Police arrest 2 linked to Toulouse gunman

FRENCH police have arrested two people in connection with the attacks by extremist gunman Mohamed Merah, whose shooting spree in and around the southern city of Toulouse left seven people dead.

A man described by police as a 38-year-old member of the traveller community who converted to Islam was detained on suspicion of having provided aid to Merah in carrying out the March attacks that shocked France.

He was arrested without incident at his home in the town of Albi, about 70 kilometres from Toulouse, where he was to be taken for questioning, police sources said.

His ex-girlfriend, also 38, was arrested separately at her home in Toulouse, in the same neighbourhood where Merah lived.

She was questioned shortly after her arrest. Police said she may have been aware of her ex-boyfriend's alleged involvement with Merah and failed to inform authorities.

The nature of his alleged involvement was unclear, but investigators have been searching for a suspected "third man" believed to have been with Merah and his brother Abdelkader during the theft of a scooter used in the attacks.

The detained man was known to police, a source said.

Merah shot a rabbi, three Jewish schoolchildren and three French paratroopers in March before being shot dead in a police siege in Toulouse.

Abdelkader was arrested after the attacks and remains in custody.

Sources close to the investigation warned against concluding that the suspect arrested on Tuesday was the "third man". He can be held for questioning for up to 96 hours without charge.

Merah's elder brother Abdelghani previously told French media that someone from the traveller community may have been involved in stealing the scooter.

Investigators are also probing whether any possible accomplices may have provided funds or weapons used by Merah.

A petty criminal who was lured into Islamic extremist circles in Toulouse, Merah visited Afghanistan and Pakistan before his attacks.

Since his shooting spree, it has become clear that Merah had been on the radar of France's security services for years and that authorities under-estimated the extent of his radicalisation following his trips abroad.

French intelligence services have been heavily criticised for failing to realise the threat posed by Merah.

His attacks prompted a rethink of French security policies, with legislation being considered that will allow authorities to prosecute citizens who attend militant Islamist training camps abroad and to boost monitoring of extremist sites on the internet.

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One dead in violent clashes in Bangladesh

PROTESTERS from Bangladesh's largest Islamic party have clashed with security forces in cities across the country in violence that has left one dead, police say.

Jamaat-e-Islami called a strike on Tuesday to protest against the arrest and trial of its leaders, who face charges of war crimes during the country's 1971 liberation struggle.

An 18-year-old youth was shot dead on Monday night during clashes in the northern town of Chirirbandar, 300 kilometres from the capital Dhaka, and unrest spread to other cities on Tuesday.

Jamaat supporters torched and damaged about 20 vehicles including a car belonging to the US Embassy in Dhaka on Tuesday and 69 people were detained on charges of violence, police said.

"Jamaat activists hurled bricks at a US embassy car which was coming from the airport after dropping a foreigner. They also tried to torch the car," police sub-inspector Abu Saleh told AFP.

In a statement posted in the party's website, Jamaat's acting secretary general Shafiqur Rahman said "sorry" for the incident saying they were ready to pay compensation for the damaged car and to the injured driver.

Violence was also reported in the eastern town of Brahmanbaria and in the cities of Sylhet, Rajshahi and Narayanganj.

The dead 18-year-old was admitted to hospital on Monday with a gun shot wound to the head after a demonstration at which police admitted firing live ammunition to control the crowd, hospital and police sources said.

"We fired seven rounds of live bullets, rubber bullets and tear gas shells," local police chief Tariqul Islam told AFP, saying that the cause of the activist's death was unclear.

Shihidul Islam, a nurse at Rangpur Medical College Hospital, said the activist died as he was brought to the clinic. "He has a bullet shot in his head," he told AFP.

The government blames Jamaat for much of the killing in the bloody nine-month war against Pakistan, in which it says about three million people died.

But the International Crimes Tribunal (ICT), created in 2010 to try war crimes suspects, has been widely criticised as being a political tool for the ruling Awami League government to target its opponents.

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Exports, spending cuts to hurt GDP growth

WEAKER exports and government spending cuts are likely to have slowed the pace of economic growth in the September quarter.

The median market forecast is for the Australian economy to have grown by 0.6 per cent in the September quarter, according to an AAP survey of 13 economists last week.

The Australian Bureau of Statistics is expected to report on Wednesday that over the year to September, the economy is to have grown by 3.1 per cent.

This will be a considerable slowdown compared to the 3.7 per cent growth recorded in the 12 months to June.

TD Securities Asia-Pacific macro strategist Alvin Pontoh said weaker exports and spending cuts from state and federal governments were expected to weigh on economic growth.

"It's lower than the first half of the year but it is not a bad rate of growth," he said.

"In the first half of the year, you had strong consumption but that is partly because of a number of temporary factors, including retailers' discounting and carbon tax compensation, but those effects are going to fade."

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West warns Damascus on chemical weapons

WESTERN powers have warned Damascus there will be an immediate reaction to any use of chemical weapons as NATO prepares to approve a Turkish request for missiles to protect its border with Syria.

"The possible use of chemical weapons would be completely unacceptable to the whole international community and I would expect an immediate reaction from the international community," NATO head Anders Fogh Rasmussen said.

Syria's chemical weapons stockpiles were "a matter of great concern," Rasmussen said, adding: "This is also the reason why it is a matter of urgency to ensure effective defence and protection of our ally Turkey."

Turkey's request for US-made surface-to-air Patriot missiles on its border is worrying Russia, but both NATO and Ankara insist they would be purely defensive.

US President Barack Obama on Monday issued a new warning to Syrian President Bashar al-Assad not to use chemical weapons against his own people, as the conflict approaches the 21-month mark with more than 41,000 people killed.

"I want to make it absolutely clear to Assad and those under his command, the world is watching, the use of chemical weapons is and would be totally unacceptable," Obama said.

"If you make the tragic mistake of using these weapons, there will be consequences and you will be held accountable."

France, with traditional interests in the region, made a similar point.

"The leaders in Damascus must know the international community is watching them and will react" if chemical weapons are used, French foreign ministry spokesman Vincent Floreani said.

The Syrian government, fighting to prevent the capital Damascus from falling to rebel forces, on Monday reiterated it would never resort to chemical weapons.

Saudi Arabia meanwhile urged the international community to take a unified position on Syria after the rebel groups formed a coalition last month.

"We see in forming the new Syrian coalition an important positive step towards uniting the opposition under one banner," Prince Saud al-Faisal said.

"We hope to see a similar step towards uniting the positions and views of the international community in dealing with the Syrian issue," the foreign minister added.

Saudi Arabia has openly called for arming the Syrian rebels.

On the ground on Tuesday, the Syrian army blasted a string of rebel zones on the eastern and southwestern outskirts of Damascus.

Rami Abdel Rahman, director of the Britain-based Syrian Observatory for Human Rights, said "the army is trying at all costs to keep the rebels out of Damascus.

"The rebels are pushing hard to enter into the city but they have not been able to make the advance they are hoping for," he added.

Pro-regime daily Al-Watan reported that the army is "making progress in all directions in Damascus province, chiefly in villages along the road linking the capital to the international airport."

Syrian state television meanwhile reported that a rebel attack on a school near Damascus on Tuesday killed nine students and their teacher.

In the face of deteriorating security, the United Nations on Monday suspended operations in Syria and said it would pull out non-essential staff, while the European Union reduced its activities in Damascus to a minimum.

Against this backdrop, Syria and Turkey's request for help to boost its defence was dominating the two-day NATO meeting in Brussels, which was to dedicate some time also to strained ties with Moscow.

Military sources in Turkey have said NATO is considering the deployment of up to six Patriot batteries and some 300-400 foreign troops to operate them.

The Patriot, designed mainly to bring down missiles but effective also against aircraft, would likely be supplied by Germany, The Netherlands or the United States.

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Egypt opposition march on palace

OPPONENTS of Islamist President Mohamed Morsi have marched on the presidential palace to protest his power grab and a controversial draft charter, as the country plunged deeper into crisis.

Thousands took to the streets waving Egyptian flags, chanting for the downfall of the regime and denouncing the Muslim Brotherhood, from which Morsi emerged, for having "sold the revolution" that toppled Hosni Mubarak last year.

A November 22 decree issued by Morsi expanding his powers and enabling him to put to a mid-December referendum a draft constitution - rejected by liberals, leftists and Christians - has sparked strikes and deadly protests.

"I'm not going to vote. Morsi and the committee (drafting the constitution) are void," said protester Mohammed.

The charter has become the focal point of a political and ideological battle in Egypt between Islamists and the largely secular-leaning opposition.

"Egypt is a country where all religions should live together. I love God's law and Sharia (Islamic law) but I will vote against the constitution because it has split the people," said Bassam Ali Mohammed, a professor of Islamic law, as he neared the presidential palace.

Thousands also gathered in Cairo's Tahrir Square - where protesters have been camping out since Morsi issued his decree - with the numbers expected to swell later in the evening.

Morsi's decree not only placed his decisions beyond judicial oversight but also barred any judicial body from dissolving the Islamist-dominated panel that drafted and approved the new constitution, sparking a conflict with the country's judges.

Security measures were tightened around the capital, with some schools and businesses closing on Tuesday.

Independent and opposition newspapers refused to publish their Tuesday editions in protest at a lack of press freedom in the constitution.

The move was in order to "stand up to tyranny," independent daily Al-Tahrir said on its website.

"The Egyptian Independent objects to continued restrictions on media liberties, especially after hundreds of Egyptians gave their lives for freedom," read a message on that newspaper's website, its only viewable content on Tuesday.

As he faces his worst crisis since taking office in June, Morsi insists the measures are aimed at ending a tumultuous transition following the popular uprising that toppled Mubarak in early 2011.

But his opponents have accused him of choosing the same path of autocracy that finally cost Mubarak his presidency.

The decision to go to a referendum on December 15 caused further upheaval, including within the judiciary itself.

On Monday, the Supreme Judicial Council said it would ensure judicial supervision of the referendum, despite calls for a boycott by some of their colleagues including the influential Judges Club, an association that represents judges nationwide.

On Tuesday, the head of the Judges Club, Ahmed al-Zind, stuck by his group's decision to boycott the vote and said judges who supervise the referendum "would never be forgiven."

He said the number of judges who refused to supervise the election far outweighed those who agreed to take part.

The constitution itself has been criticised for failing to protect key rights and for paving the way to a strict interpretation of Islamic law.

Leading dissident and former Arab League chief Amr Mussa, who walked out of the constitution panel, said the charter did not reflect freedoms that should be guaranteed in the 21st century.

"The document has to be something that makes life easier for Egyptians ... not something that requires difficult interpretations, which scares people," Mussa told reporters. "We are in the 21st century."

Tuesday's march to the presidential palace was the latest in a string of protests which the opposition said could escalate.

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Crude oil prices fall on US data

CRUDE prices have fallen after data showed US manufacturing activity contracted last month, while dealers grow concerned at the lack of progress on a deal to avert the fiscal cliff.

Brent North Sea crude for January dropped $1.04 to $US109.88 ($A105.89) per barrel in London early afternoon deals.

New York's main contract, light sweet crude for delivery in January, shed 72 cents to $88.37 a barrel.

"Crude oil prices continue to be on a consolidation mode, as mixed macroeconomic data from the United States and eurozone, and uncertainty about a potential 'fiscal cliff' dominate the markets," said Sucden analyst Myrto Sokou.

She added: "Due to the lack of US economic indicators, we expect thin trading conditions and further consolidation in the oil market today."

Crude oil prices had diverged on Monday as a weak reading in US manufacturing data for November offset an encouraging rebound in China's manufacturing sector.

The US Institute for Supply Management said manufacturing activity contracted in November in the world's biggest oil consumer, after two straight months of gains. The reading was also the lowest level of activity since July 2009.

Adding to concerns about the United States, Democrats and Republicans blamed each other over their proposals on action to close the huge US deficit.

If a deal is not reached to address the huge tax hikes and spending cuts that are due to come into effect on January 1, the world's biggest economy will likely tip into recession next year - and this would ravage global energy demand.

The White House late on Monday laid into a proposal tabled by the Republicans as not meeting "the test of balance".

The Democrats days before submitted a proposal that Republicans derided as "ridiculous".

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Fire in Chinese clothing factory kills 14

A FIRE in a clothing factory has killed 14 people in southern China, state media reports.

The official Xinhua News Agency said one other person was injured in the fire, which broke out in Shantou city in Guangdong province and was put out after half an hour.

Senior provincial officials set up a team to investigate the cause of the fire and step up safety measures to avoid similar fatal fires, it said in a brief report.

Last month, a fire at a clothing factory in Bangladesh killed 112 people and highlighted dangerous workplace conditions. Workers who survived the fire said exit doors were locked.

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France to vote for Palestinian state

THE French foreign minister says France plans to vote in favour of recognition of a Palestinian state at the U.N. General Assembly this week.

Laurent Fabius has told parliament that France has long supported Palestinian ambitions for statehood and "will respond 'yes'" when the issue comes up for a vote "out of a concern for coherency."

With the announcement, France - a permanent member of the Security Council - becomes the first major European country to come out in favour. It amounts to a setback for Israel.

The Palestinians say the assembly is likely to vote Thursday on a resolution raising their status at the United Nations from an observer to a nonmember observer state, a move they believe is an important step toward a two-state solution with Israel.

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Portuguese MPs clear austerity budget

BAILED-OUT Portugal's MPs have given final approval to a 2013 budget imposing an unprecedented austerity squeeze even as protesters massed outside.

The budget, aimed at saving 5.3 billion euros ($A6.63 billion), passed easily with the support of the centre-right government, which has an absolute majority.

The government says the plan, which relies on higher taxes for 80 per cent of the savings, is vital to Portugal's recovery.

"The state budget for 2013 is a determined step on the road to recovery," Finance Minister Vitor Gaspar said. But "the risks and uncertainties surrounding the 2013 budget year are great."

Portugal's new budget stipulates a broad rise in income tax to 14.5 per cent for the most vulnerable and 48 per cent for the most wealthy. It also reduces the number of tax brackets from eight to five, with the tax rate in each band raised by 3.5 percentage points.

Unemployment benefits are sliced by five per cent and sickness payments by six per cent.

"We have to finish with this policy before it finishes with us!" declared one banner unfurled at a rally outside parliament called by the main union, the General Federation of Portuguese Workers.

Protesters aimed their fire at the "troika" of creditors behind Portugal's 78 billion euro bailout: the International Monetary Fund, European Union and European Central Bank.

"We say no to the troika and its policies!" said one banner carried by activists, while others declared: "It's robbery, it is the people who pay!" and "Salaries frozen, future mortgaged!"

The tight-fisted budget has sparked multiple street protests including one on November 14 that degenerated into clashes between baton-wielding police and stone-throwing demonstrators.

The main opposition Socialist Party has opposed the budget, saying the austerity policies are "exaggerated", even though it was in power when Lisbon sought the rescue in May 2011.

While recognising the enormous sacrifices by his compatriots, Prime Minister Pedro Passos Coelho says austerity policies are the only path to economic recovery.

With its draconian budget, the government expects to trim the annual budget deficit to the equivalent of 4.5 per cent of gross domestic product next year from a target of 5.0 per cent in 2012.

The budget-trimming efforts come as the economy is expected to shrink three per cent in 2012, with a jobless rate already nearing 16 per cent.

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US stocks open lower despite Greek deal

US stocks have opened lower after Greece secured a revised bailout deal that will help it again avert a default on its huge debt load.

Doubts remained about the new deal, which allows Athens to trim its debt load through bond buybacks and reduced rates and promises new rescue loan instalments of 43.7 billion euros ($A54.63 billion) through March.

Five minutes into trade the Dow Jones Industrial Average was down 27.19 points (0.21 per cent) at 12,940.18.

The broad-market S&P 500 lost 2.37 (0.17 per cent) at 1403.92, while the Nasdaq Composite slipped 4.26 (0.14 per cent) to 2972.52.

European markets were mostly higher after the deal, but critics said the European Union and the International Monetary Fund had again "kicked the can down the road" with the new arrangement.

"We think that Greece will eventually need a much larger debt relief, but any agreement on this is unlikely to happen before German elections next fall," said Tullia Bucco of UniCredit Research.

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