likely, scientists remain almost oblivious to the dual uses of their research.

The report calls for a fresh effort to educate neuroscientists about such uses of the work early in their careers.

Some techniques used widely in neuroscience are on the brink of being adopted by the military to improve the training of soldiers, pilots and other personnel.

A growing body of research suggests that passing weak electrical signals through the skull, using transcranial direct current stimulation (tDCS), can improve people's performance in some tasks.

One study cited by the report described how US neuroscientists employed tDCS to improve people's ability to spot roadside bombs, snipers and other hidden threats in a virtual reality training programme used by US troops bound for the Middle East.

"Those who had tDCS learned to spot the targets much quicker," said Vince Clark, a cognitive neuroscientist and lead author on the study at the University of New Mexico. "Their accuracy increased twice as fast as those who had minimal brain stimulation. I was shocked that the effect was so large."

Clark, whose wider research on tDCS could lead to radical therapies for those with dementia, psychiatric disorders and learning difficulties, admits to a tension in knowing that neuroscience will be used by the military.

"As a scientist I dislike that someone might be hurt by my work. I want to reduce suffering, to make the world a better place, but there are people in the world with different intentions, and I don't know how to deal with that.

"If I stop my work, the people who might be helped won't be helped. Almost any technology has a defence application."

Research with tDCS is in its infancy, but work so far suggests it might help people by boosting their attention and memory. According to the Royal Society report, when used with brain imaging systems, tDCS "may prove to be the much sought-after tool to enhance learning in a military context".

One of the report's most striking scenarios involves the use of devices called brain-machine interfaces (BMIs) to connect people's brains directly to military technology, including drones and other weapons systems.

The work builds on research that has enabled people to control cursors and artificial limbs through BMIs that read their brain signals.

"Since the human brain can process images, such as targets, much faster than the subject is consciously aware of, a neurally interfaced weapons system could provide significant advantages over other system control methods in terms of speed and accuracy," the report states.

The authors go on to stress the ethical and legal concerns that surround the use of BMIs by the military. Flower, a professor of pharmacology at the William Harvey Research Institute at Barts and the London hospital, said: "If you are controlling a drone and you shoot the wrong target or bomb a wedding party, who is responsible for that action? Is it you or the BMI?

"There's a blurring of the line between individual responsibility and the functioning of the machine. Where do you stop and the machine begin?"

Another tool expected to enter military use is the EEG (electroencephalogram), which uses a hairnet of electrodes to record brainwaves through the skull. Used with a system called "neurofeedback", people can learn to control their brainwaves and improve their skills.

According to the report, the technique has been shown to improve training in golfers and archers.

The US military research organisation, Darpa, has already used EEG to help spot targets in satellite images that were missed by the person screening them. The EEG traces revealed that the brain sometimes noticed targets but failed to make them conscious thoughts. Staff used the EEG traces to select a group of images for closer inspection and improved their target detection threefold, the report notes.

Work on brain connectivity has already raised the prospect of using scans to select fast learners during recruitment drives.

Research last year by Scott Grafton at the University of California, Santa Barbara, drew on functional magnetic resonance imaging (fMRI) scans to measure the flexibility of brain networks. They found that a person's flexibility helped predict how quickly they would learn a new task.

Other studies suggest neuroscience could help distinguish risk-takers from more conservative decision-makers, and so help with assessments of whether they are better suited to peacekeeping missions or special forces, the report states.

"Informal assessment occurs routinely throughout the military community. The issue is whether adopting more formal techniques based on the results of research in neuroeconomics, neuropsychology and other neuroscience disciplines confers an advantage in decision-making."

Executive order halts transactions by Iranian bank in US, despite concerns that it may drive up petroleum costs

Barack Obama has ordered the freezing of Iranian government assets in the US, including transactions by the Iranian Central Bank, in tightened sanctions over Tehran's nuclear programme.

The White House said the executive order by the president "re-emphasises this administration's message to the government of Iran – it will face ever-increasing economic and diplomatic pressure until it addresses the international community's well-founded and well-documented concerns regarding the nature of its nuclear programme".

The new sanctions, which also include the threat of prosecution for foreign financial institutions if they do certain kinds of business directly with Iran, also appeared timed to fit in with measures introduced in other countries, including Britain which has already moved against Iran's banking system by cutting it off from London's financial sector.

The administration had previously shied away from direct action against the central bank fearing that if Tehran is unable to carry through financial transactions necessary to sell its oil, that could force the cost of petroleum up and hit the US economy.

But Congress pushed sanctions against the bank through in legislation attached to the US's annual defence spending bill. The president had the power to stall them but that was politically sensitive with a growing chorus of Republicans and some Democrats demanding stronger measures against Tehran.

Obama said in a statement to Congress that the new sanctions are required in part because the central bank is using "deceptive practices" to get around earlier measures.

"I have determined that additional sanctions are warranted, particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran's anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran's activities," he said.

The scale of Iranian official assets in the US is unclear given more than three decades of sanctions since the 1979 Islamic revolution.

In November, the US announced measures intended to limit Tehran's ability to refine its own fuel as well as targeting Iran's Revolutionary Guards' financial interests.

The US and European Union have also imposed additional sanctions on Iran's oil industry in recent weeks.

The new sanctions also come as Obama tries to dissuade Israel from a unilateral strike against Iranian nuclear facilities. Last week, US defence secretary Leon Panetta said he believes Israel may launch an attack before June.

On Sunday, Obama said he does not believe Israel has yet made the decision whether or not to attack. But he told NBC that all options remain on the table for US action if Iran presses ahead with developing a nuclear weapon.

"I think we have a very good estimate of when they could potentially achieve breakout capacity, what stage they're at in terms of processing uranium. But do we know all the dynamics inside Iran? Absolutely not," he said. "Knowing who is making decisions at any given time inside Iran is tough but we do have a pretty good bead on what's happening with the nuclear programme."

Radical Islamist cleric will walk free from Long Lartin maximum security prison after more than six years without trial

The Home Office clashed openly with judges on Monday when it criticised a decision to free on bail within days the radical Islamist cleric Abu Qatada, who is accused of posing a grave threat to British national security.

The decision by Mr Justice Mitting will see Abu Qatada, once described as Osama bin Laden's righthand man in Europe, walk out of Long Lartin maximum security prison in Worcestershire after more than six and a half years in detention without trial – the longest period in modern times.

The special immigration appeals commission (Siac) has imposed some of the most draconian bail conditions seen since 9/11, including a 22-hour curfew, but this did little to assuage the anger of the Home Office ministers or politicians from all parties at the decision.

The clash takes the battle between politicians and the judiciary into new territory as Abu Qatada is a major international terror suspect. He was first detained without trial in Britain under the quashed Belmarsh regime nearly a decade ago, in October 2002.

The decision taken by the high court judge at Siac follows the ruling by the European court of human rights that he could not be deported to Jordan because he would face a "flagrant denial of justice" – a retrial based on evidence obtained through torture. Abu Qatada had been detained under immigration laws for the past six and half years pending his deportation to Jordan.

A Home Office spokesperson said he should remain in detention: "This is the argument we made in court and we disagree with its decision. This is a dangerous man who we believe poses a real threat to our security and who has not changed in his views or attitude to the UK."

The Home Office said it will consider an appeal against the European court's ruling. It will also continue a fresh attempt to secure diplomatic assurances from Jordan that Abu Qatada will not face a trial based on torture-tainted evidence.

The British ambassador held two meetings last week with the Jordanian authorities to try to open talks on the issue.

But the decision angered both Labour and Conservative backbenchers. The former Labour home secretary David Blunkett said the decision had left the government facing a very real difficulty: "It is an unholy mess. We are left in the absurd position of not being able to remove a man even though everyone accepts he won't be tortured, not being able to keep him in prison because his human rights trump the protection of the British people, and a government that has watered down control orders so that they are more lax than was previously the case."

The Conservative backbencher Dominic Raab echoed Blunkett's anger: "This result is a direct result of the perverse ruling by the Strasbourg court. It makes a mockery of human rights law that a terrorist suspect deemed 'dangerous' by our courts can't be returned home, not for fear that he might be tortured, but because European judges don't trust the Jordanian justice system."

The bail conditions set down by Mr Justice Mitting are draconian, comprising a 22-hour curfew rather than the "overnight residence requirement" specified in the coalition's replacement for control orders. They include an electronic tag, MI5 vetting of all his visitors except for immediate family, and monitoring of his communications. The delay in his release is to allow the security services to check the proposed bail address and organise their surveillance operation.

In his ruling, the judge said that although the six and half years Abu Qatada had been detained under immigration powers was "unusually long", he agreed with the home secretary that it was also lawfully justified. However, he added: "The time will arrive quite soon when continuing detention or deprivation of liberty could not be justified." The Siac judge warned the home secretary, Theresa May, that Abu Qatada's "highly prescriptive" bail terms would be relaxed after three months if there is no "demonstrable progress" made with the Jordanians.

The bail conditions mirror those set in 2008 when he was released for six months before being returned to prison on unspecified national security grounds. The judge said the risks to national security and of absconding in the case had not significantly changed since then.

During the one-day bail hearing, Edward Fitzgerald QC, representing Abu Qatada, argued that his detention had gone on too long to be reasonable and there was no prospect of the detention ending in any reasonable period. Even if new diplomatic assurances were secured it would only trigger a new round of litigation in the English courts."There comes a time when it's just too long, however grave the risks," said Fitzgerald.

The shadow home secretary, Yvette Cooper, said May had to explain urgently what action she was taking on the national security implications of the ruling. "Abu Qatada should face terror charges in Jordan, and the home secretary needs to urgently accelerate discussions with the Jordanian government to make that possible," she said. The home secretary also had to spell out the counter-terror safeguards that will be taken to lower the national security risk.

The security services have never disclosed the actual cost of mounting round-the-clock surveillance operations on terror suspects such as Abu Qatada but it does have serious implications for their resources.

Abu Qatada, whose real name is Omar Othman, 51, featured in hate sermons found on videos in the flat of one of the 9/11 bombers. Since his original detention in October 2002, every attempt to deport him to Jordan has been frustrated. The law lords ruled three years ago that he could be sent back but the Strasbourg decision overturned that ruling.

• Exasperated Angela Merkel warns 'time is of the essence'
• Portugal's PM says 'we will not allow it to happen here'

Greece appeared intent on taking make-or-break talks over a €130bn (£108bn) rescue programme for the debt-choked country down to the wire tonight as officials announced that the discussions would be delayed.

Confounding market expectation and European hopes, the government said agreement over the conditions attached to further aid could not be reached as a meeting between political chiefs and the prime minister, Lucas Papademos, had been deferred until today.

"All parties have basically accepted the deal," said a well-briefed source, referring to the three elements in Papademos's national unity coalition. "But it is felt that the details have to be fine-tuned. The leaders want to know what they are signing up to."

With Greece staring at the spectre of bankruptcy – barely six weeks before it has to make bond repayments worth €14.5bn – EU officials expressed disbelief that politicians could not finally put their name to an accord.

Unable to conceal her own exasperation, the German chancellor, Angela Merkel, said: "I honestly can't understand how additional days will help.

"Time is of the essence. A lot is at stake for the entire eurozone," she said after holding debt crisis talks in Paris with the French president, Nicolas Sarkozy.

Papademos, a technocrat who was appointed to the post with the express purpose of passing the measures to secure the bailout deal, originally told the leaders to conclude talks by midday.

But the deadline came and went. Infuriated, Amadeu Altafaj-Tardio, a spokesman for the European economic affairs commissioner Olli Rehn, said: "The truth is we are already beyond deadline … the ball is in the court of the Greek authorities."

Hours later, the prime minister's office announced that the meeting would take place in the "late afternoon". Rumours swirled that a deal was near, with headway made on the highly contentious issues of wage cuts in the private sector. In anticipation, the Athens stock market rallied.

By mid-afternoon, however, the meeting had been cancelled with officials saying Papademos would instead hold talks with visiting inspectors from the European Union, European Central Bank and International Monetary Fund, the "troika" propping up the insolvent Greek economy.

The postponement confirmed that ahead of general elections in April the high-stake talks have also been turned into a high-stakes game of brinkmanship.

Acutely aware of the uproar that further austerity is bound to ignite among a populace that has endured unprecedented belt-tightening but seen little in return as Athens repeatedly misses fiscal targets, Greece's political class has worked furiously to disassociate itself from reforms increasingly seen as counter-productive.

Emerging from a marathon session of similar talks on Sunday, Giorgos Karatzaferis, the media-savvy leader of the populist Laos party, said: "I'm not going to contribute to the explosion of a revolution [by backing] a wretchedness that will then spread across Europe."

Racheting up the pressure on politicians, powerful unionists in both the public and private sector warned that the reaction to any agreement entailing further austerity would be "ferocious and possibly uncontrollable". A general strike was called for Tuesday with civil servants and workers saying they would step up action later in the week.

Ilias Iliopoulos, at the civil servants' union ADEDY, said: "We don't care if they feel forced to accept such measures. The fact is 500,000 families are not even earning a euro a week and another million only have work sporadically."

"Greek people can't take the burden of any more measures. If our politicians are foolish enough to agree to what our so-called saviours say, if they go ahead with yet more cuts and job losses, there will be an explosion. The reaction will be uncontrollable."

The deadlock immediately raised fears that three years into the crisis, Greece might finally be heading for the disorderly default international creditors, lead by Germany in the EU, have tried to avert.

But in Athens analysts insisted that the real threat to keeping bankruptcy at bay lay not so much in the negotiating arena as in a society seething with anger over the prospect of more austerity.

"The Greek side has no cards in its hand," said Theodore Pelagidis, professor of economics at Piraeus University. "This is not about not accepting the bailout but about politicians wanting to convince Greeks that they have not just submitted to the demands of foreign lenders but done their utmost to get the best deal. Yes, there are a lot of painful details that have to be discussed but all these delays are actually part of a show."

Eurozone finance ministers have told Greece that they want a blueprint of a basic deal to be approved by Wednesday's meeting in Brussels.

No longer willing to take any chances, Papademos on Monday ordered the finance ministry to outline what consequences bankruptcy might have on society and the economy. One Greek official said it would make Argentina "look like a picnic".

Papademos's plan is to present the findings to Greece's squabbling political leaders on Tuesday to ensure they sign off on the deal immediately.

As Greece failed to resolve its crisis, the Portuguese prime minister attempted to stave off speculation that his country would be the next to find itself in talks over a rescue package. Pedro Passos Coelho said Portugal's debts were under control and could be contained without the need of a fresh injection from the EU.

"We will not allow what happened in Greece to happen here," he said. "We hope that there will be the will to reach a new aid programme for Greece."

Coelho likened Portugal to Ireland, which he said had a debt structure that would delay the need for loan repayments until next year. "Our debt profile is very similar to Ireland's, both in absolute value and in debt to GDP terms," he said.

Daily Mail editor in chief tells Leveson inquiry he wants tough sanctions for those who break the law or lower standards

The editor in chief of the Daily Mail has called for a new system of certifying journalists, with tough sanctions for those who fall below acceptable standards or break the law.

Paul Dacre also called on the industry to introduce a transitional arrangement to replace the much-criticised Press Complaints Commission as soon as possible to show newspapers had "good intentions" to break from a past tarnished by allegations of phone hacking, corruption and computer hacking.

Outlining his vision of the future, Dacre said the new system of accreditation of journalists would act as a "Kitemark" for standards. He suggested that journalists not carrying an accredited card would be barred from covering events such as key government briefings or interviews relating to sporting fixtures.

A new ombudsman for standards should also have the right to recommend a journalist be struck off, just as doctors can be struck off by the General Medical Council, he said. "The public at large would know the journalists carrying such cards are bona fide operators, committed to a set of standards and a body to whom complaints can be made."

Over three and a half hours, an at times testy Dacre was questioned at the Leveson inquiry about the behaviour of his own staff in relation to a litany of stories that have been criticised by other Leveson witnesses, including ones on Madeleine McCann, Christopher Jefferies, Hugh Grant and the late Boyzone singer Stephen Gately.

He launched a robust defence of his decision to describe Grant's evidence as "mendacious smears", declaring that the actor's claim that a story about him may have been sourced from phone hacking was damaging to his newspaper.

"If I had allowed it to stand it would have been devastating for our reputation and it needed rebutting instantly."

Dacre repeatedly claimed that Grant had brought much of the attention he complained about upon himself. He said Grant "invaded his privacy with great proficiency" by frequently talking in public about private matters, including his desire to have a child. But he did accept that the behaviour of the paparazzi about whom Grant and others have complained was an issue. "I think there are broader issues that the industry needs to look at. The problem of paparazzi, that worries me – I think we need to try to look at that."

Dacre admitted that he knew the newspaper had used a private detective, Steve Whittamore, who was convicted in 2005 of illegally accessing confidential records such as ex-directory numbers.

He said he thought he became aware of the use of Whittamore "some time about 2004, 2005-ish" but said he was not aware of the extent of his use or that he might have been obtaining information illegally. Asked whether he thought it was acceptable to get hold of a person's "friends and family" telephone numbers, he said the information could have been obtained legally but Whittamore "was a quick and easy way to get that information".

He said he would now accept there was a "prima facie case that Mr Whittamore could have been acting illegally" but he did not accept this as "evidence our journalists were actively behaving illegally".

At times exasperated by the inquiry's line of questioning, Dacre pressed the point that he had demonstrated "huge willpower and vigour to stamp out and change of all of this", banning the use of detective agencies, writing the Data Protection Act into journalists' contracts and holding seminars for staff.

He told Leveson: "Goodness knows, I don't know what more I could have done." Dacre also mounted a staunch defence of Jan Moir, the columnist who was the subject of 25,000 complaints following a piece she wrote about the death of Gately.

"I would die in the ditch to defend any of my columnists' rights to say whatever they wish", he said, adding that she hadn't "a homophobic bone in her body". But he did observe that her column could have benefitted from some "judicious subbing [editing]" that day.

Dacre told the inquiry he had turned down an offer to edit the Times because it would have curbed his independence. He described Rupert Murdoch as a "great proprietor in his time" but said he would not have given him the necessary freedom. He said there was no doubt Murdoch "had strong views" which he expected to be followed by his editors. "The classic case is the Iraq war" and the "implacable support" he gave Tony Blair, said Dacre.

Dacre reserved the more forceful side of his personality for the issue of the importance of the press to society.

He said his paper had written hundreds and thousands of stories and the inquiry was alighting on a few negative examples. The British public were being given "a very bleak, one-sided view" of an industry that employs thousands.

£50bn merger with Xstrata will be latest City coup for billionaires behind commodities trader

More than £50m of World Food Programme aid to feed the starving has ended up in the hands of a London-listed commodities trader run by billionaires, despite a pledge by the United Nations agency to buy food from "very poor farmers".

Glencore International, which buys up supplies from farmers and sells them on at a profit, was the biggest single supplier of wheat to the WFP over the last eight months, the Guardian can reveal.

Glencore, which was able to operate with secrecy from its base in Baar, Switzerland, until it floated on the London stock exchange last May, is expected on Tuesday to announce a merger with mining group Xstrata to become one of the 10 biggest FTSE 100 companies with a market value of more than £50bn.

Details of the dealings with Glencore, which controls 8% of the global wheat market, emerged a year after the head of the WFP committed to buying food from local farmers.

"Our new motto is to help people feed themselves," Josette Sheeran, the executive director of the WFP, told China's state news agency. "When we can, we purchase our food from the very poor farmers who suffer because they are not connected to local markets."

Raj Patel, an economist expert in the global food trade and former UN employee, said it was shocking how much food aid money was "funnelling to one of the largest commodity traders".

The rising price of wheat has squeezed the incomes of millions of the world's poorest people. Many have been forced to turn to the WFP, which last year fed more than 90 million people in 73 countries.

Over the last eight months Glencore has sold wheat worth $78m (£50m) to the WFP, according to details of contracts published on the agency's website.

In the biggest single deal, the WFP bought $22.5m of Glencore wheat in July last year to feed Ethiopians in one the worst famines in recent memory. The WFP also bought Glencore wheat, sorghum and yellow split peas for Kenya, Djibouti, Bangladesh, Sudan, North Korea and Palestine. Last month the WFP spent $10.8m on wheat for drought-stricken Djibouti.

In its latest half-year financial results Glencore, which previously attracted controversy for environmental breaches and accusations of dealing with rogue states, including Iraq under Saddam Hussein, reported that revenue from agricultural products doubled to $8.8bn. The company said its performance had been "driven by stronger profits in grains and oil seeds" for which "prices were substantially higher in H1 [the first half of] 2011 compared to H1 2010".

The company said: "There were increased geographic arbitrage opportunities [buying commodities cheaper in order to sell them on later at a higher price] available in wheat and edible oils." It said the average wheat price of a bushel [8 gallons] of wheat increased by 60% over the previous year to $778.

A spokeswoman for the WFP said: "As a humanitarian agency that depends entirely on voluntary donations we always aim to get the most competitive price when purchasing food on the open markets. Rising food prices do have an impact on our budget and they can be driven up by any number of factors, including speculation."

Glencore said it won the WFP tenders because "we were able to offer the commodities needed at the lowest possible price".

Rob Bailey, a senior research fellow in food security at Chatham House in London, said the WFP often buys from traders such as Glencore, Cargill and Viterra, because food donations are not available and local farmers cannot provide the quantities needed. "It is concerning that the World Food Programme is left at the whim of international markets precisely when prices are high," he said.

"Such crisis periods of high volatility are also when the big traders make the most money, because they have the best information on likely supply and demand and how markets are going to evolve, allowing them to take positions in the market to turn profits."

John Hilary, the executive director of the War on Want, said: "Glencore's self-confessed speculation on grain markets last year forced up prices at a time of world shortage, driving more people into extreme hunger. The WFP needs to rethink its priorities and support local markets rather than corporate giants such as Glencore."

Patel, the author of Stuffed and Starved: Markets, Power and the Hidden Battle for the World's Food System, said: "It's a shocking amount of money to be funnelling to one of the largest commodity traders. That financial entities are now making their presence felt – and Glencore is among the most powerful of these new corporations – points to the increasing financialisation of food in the 21st century."

Glencore admitted that it bet on a rising wheat price after drought in Russia, according to investment bank UBS. "[Glencore's] agricultural team received very timely reports from Russia farm assets that growing conditions were deteriorating aggressively in the spring and summer of 2010, as the Russian drought set in … This put it in a position to make proprietary trades going long on wheat and corn," UBS said in a report to potential investors, disclosed by the Financial Times.

On 3 August 2010 the head of Glencore's Russian grain business, Yury Ognev, urged Moscow to ban grain exports, according to the UBS report. Two days later Russian authorities banned wheat exports, which forced prices up by 15% in two days.

On Monday Glencore said UBS's account of its role in the Russian grain crisis was "simply untrue. In any case, the export ban did not help our business".

A spokesman said: "We share the view that financial speculation in agricultural products markets can be harmful. Our business is physical – we produce, buy, store and blend agricultural commodities.

"We bridge the gap between harvests that last for a couple of weeks and demand which is fairly constant throughout the year.

"Because we are physical holders, we are always net sellers in the agricultural products futures markets which actually has a downward effect on the prices of agricultural products futures."

Glencore's chief executive, Ivan Glasenberg, earned the moniker "the $10 billion man" when his stake was valued at £5.76bn at last May's flotation. Four other partners – Daniel Maté, Telis Mistakidis, Tor Peterson and Alex Beard – were also made paper billionaires. More than $3.6bn was given to the WFP last year, with the US contributing $1.2bn and the UK £144m.

Merger deal anticipated

Glencore is on Tuesday expected to announce plans to merge with mining group Xstrata to become one of the 10 biggest companies listed on the London stock market. It will be the latest move in Glencore's journey from secretive trading house founded by Marc Rich, a commodities traderwho was charged by US authorities with selling oil to Iran during the 1979-81 hostage crisis, to global powerhouse in the sale of commodities from copper and coal to sugar and wheat.

The largest shareholder in the combined company – dubbed Glenstrata – will be Ivan Glasenberg, Glencore's multibillionaire chief executive. But Glasenberg, who makes so much money he indirectly funded a generous Christmas tax break for the other residents of the Swiss village where he lives, is understood to be planning to step aside to become deputy to Mick "the miner" Davis, the head of Xstrata.

Davis, already one the highest paid executives in the FTSE 100, is likely to be offered a "golden handcuffs" deal to stay at the company. A change of control clause could also see Davis collect an additional £10.7m in long-term shares.

The deal is likely to see Glencore pay about an 8% premium to buy up the Xstrata shares it does not already own.

Sir John Bond, Xstrata's chairman and a former chair of HSBC and Vodafone, will lead the Glenstrata board, while Glencore's chairman Simon Murray, who has been attacked for his "unbelievably primitive" views on women in business, is likely to step aside.

Tony Hayward, the former boss of BP, is likely to be appointed the senior independent director of the combined company, which will have more than 120,000 staff across five continents.

Former Northern Ireland first minister, 85, is being treated in Ulster hospital, his wife confirms

Former Northern Ireland first minister Ian Paisley is in intensive care in hospital after suffering respiratory problems.

The family of the 85-year-old founder of the Democratic Unionist party, now officially known as Lord Bannside, confirmed that he was being treated in Ulster hospital on the outskirts of east Belfast.

In a statement issued on Monday afternoon his wife, Lady Paisley, requested that "the family's privacy be respected at this time".

The veteran unionist politician and fundamentalist Protestant preacher took ill at the family home in east Belfast on Sunday. DUP members of the Northern Ireland assembly were briefed on their ex-leader's medical condition in the Stormont parliament.

Last year Paisley had a pacemaker fitted at St Thomas's hospital in London after he fell ill at Westminster. Paramedics had to revive him after he collapsed in parliament.

Since he stepped down as first minister Paisley has slowly retreated from public life. In December he announced his retirement as a preacher in the Free Presbyterian church, the hardline Protestant sect he founded in the 1960s.

His final sermon took place last week in the Martyrs Memorial Church in Belfast. He told worshippers inside the church he helped build that he wanted to take time out to write his autobiography.

For nearly five decades Paisley was a colossal presence in Ulster politics. He established the DUP in 1971 and opposed every attempt by successive British and Irish governments to create a power-sharing government between nationalists and unionists in Northern Ireland.

When he moved aside as DUP leader he was succeeded by his long-time deputy and closest political confidant Peter Robinson.

However, Paisley stunned the political world in 2006 when, after the St Andrews agreement, he indicated that the DUP would share power with their former enemies in Sinn Féin. As a result, he and ex-IRA member Martin McGuinness became first and deputy first ministers of Northern Ireland. The pair struck up an unlikely rapport and gained the nickname "the Chuckle Brothers" because at public events they were often seen smiling together.

During his long reign as head of the Free Presbyterian church Paisley embarked on several moral crusades, including an unsuccessful battle to oppose the legalisation of homosexuality in Northern Ireland.

In opposition to Paisley's "Save Ulster from Sodomy" campaign, the Northern Ireland Gay Rights Movement depicted him as an "ayatollah" who was watching everyone in the province.