Syria faces growing world pressure to halt bloodshed (Reuters)

BEIRUT (Reuters) – Jordan's King Abdullah told Syria's President Bashar al-Assad on Monday he should step down and the European Union added pressure with more sanctions after the Arab League's surprise decision to suspend Damascus for its violent crackdown on protests.

Syria looks ever more isolated, but still has the support of Russia, which said the Arab League had made the wrong move and accused the West of inciting Assad's opponents.

Despite the diplomatic pressure, there was no let-up in violence and at least two people were killed, activists said.

The anti-Assad unrest, inspired by Arab revolts elsewhere, has devastated Syria's economy, scaring off tourists and investors, while Western sanctions have crippled oil exports.

Jordan's King Abdullah said Assad should quit. "I believe, if I were in his shoes, I would step down," he told the BBC.

Syrian Foreign Minister Walid Moualem said the League's decision, due to take effect on Wednesday, was "an extremely dangerous step" at a time when Damascus was implementing an Arab deal to end violence and start talks with the opposition.

Syria has called for an emergency Arab League summit in an apparent effort to forestall its suspension.

Nabil Elaraby, the organization's secretary general, said he had delivered the request to rulers of Arab League states and 15 members would have to approve in order to hold a summit, according to Egypt's state news agency MENA.

The League's suspension is a particularly bitter blow for Assad who has always seen himself as a champion of Arab unity. But adding to the injury, the Cairo-based League plans to meet Syrian dissident groups on Tuesday.

Even so, Elaraby said on Sunday it was too soon to consider recognizing the Syrian opposition as the country's legitimate authority.

Elaraby met representatives of Arab civil society groups on Monday and agreed to send a 500-strong fact-finding committee, including military personnel, to Syria as part of efforts to end the crackdown on demonstrators and dissenters.

"Syria agreed to receive the committee," said Ibrahim al-Zafarani, of the Arab Medical Union.

Moualem said Syria had withdrawn troops from urban areas, released prisoners and offered an amnesty to armed insurgents under an initiative agreed with the Arab League two weeks ago.

Yet violence has intensified since then, especially in the central city of Homs, pushing the death toll in eight months of protests to more than 3,500 by a U.N. count. Damascus says armed "terrorist" gangs have killed 1,100 soldiers and police.

Syria's ban on most foreign media makes it hard to verify events on the ground.

SHOOTING, TANK FIRE

In the latest violence, security police shot dead activist Amin Abdo al-Ghothani in front of his nine-year-old son at a roadblock outside the town of Inkhil, a grassroots organization known as the Local Coordination Committees said.

In Homs, residents said renewed tank shelling killed a teenager and wounded eight people in the restive Bab Amro district. Students in the Damascus suburb of Erbin chanted "God is greater than the oppressor," according to a YouTube video.

Moualem described Washington's support for the Arab League action as "incitement," but voiced confidence that Russia and China would continue to block Western efforts to secure U.N. Security Council action, let alone any foreign intervention.

"The Libya scenario will not be repeated," he said.

It was the Arab League's decision to suspend Libya and call for a no-fly zone that helped persuade the U.N. Security Council to authorize a NATO air campaign to protect civilians, which also aided rebels who ousted and killed Muammar Gaddafi.

The Arab League made no call for military action, but its disciplining of Syria is deeply embarrassing to a nation touted by its Baathist leaders as the Arab world's "beating heart."

Syrian state television said millions of Syrians protested at the League decision in Damascus and other cities on Sunday.

Crowds also attacked Saudi, Turkish and French diplomatic missions in Syria after the Arab League announcement.

Moualem apologized for the assaults, which have worsened already tense ties between Syria and its former friend Turkey.

"We will take the most resolute stance against these attacks and we will stand by the Syrian people's rightful struggle," Turkish Foreign Minister Ahmet Davutoglu told the Turkish parliament, saying Damascus could no longer be trusted.

Non-Arab Turkey, after long courting Assad, has lost patience with its neighbor. It now hosts the main Syrian opposition and has given refuge to defecting Syrian soldiers.

Turkey's stance has stung its former friends in Damascus.

"The implementation of the Arab plan must be accompanied by the securing of borders by neighboring countries," Moualem Said. "I mean here specifically the flow of weapons from Turkey and the transfer of money to the leaders of armed groups."

EU SANCTIONS

The European Union extended penalties to 18 more Syrians linked with the crackdown on dissent and approved plans to stop Syria accessing funds from the European Investment Bank.

EU foreign policy chief Catherine Ashton said she was in touch with the Arab League to work on an approach to Syria, but the 27-nation body appears set against military intervention.

"This is a different situation from Libya," British Foreign Secretary William Hague said in Brussels, where EU foreign ministers were meeting. "There is no United Nations Security Council resolution and Syria is a much more complex situation."

Syria, which borders Israel, is Iran's main Arab ally and has strong ties with Shi'ite Hezbollah guerrillas in Lebanon and the Islamist Hamas movement that rules the Gaza Strip.

Russian Foreign Minister Sergei Lavrov, whose country joined China to block a U.N. resolution critical of Syria in October, criticized the Arab League's decision.

Russia, an arms supplier to the Syrians, has urged Assad to implement reforms but opposes sanctions and has accused the United States and France of discouraging dialogue in Syria.

"There has been and continues to be incitement of radical opponents (of Assad) to take a firm course for regime change and reject any invitations to dialogue," Lavrov said.

The Arab League also plans to impose unspecified economic and political sanctions on Syria and has urged its members to recall their ambassadors from Damascus.

Assad still has some support at home, especially from his own minority Alawite sect and Christians, wary of sectarian conflict or Sunni Muslim domination if he were to be toppled.

Despite some defections, the Syrian military has not emulated its counterparts in Egypt and Tunisia in abandoning long-serving presidents faced with popular discontent.

The government has acknowledged that sanctions are hurting, but it is not clear whether this will force any policy change.

Chris Phillips of the Economist Intelligence Unit in London said Syria's economy was "slowly bleeding to death."

(Additional reporting by Khaled Yacoub Oweis and Suleiman al-Khalidi in Amman, Steve Gutterman in Moscow, Tulay Karadeniz in Ankara, Dominic Evans in Beirut, Ayman Samir in Cairo and Justyna Pawlak in Brussels; Writing by Alistair Lyon; Editing by Jon Hemming)

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Pressure mounts on MF Global to strike a deal (Reuters)

(Reuters) – Shares of MF Global Holdings Ltd hit another all-time low and its bonds were in freefall on Friday as troubles intensified for the U.S. futures brokerage that is looking to sell off units in order to retain customers and to survive.

The company run by former Goldman executive Jon Corzine has shed 63 percent of its market capitalization this week. That could hamper MF Global's dealmaking ability, while at the same present possible buyers with assets at big discounts.

Goldman Sachs Group Inc, State Street Corp and Macquarie are all eyeing MF Global or parts of it, The Wall Street Journal reported.

In the last few days, the brokerage posted a quarterly loss and two ratings agencies cut its debt rating to junk -- underscoring the bad bets MF Global made on bonds of countries in the euro zone, which is now battling a debt crisis.

MF Global stock dropped as much as 31 percent in early trading to 99 cents, its lowest ever, but later rebounded to $1.35. It was the second most actively traded stock on the New York Stock Exchange.

"The MF Global team has no choice but to quickly shrink its balance sheet to raise cash and then to sell the cash into the market to show 'strength'," Brad Hintz, a senior analyst at Bernstein Research, wrote to clients.

"These events play out in days."

The company's bonds were trading at distressed levels in the mid-40s, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70.

MF Global, which is emerging as one of the hardest-hit U.S. firms in the fallout from Europe, had offered the notes at par in August.

The company tapped Evercore to advise it on strategic options including a possible sale, said a source familiar with the situation. A second source, who was briefed on the matter, said the company is "focused on doing a smart deal, a fair deal," and that it did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients. "However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity," she wrote.

MF Global has declined to comment on its troubles.

CORZINE AND EUROPE'S FALLOUT

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear. (Graphic of MF Global's market share among futures commission merchants: http://link.reuters.com/syz64s )

MF Global's bank loans were lower Friday amid rumors the company drew down its revolving credit lines, separate sources said. The extended revolver due 2014 is quoted 60-65 on Friday after a large piece of the paper is said to have changed hands on Thursday at 70, the sources said.

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

European Union leaders stuck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio, Paritosh Bansal, Jeanine Prezioso and Herb Lash in New York, and Charmian Kok in Singapore; Editing by Matthew Lewis and Phil Berlowitz)

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Obama ups pressure ahead of Senate jobs bill vote (Reuters)

WASHINGTON (Reuters) – President Barack Obama maintained his attack against congressional Republicans over his jobs bill on Saturday, upping pressure before it faces a vote in the Senate next week.

Repeating a warning to make them explain to the American people why they oppose his measures, Obama said the country needed it as insurance against a double dip recession.

"This jobs bill can help guard against another downturn here in America," the president said in his weekly address.

Republicans, who complain Obama is more interested in keeping his own job in next year's election than creating work for ordinary Americans, dismissed the steps as more of the same policies they say have missed their mark in the past.

"It's nothing but a rehash of the same failed ideas he's already tried, combined with a huge tax increase," said Republican Senator John Thune in his party's weekly address.

The president has toured the country since he launched the proposal last month in a bid to enlist public opinion to pressure Congress to pass the bill, and he held a short-notice press conference on Thursday to hammer home this message.

"If their plan doesn't measure up, the American people deserve to know what it is that Republicans in Congress don't like about this jobs plan," Obama said.

Senate Democrats will vote on his $447 billion proposal for tax cuts and spending on Tuesday, after replacing Obama's suggestion of how to cover its cost with their own millionaire tax surcharge. However, the Senate is not expected to get enough votes to pave the way for the bill's passage.

If it does fail to win the 60 votes needed to avoid Republican delaying tactics in the Senate, congressional Democrats will likely look at other ways to advance bits of Obama's initiative, either through promoting individual bills or by attaching measures into other legislation.

Obama said action was needed and the latest monthly jobs data, released on Friday, bore him out.

It showed U.S. unemployment remained pinned at a historically lofty 9.1 percent last month -- a rate of joblessness the president must reduce to improve his hopes of winning reelection in November 2012.

Trade pacts between the United States and South Korea, Colombia and Panama that will be voted on by U.S. lawmakers on Wednesday could generate business that Obama says may create tens of thousands of new U.S. jobs.

He hosts South Korean President Lee Myung-bak to a White House state visit on Thursday and they will travel together to Detroit on Friday to discuss the job benefits of the pact.

But Republicans complain that he should have advanced these deals when he entered the White House 2-1/2 years ago.

"It's extremely unfortunate that we had to wait so long for the president to do something so simple, to help promote American exports, and create American jobs," Thune said.

(Reporting by Alister Bull; Editing by Paul Simao)

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Euro seen under pressure on lack of G7 support (Reuters)

LONDON (Reuters) – The euro and growth-linked currencies may fall on Monday, hit by a lack of concrete measures from Group of Seven finance chiefs to address either faltering growth, the escalating euro zone debt crisis, or exchange rate volatility.

The dollar, yen and, to a lesser extent, Swiss franc are set to advance with more investors seeking safe-haven currencies on the back of rising financial market stress.

That will raise the risk of more solo intervention from Japanese and Swiss authorities.

The flight to safety should drive core government bonds like German Bunds and British gilts higher, leading to wider spreads over euro zone peripheral debt, while European banking shares may ease on mounting worries about contagion engulfing bigger economies like Italy and Spain.

Finance ministers and central bankers from the Group of Seven industrialized nations pledged to respond in a concerted matter to a global slowdown. However, they offered no specific steps and differed in emphasis on Europe's debt crisis.

That will likely offer little solace to investors who had expected some sort of coordinated policy response from G7 policymakers at a time when stock markets have been falling and global growth in showing increasing signs of stalling.

"As this falls short of any commitment to undertake co-ordinated action in currency markets, investors are likely to react with disappointment when trading resumes on Monday," said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

He expected Japan to stay on intervention watch.

Japan's finance minister, Jun Azumi, said he met with little resistance to further intervention at the G7 meeting. Japan last intervened in the currency market on August 4 to topple the yen from a record high against the dollar.

"We expect Japan's authorities will act again unilaterally if dollar/yen tests its post-war lows of 75.95 yen. As a result we think investors should instead keep favoring the dollar now when they seek safe-haven currencies," UBS's Mohi-uddin said.

The dollar index, which measures its performance against a basket of six currencies which includes the euro, yen and sterling, rose to its highest in six months at 77.276 on Friday.

In a bullish signal, it closed above its 55-week moving average at 77.01. Resistance was seen at the base of the weekly Ichimoku cloud around 78.05, while strong resistance was at the 38.2 percent retracement of the index's fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.

The dollar is set to make strong gains against the euro, which last week fell to its lowest in six months, at around $1.3627. The euro posted its biggest weekly fall since mid-August last year, with many looking for it to test $1.35 in the near term.

EURO ON THE WAY DOWN

The euro also fell sharply against the safe-haven Japanese yen on Friday, dropping to its lowest in nearly a decade. It ended the week at 105.85 yen, and a break below the psychologically key 105.00 level could see it drop toward 100 yen in coming weeks, analysts said.

Howard Wheeldon, a strategist at BCG Capital Partners, said the weekend's developments provided little confidence to investors in the euro zone, and the coming week will see increased volatility in stock markets.

That could hurt the euro more in coming days.

The euro was sold off last week after European Central Bank President Jean-Claude Trichet shifted the monetary stance from a hawkish bias to a more neutral one.

The shock resignation of ECB board member Juergen Stark, which highlighted sharp divisions within the central bank over purchases of government bonds in the secondary market and concerns that Greece may not secure its latest aid tranche from the IMF/European Union, also added to the euro's woes.

Investors will also likely be unsettled by a weekend report from Der Speigel magazine that the German finance ministry was looking at scenarios that included Greece abandoning the euro.

Indeed, latest data from the Commodity Futures Trading Commission showed speculators added to their bearish bets against the euro in the week to September 6.

"With $1.40 going last week, I think the euro could fall to $1.35 in the next few days," said Michael Derks, chief strategist at FXPRO. "The dollar be will the currency that will gain from safe-haven inflows given the risk of intervention in the yen and the line in the sand that has been drawn on the Swiss franc by the Swiss National Bank."

On the charts, near term support was seen at $1.3426, a low hit on February 14 and from where the euro started its move to a 17-month high at $1.4939 struck on May 4.

(Reporting by Anirban Nag; Editing by Dan Lalor)

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Italy minister says no pressure on ECB over bonds (Reuters)

CERNOBBIO, Italy (Reuters) – Economy Minister Giulio Tremonti promised on Sunday to meet Italy's budget pledges after growing speculation over whether the European Central Bank may cut back its purchases of Italian government debt.

Tremonti, under mounting pressure to present a credible plan to fulfill a pledge of balancing the budget by 2013 and cutting Italy's 1.9 trillion euro debt pile, told a business conference in the northern town of Cernobbio that the target would be met.

However he admitted that a hastily put-together package of measures presented to parliament in August and now undergoing substantial revision, had been incomplete.

"When you take measures in four days you can make mistakes, it's true," he told a conference discussion.

The regular Ambrosetti conference in Cernobbio near Milan this weekend has brought growing doubts about the 45.5 billion euro austerity package to a head following a week of rising market pressure on Italian government bonds.

Both ECB President Jean-Claude Trichet and Italy's head of state, President Giorgio Napolitano issued strong calls for swift action following widespread criticism of the haphazard way in which the plan was being handled.

Marco Tronchetti Provera, chairman of tyremaker Pirelli, one of the icons of Italian industry, said Tremonti's speech to the conference had been clear but it had not eliminated doubts about the gravity of the situation.

"I repeat that anyone who is not concerned about this situation is making a mistake," he told reporters.

The head of Confindustria, Italy's largest employer federation also took aim at the government during the conference, saying the plans presented so far did not do nearly enough to stimulate the country's anaemic growth rates.

Underlining the growing concerns, the premium investors demand to hold Italian debt rather than benchmark German bonds rose on Friday to 331 basis points, the highest since the ECB started buying Italian paper in August.

Yields on 10-year Italian bonds ended the week at 5.29 percent, creeping back up toward the 7 percent level generally regarded as unmanageable.

ECB INTERVENTION

With the spreads over German debt widening ominously, there was growing speculation over whether the ECB would continue buying Italian debt, a strategy that has caused sharp divisions within the Frankfurt-based central bank.

The ECB has been buying Italy's bonds in the market to try to hold down yields and stop Rome's borrowing costs spiralling out of control, there has been a growing sense of frustration that the government has not done enough itself.

"Our biggest concern is that the ECB might halt its purchases of Italian bonds, which would cause spreads to widen again," the head of Confindustria, Emma Marcegaglia, told reporters. "In this case, Italy would have huge problems."

On Saturday, Trichet declined to comment on the bond buying programme ahead of a Governing Council meeting on Thursday.

Italy, the euro zone's third largest economy, has been dragged ever closer to an emergency that could overwhelm any existing euro zone bailout mechanisms. But there have been worries in Germany that the ECB is blurring the lines between monetary policy and governments' own fiscal responsibilities.

Italy's Foreign Minister Franco Frattini, who said on Saturday that the government was pressing the ECB to keep up the purchases, backtracked on Sunday, saying the central bank was independent and Rome was not exerting pressure.

Tremonti offered no substantial new pledges on the timing or substance of the austerity package, which has been subject of repeated changes and dispute over the past weeks.

However he repeated his longstanding call for jointly issued euro bonds, which have been rejected by Germany.

"The euro bonds will absolutely be done," he said. "Either we do euro bonds or we will have critical problems," he said.

Frattini told reporters the Senate would approve the new package by the end of next week and that approval from the Lower House would follow swiftly.

"I don't see any reason why the government should ask for a confidence vote on the budget," he added.

(Writing by James Mackenzie, editing by Rosalind Russell)

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Obama ups pressure over transportation (Reuters)

WASHINGTON (Reuters) – President Barack Obama, under fire over high unemployment, stepped up pressure on Congress on Saturday to pass transportation legislation he said would protect almost 1 million American jobs.

"Allowing this bill to expire would be a disaster for our infrastructure and our economy," the president said in his weekly radio address, after a monthly employment report showed the economy created no jobs in August.

Democrat Obama, who delivers a major speech on Thursday on how he would boost hiring and growth, must bring down a jobless rate stuck at 9.1 percent to improve his chances of winning a second presidential term next year.

Repeating a message he issued in the White House Rose Garden earlier this week, Obama urged lawmakers to pass multibillion-dollar temporary funding bills for aviation and highway projects, or risk heaping more pain on the economy.

"If it's delayed for just 10 days, we will lose nearly $1 billion in highway funding that we can never get back. And if we wait even longer, almost 1 million workers could be in danger of losing their jobs over the next year," he said.

Republicans say they support an extension of the highway bill and view Obama's words as a way to deflect criticism over the economy away from the White House and toward Congress.

Obama's approval rating has slipped, after he spent July and August fighting with Republicans to raise the U.S. debt ceiling, which resulted in rating agency Standard & Poor's cutting the AAA U.S. credit rating. But polls show the American public holds Congress in even lower esteem.

"There's a lot of talk in Washington these days about creating jobs. But it doesn't help when those same folks turn around and risk losing hundreds of thousands of jobs just because of political gamesmanship," Obama said.

The law authorizing aviation ticket taxes to pay for airport construction under the Federal Aviation Administration expires on September 16. A law directing gasoline taxes to underwrite road construction grants expires on September 30. Both must be extended to continue funding while lawmakers craft legislation authorizing the programs over longer periods.

(Reporting by Alister Bull; Editing by Peter Cooney)

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Euro zone bond debate raises pressure on Merkel (Reuters)

BERLIN/FRANKFURT (Reuters) – Leading German business groups called on Monday for joint euro zone bond issuance, despite their government's opposition, and the European Central Bank showed its intent to defend Italy and Spain.

The ECB spent a record 22 billion euros ($31 billion) on government debt last week, to try to halt the spread of the euro zone debt crisis.

Spanish and Italian bond yields, which had soared to dangerous levels, fell back as a result of the central bank's support, which marked its first bond purchases for 19 weeks.

The ECB is keen to put the ball back in the court of euro zone governments, but despite some internal opposition stepped into a vacuum until the bloc's rescue fund acquires new powers to intervene in the secondary bond market.

Most experts say the latest measures will only buy some time whereas common bond issuance could solve the currency area's intractable debt crisis by allowing all its members to borrow at affordable rates.

But the idea of so-called "Eurobonds" has been fiercely opposed by Berlin, which is fearful such a step would push up German borrowing costs and reduce incentives for weaker euro zone members like Greece to reform their economies.

A German government spokesman was emphatic -- German Chancellor Angela Merkel and French President Nicolas Sarkozy will not discuss common euro zone issuance at a meeting in Paris on Tuesday because Berlin does not think it is a good idea.

"The German government has said on numerous occasions that it does not believe Eurobonds make sense and that's why they will not play any role at tomorrow's meeting," spokesman Steffen Seibert said.

However, a deepening of the debt crisis over the past weeks, with big member states like Italy, Spain and even France coming under pressure, has convinced some Germans to reconsider, even if top government officials continue to rule it out.

The president of Germany's BGA export association became the first senior industry head to back the idea, telling Reuters all other avenues for fighting the crisis had been exhausted.

"The alternative is the markets attack Italy, then France, we lose our AAA rating and then it's our turn. This is a downward spiral that would lead to a worldwide depression," Anton Boerner said in an interview.

"What have we achieved then?" Boerner said. "We'll end up paying three times over. This way we pay just once."

His view was backed by the head of Germany's trade association for small- and mid-sized companies, Mario Ohoven, who said Eurobonds could be introduced with guarantees to cap German liability. Other German trade groups remain opposed.

The head of the center-left Social Democrats, Sigmar Gabriel, also backed the idea, telling German public television station ARD late on Sunday that euro zone countries should be able to raise 50-60 percent of their funding through such joint issues if they agreed to certain conditions.

"States that use Eurobonds would have to agree to give up a degree of sovereignty over their own budgets," Gabriel said.

After unveiling tougher austerity plans in return for ECB help, Italian Economy Minister Giulio Tremonti said a common euro zone bond would stop markets forcing high-debt economies in the bloc to the brink. "We would not have arrived where we are if we had had the euro bond," he said at the weekend.

GOVERNANCE IN FOCUS

With common debt issuance off the agenda, Merkel and Sarkozy are instead expected to discuss improving economic governance.

Officials have said they could agree to regular meetings of euro zone leaders -- a longstanding French demand -- and enlarge the role of European Council President Herman van Rompuy to make him a spokesman for the euro.

These steps could bring greater policy discipline in the 17-nation bloc, which has regularly sowed confusion in the markets by talking with disparate voices, but are unlikely to assuage concerns about the high debt of certain countries in the bloc.

Both German Finance Minister Wolfgang Schaeuble and Economy Minister Philipp Roesler gave interviews over the weekend in which they spoke out against euro zone bonds.

German media reports have said a working group within Merkel's CDU party has been studying the idea of Eurobonds in greater detail, suggesting some may be open to it. But leading members of the party and other northern European member states, such as the Netherlands and Finland, remain vehemently opposed.

Merkel, whose popularity has sunk to its lowest level in nearly five years according to some recent polls, could face a revolt within her coalition and Germany's broader economic policy establishment if she agreed to joint bond issuance.

Her coalition partners, the Free Democrats (FDP) and the Bavarian Christian Social Union (CSU), are seen as dead-set against the idea.

The leadership of the FDP have set a meeting for Wednesday to discuss their stance on the euro crisis, while the Secretary-General of the CSU, the Bavarian sister party to Merkel's CDU, attacked the opposition SPD for its support of common bonds.

"The SPD must say what type of tax increases it wants to raise to get the umpteen billion euros for Eurobonds to aid Greece and other Dolce-Vita countries," Alexander Dobrindt said

in comments to business daily Financial Times Deutschland.

Boerner of the BGA said, however, that Eurobonds may be the only solution that can prevent the markets from launching new assaults on euro zone members.

"We must show the markets that we are ready to use the appropriate tools, and that means Eurobonds signed off by Germany," said Boerner. "We need Eurobonds with strict conditions attached. We need this and we need it fast."

(Additional reporting by Brian Rohan, writing by Noah Barkin, editing by Mike Peacock)

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Heat 'dome' traps much of US in pressure cooker (AP)

CHICAGO – For millions of people enduring this week's extreme heat and humidity, it feels like they're living in a pressure cooker. And in a sense, they are.

Much of the United States is trapped under a heat "dome" caused by a huge area of high pressure that's compressing hot, moist air beneath it, leading to miserable temperatures in the mid-90s to low 100s and heat-index levels well above 100 degrees.

"It's hot no matter what you're doing or where you are," said Tim Prader, a 50-year-old construction worker who was taking a break Tuesday at a job site in St. Louis. Although his huge Caterpillar excavator has air conditioning, he couldn't entirely escape. "When you're done for the day, you're ready to eat, drink and hit the couch."

The oppressive conditions extend from the northern Plains states to Texas and from Nebraska to the Ohio Valley. And they're expanding eastward.

When a high pressure system develops in the upper atmosphere, the air below it sinks and compresses because there's more weight on top, causing temperatures in the lower atmosphere to heat up, said Eli Jacks, a meteorologist with the National Weather Service in Silver Spring, Md.

The dome of high pressure also pushes the jet stream and its drier, cooler air, farther north — it's now well into Canada — while hot, humid air from the Gulf of Mexico circulates clockwise around the dome, traveling farther inland than normal.

Combined with generally clear skies and the sun's higher summertime angle, "it gets really hot," Jacks said.

That also explains why temperatures in, say, North Dakota this week aren't all that different from temperatures in Houston, he said. The big difference is that people in Houston are accustomed to hot weather, while those in the north are not.

"In places where the highest temperature you ever expect is in the 80s and you're at 102, there are big health concerns," because fewer people have air conditioning or fans, Jacks said. "Heat is the No. 1 killer out of all weather hazards."

What's more, because of the humidity, even nighttime brings little relief.

"It's been 100 degrees at 11 o'clock, lately, at night," said Curtis Mark, who was servicing air conditioners Tuesday at the Greer County Courthouse in Mangum, Okla., where the temperature was 106 degrees at noon. "Stay indoors is about all I do."

Fellow Oklahoman Norma Lauer of Granite said she puts cold water on her hands and arms before going to bed and then lies down "without covering up on the bed, under the fan" and with the air conditioner running.

Thunderstorms can develop around the perimeter of the dome — called the "ring of fire" — bringing temporary relief to some areas, said Kevin Birk, a National Weather Service meteorologist in Illinois. But this dome is so large that the heat rebuilds quickly, Birk said.

While heat domes aren't uncommon, this one is unusual because of its size and duration. It began three days ago and may last seven to 10 days in some locations. And it's moving eastward, with temperatures expected to reach 100 degrees in Washington by Thursday.

National Oceanic and Atmospheric Administration records show that the United States broke 25 local high records for the date on Monday, including 103 degrees in both Edgemont S.D., and Victoria, Texas.

On Tuesday, it was 102 in Manhattan, Kan., and Valentine, Neb. The mercury rose to 100 in Joplin, Mo., and Rockford, Ill. — which tied that city's record for the date set in 1930. And in some cities it will be even hotter Wednesday: Chicago reached 93 degrees Tuesday, with 97 forecast for Wednesday.

No widespread deaths have been reported, but the heat sent dozens of people to hospitals.

As hot air blew over the cooler waters of Lake Michigan on Tuesday, a thick fog shrouded many of Chicago's beaches. Lifeguards had to turn away swimmers because they could not see beyond the water's edge.

In South Dakota, up to 1,500 head of cattle died across the state from the heat. And in eastern Iowa, the scorching sun caused a portion of Interstate 380 to buckle.

A Veterans Affairs hospital in Fargo, N.D., had to reschedule more than 50 surgeries after cooling systems struggled to keep up with the weather. Some floors and other surfaces became wet, potentially compromising the sterile environment needed to operate.

In Detroit, more than 70 schools without air conditioning were to close Wednesday afternoon. Power outages and mechanical problems closed several others.

Relief is on the way. Cooler air should begin moving into the Plains states this weekend, as a strong pool of air from the jet stream begins to push hot air out of the way in the Dakotas and into Minnesota before making its way east.

By Monday, temperatures will drop into the mid-80s in the north. Cities in the East could still be sweltering.

"This is really an exceptional event, I think it's fair to say ... in terms of scope and duration," Jacks said.

Sweet corn grower Ron Deardorff of Adel, Iowa, is ready for a break in the weather.

The 64-year-old spent Tuesday morning helping his crew of 24 pick corn in the field and by noon was driving the harvest to a grocery store in Des Moines — with a temperature of 95 degrees, a heat index of 105 and no air conditioning.

"Sometimes I have to change shirts in the middle of the day or middle of the afternoon and get a dry one, " said Deardoff, who kept his truck vents wide open and the windows rolled down. "It's no fun and nobody likes it, but the season is only so long and when the corn's ready, it's ready. You just have to go after it and do what you've got to do."

___

Associated Press writers Melanie Welte in Des Moines, Tim Talley in Mangum, Okla., Jim Suhr in St. Louis and Randy Schmid in Washington contributed to this story.

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Murdochs bow to pressure to attend UK parliament (Reuters)

LONDON (Reuters) – Rupert Murdoch on Thursday caved in to pressure from Britain's parliament to answer questions over alleged crimes at one of his newspapers, setting up a showdown with lawmakers keen to break the media mogul's grip on politics.

British police arrested a ninth suspect, named by media as a former deputy editor of Murdoch's News of the World, adding weight to a government call for the media regulator to decide whether his business is fit to run British television stations.

Murdoch, 80, has already been forced to close the News of the World and back down on his biggest acquisition plan yet, the buyout of British pay TV operator BSkyB, due to an outcry over allegations reporters accessed private phone messages.

He and his son James, heir apparent to his News Corp empire, initially said they would not face questions from parliament's media committee over phone hacking and then reversed their decision after Prime Minister David Cameron said they should attend.

Rebekah Brooks, who runs Murdoch's British newspaper arm, News International, had agreed to face a grilling from the committee. Brooks was a friend of Cameron, who echoed calls for her to go.

Brooks, who edited the News of the World at the time of one of the most serious alleged incidents, said the police inquiry might restrict what she could say.

Speculation was growing at News International's east London headquarters that the company might be reconsidering their position on Brooks after resisting pressure for her to quit, a source familiar with the situation said.

Murdoch, a U.S. citizen, said he would give evidence to a public inquiry announced by Cameron after questions were raised over the role of some police officers in the scandal and over the relations between British politicians and media owners.

The session is certain to be hostile. During a heated debate on the hacking scandal on Wednesday, Dennis Skinner, a veteran left-wing Labour member of parliament described Murdoch as "this cancer on the body politic." Murdoch and other senior executives have denied any knowledge of the alleged practices.

GLOBAL FALLOUT

The allegations of phone hacking, which reached a peak as Murdoch's British bid came up for approval this month, are now reverberating around the world.

Some U.S. lawmakers called for an investigation to see if the billionaire's News Corp had broken American laws while in Australia, where Murdoch was born, the prime minister said her government may review media laws.

Murdoch, who owns 39 percent of British pay TV operator BSkyB, withdrew his $12 billion bid to take over the rest of it on Wednesday after British politicians united in a call for him to pull out of the deal.

Britain's Deputy Prime Minister Nick Clegg noted media regulator Ofcom was already looking into whether News Corp should be allowed to maintain its existing stake in BSkyB.

"Clearly there are big questions about the fitness and properness of News International and that is exactly why Ofcom are now looking at it," Clegg, leader of the Liberal Democrat coalition partners, told BBC Radio 4.

"The thing that I think isn't quite clear to me at least is exactly how fit and proper tests are applied," he added.

The catalysts for public disgust over the hacking allegations were reports a News Corp newspaper had hacked into the voicemails of murder victims.

"To see some of the things that have been done to intrude on people's privacy, particularly in moments of grief and stress in the family lives, I've truly been disgusted to see it," Australian Prime Minister Julia Gillard told Australia's National Press Club.

"I anticipate that we will have a discussion amongst parliamentarians about this, about the best review and way of dealing with all of this," she said.

"DARK ARTS" OF JOURNALISM

U.S.-based News Corp has been rocked by a series of scandals alleging journalists and hired investigators working for its flagship News of the World tabloid hacked into the voicemails of thousands of people, from victims of notorious crimes to families of soldiers killed in the war in Afghanistan.

The allegations, which include bribing police officers for information, galvanized British lawmakers across party lines to oppose a man long used to being courted by the political elite.

Police arrested former News of the World deputy editor Neil Wallis on Thursday, the ninth person held since the inquiry was revived earlier this year.

In a statement, the Metropolitan Police said it had hired Wallis as a consultant from October 2009 until September 2010, an embarrassment for a force facing questions about its links to tabloid reporters.

The crisis has also tarnished Cameron, who faces questions about why he appointed a former News of the World editor as his communications chief.

Clegg distanced himself from the decision on Thursday.

"We did discuss it. Of course we discussed it. But at the end of the day I make my appointments to my own office and David Cameron makes his own appointments."

Politicians in the United States are taking notice, too.

Three prominent U.S. lawmakers called on federal officials to investigate whether News Corp broke any American laws, meaning Murdoch could be battling investigations on both sides of the Atlantic.

(Additional reporting by Stefano Ambrogi, Michael Holden, Matt Falloon in London, Paul Thomasch in New York and Rob Taylor in Canberra; Writing by Keith Weir; Editing by Louise Ireland)

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Murdoch under pressure to reconsider British bid (Reuters)

LONDON (Reuters) – Britain was looking for a way out of approving media baron Rupert Murdoch's multi-billion dollar deal to buy broadcaster BSkyB amid a phone-hacking scandal that has damaged the prime minister and raised broader questions about politicians' relations with the media.

Deputy Prime Minister Nick Clegg, from the junior coalition partner the Liberal Democrats, urged Murdoch to reconsider the bid after revelations one of his newspapers hacked into the phones of murder victims and relatives of Britain's war dead.

New allegations Monday included reports it had bought contact details for the British royal family from a policeman and tried to buy private phone records of victims of the September 11, 2001, attacks on the United States.

"Do the decent thing, and reconsider, think again about your bid for BSkyB," Clegg told BBC News after meeting relatives of one of the victims of phone-hacking, a murdered schoolgirl.

The government, which faces a stormy parliamentary debate on Wednesday, earlier asked media regulator Ofcom and the consumer watchdog to reassess the bid in the light of the scandal, a move that could provide a basis to block the buyout.

The new request to Ofcom, which is already assessing whether News Corp is a 'fit and proper' holder of a broadcast license, and the Office of Fair Trading follows a report in the Independent newspaper that government lawyers were drawing up plans to block the BSkyB bid.

Shares in BSkyB dropped more than 7 percent Monday morning after a similar fall Friday. News Corp shares fell more than 7 percent in New York last week.

"We believe the deal is all but dead," Panmure Gordon analyst Alex DeGroote said.

The head of UK equities at one top 30 investor in BSkyB told Reuters they expected the deal to be delayed. "I believe the takeover will happen in due course but it is unlikely to go through until next year at the earliest," the investor said.

Murdoch flew to London Sunday from the U.S. to try to contain the damage to his media empire, which wields influence from Hollywood to Hong Kong and includes U.S. cable network Fox and the Wall Street Journal as well as Britain's biggest selling paper, the Sun.

He has shown no sign of backing away from the BSkyB deal, which would be his company's largest acquisition. Sources close to his company said he could consider other options to get it through if he felt the government was going to block or delay it, but they did not elaborate.

Eight people, almost all journalists, have been arrested so far in a police inquiry into the allegations, which include that police may have been paid for information and a company executive may have destroyed evidence. News Corp's British media arm firmly denies any obstruction of justice.

"You wouldn't be human if you weren't totally appalled by the revelations that have come to light, they're just stomach churning and I think everyone feels totally shaken," Culture Secretary Jeremy Hunt said in a television interview.

Hunt's strong comments, and the approach to the regulators, may have been designed to give the government some political cover ahead of Wednesday's debate, lawyers said, as from a legal standpoint the takeover deal and hacking scandal are not linked.

Both Hunt and Prime Minister David Cameron, from the center-right Conservatives who lead the coalition government, have been accused by left-leaning Labor of being too close to Murdoch and too slow to act to uncover the full extent of the scandal.

Andy Coulson, a former editor of the News of the World, was until earlier this year Cameron's spokesman, before he was forced to resign over the scandal.

Labor party leader Ed Miliband said Sunday he would force parliament to vote this week if Cameron did not take steps to halt News Corp's $14-billion bid for the 61 percent of BSkyB that it does not already own.

He said Monday the government had moved reluctantly. "They are doing it not because they want to, but because they have been forced to," Miliband said, urging Murdoch to "drop the bid for BSkyB."

A vote in parliament could split the coalition between Cameron's Conservatives and the Liberal Democrats who, traditionally less favored by Murdoch's media, have signaled they could vote with Labor on the issue.

It would also give Labor a chance to cast itself as the champion of a public angered by allegations that News of the World reporters and editors were complicit in breaking into voicemails including those of bombing victims for stories.

"We are working on a plan to suspend the deal while the police investigation is taking place," the Independent quoted a senior government source as saying. A spokesman for the prime minister declined to comment.

Hunt's letter to the regulator asked them to consider whether News Corp's undertakings which were made to secure the deal were still credible given the revelations.

"Given the well-publicized matters involving the News of the World in the past week...I would be grateful if you could let me know whether you consider that any new information that has come to light causes you to reconsider any part of your previous advice to me including your confidence in the credibility, sustainability of practicalities of the undertakings offered by News Corporation," the letter said.

Murdoch's own Sunday Times reported that a 2007 internal investigation at the News of the World had found evidence that phone hacking was more widespread than the company had admitted and that staff had illegally paid police for information.

As Murdoch, 80, was driven into his London headquarters on Sunday, he held up the final edition of the News of the World, the 168-year-old newspaper he bought in 1969 then closed last week in a bid to stem the crisis.

Christina Camargo-Lima, walking on her way to work past Murdoch's London flat Monday morning, welcomed the criticism of Murdoch. "I think it's time the mogul came down. They just can't control democracy like that."

LURID HEADLINES

The News of the World is best known for its lurid headlines exposing misadventures of the rich, royal and famous. Its last headline said simply "Thank You & Goodbye" over a montage of some of its most celebrated splashes of the past 168 years.

Monday, the BBC said News International had bought phone details for the royal family from a security officer, citing company emails. "The implication, therefore, is that the security of the head of state was in some sense being threatened," said BBC business editor Robert Peston.

The Daily Mirror newspaper reported, citing an unidentified source, that News of the World journalists had offered to pay a New York police officer to retrieve the private phone records of victims of the September 11, 2001, attacks.

There was no immediate comment from the company.

Murdoch dined Sunday in an upmarket hotel with his British newspaper arm's chief executive Rebekah Brooks, a friend of Cameron's and editor of the News of the World at the time of the alleged phone-hacking, and his son and heir apparent, James. Cameron has since said Brooks should step down.

The affair has thrown a harsh spotlight on the long-standing ties between British politicians and Australian-born Murdoch.

Cameron has insisted that the government has no legal power to block the BSkyB deal if it is satisfied that enough media plurality -- competition -- will be maintained. It had already indicated it would accept News Corp's assurances on this count.

"FIT AND PROPER"

The Independent said the government had latterly hoped the broadcasting regulator Ofcom would stop the deal going through on grounds that News Corp directors were not "fit and proper" to run BSkyB, but this was unlikely to happen until a possibly lengthy police investigation had been completed.

Instead, it said lawyers in the department of Culture and media were now looking at using competition criteria to block the deal.

That would still be embarrassing for the prime minister, who has ordered a public inquiry and also admitted media barons had too much influence over politicians, but arguably less damaging than a split with his coalition partners.

Blocking the BSkyB deal on grounds of media plurality would also be better for Murdoch than if he and his team were found to be not "fit and proper" to run the broadcaster, as that could see him lose his existing 39 percent of the company.

(Additional reporting by Paul Sandle, Keith Weir, Tim Castle, Sudip Kar-Gupta, Sinead Cruise and Chris Vellacott; writing by Philippa Fletcher)

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New hacking allegation piles pressure on Murdoch (Reuters)

LONDON (Reuters) – Prime Minister David Cameron led a chorus of condemnation Tuesday over allegations a top-selling British newspaper from Rupert Murdoch's global media empire hacked the voicemail of a missing schoolgirl who was later found murdered.

Suggestions that in 2002 a News of the World investigator listened in to, and deleted, messages left for the cellphone of the 13-year-old, misleading police and her family, caused uproar in parliament, where the tactics and power of the tabloid press, many of them Murdoch titles, have long caused controversy.

The gravest accusations yet drove the long-rumbling scandal into the heart of Murdoch's News Corp: it came as it seeks official approval to take over broadcaster BSkyB; and forced Rebekah Brooks, a Murdoch confidante who was the News of the World editor at the time, to plead ignorance and say she would not resign as head of News Corp's British newspaper arm.

Pressure is unlikely to let up, however. At least one major advertiser, carmaker Ford, said it was pulling ads from the News of the World -- though not the other Murdoch papers -- until it saw how the tabloid dealt with the new allegation.

Lender Halifax said on its official Twitter feed that it was considering its options, while telephone operator T-Mobile UK said on Twitter it was reviewing its advertising position.

And police looking into phone hacking by the newspaper later said they had been in touch with the parents involved in another notorious child murder, when two 10-year-old girls were seized and killed by a school caretaker in the town of Soham in 2002.

Suggestions that the News of the World's activities might have hampered police and given false hope to the family of the murdered teen-ager, Milly Dowler, caused uproar in Britain and moved Cameron to comment while on a visit to Afghanistan.

"On the question about the really appalling allegations about the telephone of Milly Dowler, if they are true, this is a truly dreadful act," Cameron told journalists in Kabul.

Lawmakers agreed to clear three hours of parliamentary time for an emergency debate on the issue Wednesday.

Cameron had until now said little about the phone hacking scandal, which forced the resignation earlier this year of his own spokesman, another former editor of the News of the World.

His government is weighing approval of News Corp's takeover bid for BSkyB though it was unclear the latest twist of scandal would do much to raise what analysts see as a slim chance that his center-right administration would step in to block the move. Critics say the deal concentrates too much political power in the hands of the Australian-born American media baron.

PREMIER'S SPOKESMAN

The phone-hacking affair, in which journalists desperate to boost circulation dialed in to mobile phone voicemail servers of public figures in the hunt for stories, has rumbled for years -- the News of the World's royal correspondent and a private investigator were jailed in 2007 after hacking.

In January, angry celebrities, including entertainment and sports stars, as well as politicians, who feared their messages had been listened to prompted police to open a new inquiry.

Cameron, who is close to the Murdoch family and has often been spotted socializing with Brooks in Oxfordshire where they both have country homes, also reiterated that the BSkyB merger should be handled separately from the phone-hacking probe.

Murdoch transformed the British press landscape in the 1980s during Margaret Thatcher's years as prime minister, bringing in new technology and confronting printers' and journalists' trade unions. He commands audiences with global leaders and, through his media, is seen as one of the world's most powerful men.

Analysts expect the $15 billion-plus BSkyB deal to go through.

"The secretary of state is not entitled to consider these latest appalling allegations when considering the News Corp proposal to buy the rest of BSkyB," said analyst Chris Goodall of media and telecoms research firm Enders Analysis.

The ministry reviewing the bid declined comment. But opposition Labour politician and former deputy prime minister John Prescott, who was told by police his phone may have been hacked, wrote to communications regulator Ofcom to ask it to review the bid and said it was not too late to halt the deal.

Ofcom has the power to decide whether News Corp is a fit and proper owner of BSkyB but an industry source said it would not do anything until the police investigation into the phone hacking scandal at the News of the World was concluded.

BSkyB shares closed 0.6 percent down at 845 pence, underperforming a stronger European media index.

FALSE HOPE

The kidnap and murder of Milly Dowler is among the highest-profile criminal cases of recent years. Revelations from her family's lawyer that police were checking whether journalists manipulated her cellphone account while she was missing come less than two weeks after her killer was finally convicted.

Influential BBC journalist Robert Peston blogged on his Twitter feed: "News Int execs tell me they fear there may have been worse examples of NOTW hacking than that of Milly Dowler's phone. The mind reels." News International declined to comment.

Simon Greenberg of News International told Sky News Tuesday evening that it had found "some significant new information that certainly helps us get closer to establishing the facts of the case about who was involved," without giving further details. He also said it had been in dialogue with its commercial partners, informing them of the steps taken.

Opposition Labour party leader Ed Miliband said News International Chief Executive Brooks, News Corp's most senior executive so far affected, should think about resigning.

"She should consider her position. But this goes well beyond one individual. This is about the culture and practices that were obviously going on at the News of the World, for a sustained period," he said in a statement.

Brooks told staff in a memo she would not go. "It is almost too horrific to believe that a professional journalist or even a freelance inquiry agent working on behalf of a member of the News of the World staff could behave in this way."

Glenn Mulcaire, the private investigator jailed for phone hacking, issued a statement released to the Guardian, the newspaper that has forced much of the agenda, in which he apologized "to anybody who was hurt or upset by what I have done," blaming the constant demand for results.

"I knew what we did pushed the limits ethically. But, at the time, I didn't understand that I had broken the law at all," he was cited as saying.

Media consultant Steve Hewlett told BBC radio it "looks like an industrial-level activity, which makes editors' denial that they knew anything about it even more implausible."

Facebook and Twitter campaigns sprang up in the wake of the latest allegation encouraging to boycott the News of the World.

It is not clear how badly it might be hit commercially but a boycott in 1989 of best-selling sister paper The Sun by Liverpool readers is estimated to have cost tens of millions of pounds.

People in the English city stopped buying the paper after it wrongly accused Liverpool soccer fans of loutish behavior while 96 of their fellow fans were crushed to death ahead of cup tie at Hillsborough stadium.

News Corp long maintained that the cases of phone hacking were isolated and the work of a lone journalist gone off the rails. This year, it admitted liability in a few cases and will pay compensation to victims including actor Sienna Miller. Others, including actor Jude Law and soccer star Ryan Giggs are still suing the paper.

Peta Buscombe, chair of Britain's Press Complaints Commission, said News Corp had lied, leading the PCC to conclude in 2009 that there was no evidence the phone hacking was the work of more than one rogue reporter. "I personally and the PCC are so angry because clearly we were misled," she told the BBC.

Police, who have been accused of being sluggish in probing a media organization to which some officers sold information, have arrested three journalists since relaunching their inquiries.

(Additional reporting by Mohammed Abbas in Kabul and Jodie Ginsberg, Olesya Dmitricova, Keith Weir, Michelle Nichols, Avril Ormsby, Stefano Ambrogi and Matt Falloon in London; Editing by Alastair Macdonald)

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EU piles pressure on Syria as nine die in anti-regime demos (AFP)

DAMASCUS (AFP) – Security forces fired on demonstrations killing 11 people as tens of thousands of anti-regime protesters surged onto Syrian streets after Friday prayers, and the EU turned up the heat on Damascus.

The demonstrations were in response to a call by the Facebook group Syrian Revolution 2011, one of the motors of protests against the autocratic rule of President Bashar al-Assad that have rocked Syria since mid-March.

"Security forces tried to break up a rally calling for the fall of the regime with tear gas before opening fire" killing three people and injuring 25 others, an activist in the Damascus neighbourhood of Barzeh said, reached by telephone.

They also opened fire on demonstrators in the town of Kiswah south of Damascus, killing at least five people, another activist told AFP.

"Demonstrators left the mosque after Friday prayers and marched for a few minutes until security forces opened fire to disperse them, killing five people and wounding six others," rights activist Mohammad Enad Suleiman said.

Three people were killed in the central city of Homs and 20 others wounded when security forces opened fire on the crowd of protesters, an activist at the scene told AFP.

Demonstrations also rocked many other cities, including the eastern oil hub of Deir Ezzor where 30,000 protesters filled the streets, and neighbouring Median, said Rami Abdel Rahman who heads the London-based Syrian Observatory for Human Rights.

Syria's state television blamed the civilians deaths in Barzeh on "armed men" whom it said also opened fire on security forces, wounding several of them including an officer.

The state broadcaster added that a police officer was also killed by gunfire in the Damascus suburb of Kadam while the official SANA news agency reported that "several members of the security forces were hit by gunfire in Kiswah."

Syria blames the violence on "armed terrorist gangs" and says the protests are being orchestrated from abroad.

Syrian rights groups say that more than 1,300 people have been killed and while 10,000 have been arrested in the regime's brutal crackdown against dissent since the protests first erupted on March 15.

Friday's protests were held under the banner, "Fall of legitimacy" and a message on the Facebook page read, "Bashar is no longer my president and his government no longer represents me."

The crackdown on dissent has sent nearly 12,000 Syrians fleeing to safety in neighbouring Turkey, prompting concerns from US Secretary of State Hillary Clinton who warned of the risk of a regional escalation.

The European Union warned Assad's regime that its legitimacy was undermined by the brutal crackdown.

EU leaders holding a summit in Brussels were expected on Friday to adopt a declaration condemning the "unacceptable and shocking violence the Syrian regime continues to apply on its own citizen," said a draft obtained by AFP.

"By choosing a path of repression instead of fulfilling its own promises on broad reforms, the regime is calling its legitimacy into question," it said. "Those responsible for crimes and violence against civilians shall be held accountable."

The EU declaration also calls for the UN Security Council to adopt a resolution slamming the crackdown -- a move opposed by veto-wielding member Russia.

The EU this week issued fresh sanctions against Syria, which expanded a blacklist targeting 23 top leaders including the embattled president Assad.

Syria has reacted angrily to the EU sanctions, with Foreign Minister Walid Muallem saying this week they were "equivalent to war" and denying receiving assistance from Iran.

Meanwhile the number of Syrians sheltering in Turkey has approached 12,000 after some 1,500 refugees poured across the border on Thursday and Friday, officials said in Ankara.

The influx has triggered concern in Washington, particularly as the flow came after Syrian troops stormed border villages including Khirbet al-Joz, where many of the displaced had massed, according to activists.

US Secretary of State Hillary Clinton said the Syrian troop build-up was "worrisome" and could increase the changes of a border clash and "only exacerbate the already unstable refugee situation in Syria."

The exodus has prompted Turkey to build a giant tent city along the border with Syria to expand a Red Crescent camp where more than 200 tents have already been erected.

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