Most major European and Asian equity markets rose, bolstered by a 1.7 percent jump in the Dow Jones industrial average Tuesday. Markets in China and Taiwan were closed for the Lunar New Year holiday.

Investors were cheered by signs the U.S. economy may be improving. On Tuesday. Kraft Foods Inc. and apparel retailer Abercrombie & Fitch reported earnings that beat expectations, while drugmaker Merck & Co. said profits jumped. UK banking giant Barclays also reported soaring profits.

Traders will be eyeing reports on housing starts, jobless claims and inflation later this week for more evidence the U.S. economy is rebounding strongly from last year’s recession.

Markets also got a boost from news European officials are working with Greece to control its debt crisis. European Union leaders on Tuesday gave Greece one month to prove it can cut its fiscal deficit.

Concerns about rising debt burdens in Greece, Portugal and Spain have undermined investor confidence during the last few weeks.

As trading got underway in Europe, Britain’s FTSE 100 rose 0.7 percent, Germany’s DAX index gained 0.9 percent, and France’s CAC-40 added 1.2 percent.

Earlier in Asia, Japan’s Nikkei 225 stock average jumped 272.58 points, or 2.7 percent, at 10,306.83 and Hong Kong’s Hang Seng index climbed 265.32, or 1.3 percent, to 20,534.01.

South Korea’s Kospi gained 26.38, or 1.7 percent, to 1,627.43 while Singapore added 1.3 percent and India 1.3 percent. Australia’s benchmark advanced 2.1 percent.

In the U.S. on Tuesday, the Dow rose 169.67, or 1.7 percent, to 10,268.81. The Standard & Poor’s 500 index rose 19.36, or 1.8 percent, to 1,094.87, while the Nasdaq composite index rose 30.66, or 1.4 percent, to 2,214.19.

Oil prices extended gains above $77 a barrel in Asia amid expectations a growing U.S. economy will fuel increased crude demand.

Benchmark crude for March delivery was up 52 cents at $77.53 in electronic trading on the New York Mercantile Exchange. The contract rose $2.88 to settle at $77.01 on Tuesday.

In currencies, the dollar rose to 90.54 yen from 90.14 yen. The euro fell to $1.3752 from $1.3764. By Alex Kennedy, Philadelphia Daily News

These happen to be the worst years as far as the poverty situation in the country is concerned, data reveals.

The Federal Bureau of Statistics data updated for the Centre for Poverty Reduction and Social Policy Development (CPRSPD), Planning and Development Division, shared with The News indicates an upswing in the headcount poverty ratio for 2008-09.

The steep increase in the prices of petroleum products, electricity and natural gas as well as food items (especially flour, sugar and meat) began in 2007, while the situation worsened in 2008 with global increase in POL and commodity prices.

The financial meltdown followed as industry could not cope with the rising energy prices triggered sharp slowdown in growth and high inflation.

This situation impacted Pakistan’s economy generally and the poor households particularly, as the report indicates.

The government is yet to make this report public after its preparation is formalized and the relevant officials in high places approve its launch.

The News obtained salient figures from this report revealing that the increase in food and energy prices since late 2007 compelled the government to launch a household income and expenditure survey for assessment of poverty increase and vulnerability of the countryside and city-slum majority.

Survey to make such assessment got delayed for inexplicable reasons but the reports based on a 5-year old assessment got regularly updated for the federal cabinet’s appraisal.

The updated Planning Commission’s Interim Report based on 2004-05 poverty head count number of 23.9 percent put the increase in poverty at around 6 percent for the year 2008-09. The newly updated figures say this ratio must go as high as 29.9 percent.

The World Bank’s Task Force on Food Security had put the ratio at 29.2 percent in 2004-05, 33.8 percent in 2007-08 and 36.1 percent in 2008-09. Such estimates placed 62 million people of the country Below the Poverty Line (BPL) in 2008-09.

The new assessments say at least 20 million people might have joined the previous headcount on BPL population.

The poverty increase situation thus stood as follows: 22.3 percent of the population in 2005-06 to between 30-35 percent in 2008-09; now this population is beyond 40 percent.

The data is explained in a manner that the increase in BPL population in the rural areas is more tragic as people lost their small holdings to inflation and overall expenditure per family unit increased by more than 20 percent in the past 3 years.

Though the increase of inflation-hit population in the urban areas remained more pronounced, the net impact was far lower than in the rural areas.

More than 50 percent of the urban workforce underwent decrease in actual wages viz a viz inflation.

The high food prices undermined the government efforts for poverty reduction as food price hike severely eroded poor households’ purchasing power.

This situation indicates a serious risk of massive school dropouts at primary levels while fresh enrolments would also be on the decline.

The poorest households are compelled to spend more than 78 percent of incomes on food and other most essential expenditure, while health and education are tragically compromised areas. By Ikram Hoti, The News International

As is often the case, things have played out differently in China.

Like other besieged governments, Beijing responded to the financial crisis in late 2008 with a major fiscal stimulus of 4 trillion renminbi, or $586 billion, over two years. Unlike many other governments, Beijing could also order — not just ask — Chinese banks to mount a parallel stimulus offensive in the form of a huge lending drive.

Fresh lending by Chinese banks in 2009 rose to nearly 10 trillion renminbi, about double the volume of the previous year.

While this has helped China to weather the economic storm in flamboyant style so far, it may yet prove costly. Not only does the government fear the inflationary potential of its stimulus measures, but there are also risks of destabilizing asset bubbles, industrial overcapacity and waste from duplicative investment projects.

For the banks themselves, the lending splurge threatens to undo significant progress made in recent years in reducing ratios of problem loans to total lending.

A decade ago, Chinese banks staggered under a load of bad debt, reported by the Bank of China at nearly 40 percent of their total lending in 1999. In 2000, the nonperforming loan rate for the major commercial banks in China stood at 29 percent, according to official statistics and in the view of many Western analysts who questioned Chinese accounting standards, it was probably far higher. Nonperforming loans are defined as those on which repayments are more than three months in arrears.

The government vowed to bring the rate down to 15 percent by 2005, and by the end of 2007 it had dropped below 7 percent. One factor behind this reduction was the need for Chinese banks to attract investment from private and foreign sources.

This steep decline to single-digit levels would seem to tell a heroic tale of a banking system that solved its problems, but not all analysts take it at face value. Skeptics say the cleanup was largely based on sleight of hand, involving specially established asset management companies, speculative bonds and fuzzy government guarantees that together did little more than kick the problem down the road.

Even the least cynical analysts acknowledged that lower ratios partially reflected the dilution of bad loans in a vast sea of new lending, some of which would go bad but was still too recent to register as nonperforming.

Yet such doubts and qualifications notwithstanding, few deny that some degree of bad debt reduction was genuine and that overall loan quality among Chinese banks has improved from the worst of times.

Now, however, new concerns are emerging over the state of Chinese banks and their balance sheets. Zhou Xiaochuan, governor of the People’s Bank of China, the country’s central bank, spoke publicly of such worries in early January, and hinted at a lending slowdown.

Large credit flows, “will not only go against the objective of economic structural adjustment, but will also pose bank lending quality risks,” Mr. Zhou said in a magazine interview.

As recently as November, senior Chinese bankers spoke confidently of their ability to avoid loan quality problems. Jiang Jianqing, chairman of the Industrial & Commercial Bank of China, China’s largest lender, explicitly predicted that record-high lending in 2009 would not lead to any increase in the country’s overall bad-debt ratio.

About the same time, the Banking Regulatory Commission reported that during the first 10 months of 2009, the nonperforming loan ratio for commercial banks had fallen by 0.76 percentage point from the end of 2008, to a mere 1.66 percent.

In his remarks this month, the central bank governor, Mr. Zhou, promised that Chinese policy makers would seek “to improve the focus and flexibility of policy” and “keep a good handle on the pace of monetary and credit growth, guiding financial institutions toward balanced release of credit and avoiding excessive turbulence.”

Mr. Zhou’s comments also included a mention of bank reserve ratio requirements as a policy tool, and on Jan. 12, the central bank duly announced an increase of 0.5 percentage point, to 16 percent, in the proportion of their deposits that Chinese banks must keep on reserve.

The increase was the first reserve ratio adjustment in China in about 14 months. Many analysts predict that total Chinese bank lending may pull back by about 20 percent, to no more than 8 trillion renminbi, this year.

According to Jing Ulrich, managing director of China equities in Hong Kong for JPMorgan, the first half of 2010 will experience continued but gradual policy tightening, with more emphasis on further administrative measures, rather than interest rate adjustments. In a Jan. 12 research note, Ms. Ulrich predicted a 20 percent to 30 percent cut in bank lending growth for this year, compared with 2009.

Ms. Ulrich also warned that the longstanding Chinese aim of lifting domestic consumption “has gained new urgency in the face of last year’s collapse in external demand.” She said that she expected the authorities to continue the consumption stimulus policies they adopted in 2009. These included encouragement for consumer finance companies, subsidies for private car owners who sell old vehicles to buy newer ones, and similar aid for large household appliances.

China, meanwhile, seems determined to keep the renminbi pegged to the dollar, despite protests from the United States and other trading partners who say that this leaves the currency artificially undervalued, giving Chinese exports an unfair advantage. While this may lead to political tension, especially as the United States heads into congressional elections this year, it should succeed in helping to expand the exports on which so many Chinese companies — and jobs — depend.

But according to Michael Pettis, a professor of finance at Guanghua School of Management at Peking University, any added stress on Chinese banks will hamper progress toward China’s objective of raising domestic consumption.

It is “almost inevitable” Mr. Pettis said, that the recent credit splurge would lead to more nonperforming loans, or NPLs, and the burden of recapitalizing banks might ultimately fall on households. Because substantial stakes in many Chinese banks are now held by private and foreign investors, the government may be reluctant either to give cash directly to banks or to buy their bad loans above true value. That, he said, left the option of giving banks a de facto subsidy by setting a wide spread between the rates they pay on deposits and the rates they charge for lending.

“Households are effectively being taxed with low interest rates on their deposits,” Mr Pettis said.

“If you see NPL rise, will this subsidy be increased? You can’t increase the effective tax on household income and also expect them to increase consumption.” By Ted Plafker, The New York Times

Medvedev said the new missiles would be developed in full accordance with arms agreements made with the United States. “Of course, we will develop new systems, including delivery systems, that is, missiles,” Medvedev said in an end-of-year interview with state-controlled television channels.

“This process will be continued, and our nuclear shield will always be efficient and sufficient to protect our national interests,” Medvedev said.

The Kremlin chief said Russia and the United States were close to a new deal on reducing vast Cold War arsenals of nuclear weapons, adding that he had “trustworthy relations” with US President Barack Obama. Zeenews

He urged Ahmadinejad to “continue contacts with interested countries for a just and balanced solution on the nuclear issue in Iran”.

In his weekly radio address earlier, Lula said engaging Iran instead of isolating it was the way to push for peace and stability in the Middle East.

“It doesn’t help isolating Iran,” he said. “It’s important that someone sits down with Iran, talks with Iran and tries to establish some balance so that the Middle East can return to a certain sense of normalcy.”

Lula, who honed his negotiating skills as a union leader, says a new tactic is needed with the Iranians.

“I told President [Barack] Obama, I told President [Nicolas] Sarkozy, I told [German] Chancellor Angela Merkel that we will not get good things out of Iran if we corner them. You need to create space to talk,” he said last month.

During his radio show, Lula also proposed a football game in March pitting Brazil’s famed national team against a team comprising Israelis and Palestinians.

Security council ‘failure’

Ahmadinejad, for his part, supported Brazil’s bid to become a permanent member of the UN Security Council.

Brazil is to take one of the 10 non-permanent seats – those without the power of veto – in 2010 and 2011.

“We support a reformed UN Security Council and for Brazil to have a permanent seat,” Ahmadinejad said.

He said the council “has failed over the past 60 years because of the veto power of a small number of countries, a source of insecurity for several countries in the world”.

The first visit by Ahmadinejad to Brazil provides Lula an opportunity to boost the international political clout of South America’s largest nation, analysts said.

But Brazilian opposition politicians criticised it, citing concern over Iran’s nuclear programme as its human rights record, as well as Ahmadinejad’s denial of the Holocaust.

Demonstrations against the visit were staged in Brasilia and other major cities across the country.

Lucia Newman, Al Jazeera’s Latin America editor, said: “He [Lula] has faced criticism not only from the Republicans in Washington but also in Brazil itself.

“They [critics] believe he has gone too far; that he’s isolating Brazil by going to the side of countries that are considered by some to be, as we know, on the axis of evil.”

Lula defended the visit, saying any progress on the nuclear standoff with Iran and on the stalled Middle East peace process required dialogue with all parties involved.

Ahmadinejad’s trip follows visits in the past two weeks by Mahmoud Abbas, the Palestinian president, and Shimon Peres, his Israeli counterpart, who called on Lula to use Brazil’s influence to help curb Iran’s nuclear ambitions.

Iran’s nuclear programme, which it says is intended for civilian use, has drawn criticism from Western countries which suspect Tehran is seeking to build a nuclear bomb.

World powers have urged Iran to reconsider its rejection of a UN-drafted deal aimed at a peaceful resolution to its contested nuclear programme.

The deal would have seen Tehran shipping its low-grade enriched uranium to Russia and France where it could be processed to be used as fuel in Iran’s medical-purpose reactor.

Instead, Iran wants a direct swap of low-enriched uranium for processed nuclear fuel, taking place on Iranian soil.

Ahmadinejad’s visit comes as the military back home engages in large-scale war games centred on protecting Iran’s nuclear facilities from attack. The Iranian leader is set to visit allies in Bolivia and Venezuela next to shore up more South American support. Al Jazeera

Brig. Gen. Ahmad Mighani also suggested Iran could itself produce an advanced missile defense system which Russia has so far failed to deliver to the Islamic Republic and which Washington and Israel do not want Tehran to have.

Iran believes Russia’s delay in supplying high-grade S-300 missiles was due to pressure by Israel, not technical problems as cited by Moscow, Mighani said.

“We are hopeful the Russians will ignore the pressure of the Zionist lobby,” Fars news agency quoted him as saying on Saturday. Iran refers to Israel as the “Zionist regime.” The military maneuvers will last for five days and involve both the elite Revolutionary Guards and the regular armed forces against a hypothetical enemy, Iranian media reported.

The United States and Israel have not ruled out military action if diplomacy fails to resolve the row over Iran’s nuclear program.

Iran, which says its nuclear program is solely to generate electricity, has threatened to hit back at Israel and US if it is attacked. “This week’s air defense maneuvers will be held with the intention of protecting the country’s nuclear facilities,” Mighani said, Fars reported. State television said the defense drills would “ensure better protection” for these facilities. Arab News

It came complete with a dismissive sound bite – comparing Iran’s foes to a mosquito – a bit of boasting about Iran’s prestige and a touch of self-analysis. Iran’s president said Sunday that Tehran doesn’t trust the West to keep its promises.

Added together, it helps explain Iran’s zigzag reactions last week to a UN-drafted nuclear pact, and why Iran is in no hurry to cut a deal.

For days, Iran had hinted that it would back the essential element of the UN offer – to send about 70 percent of its low-enriched uranium stockpile out of the country – but wanted some changes to the formula.

Those changes turned out to be more like a full counter proposal.

The response Thursday – as described by diplomats – essentially seeks to keep the uranium in Iran. That could be an ultimate deal breaker, because the West wants to pare down Iran’s store of low-enriched uranium to a point where it cannot make a nuclear warhead – at least temporarily.

But no one is ready to call it quits yet. Washington and its allies are hoping Iran softens its position. On Monday, Iran’s Foreign Minister Manouchehr Mottaki told reporters in Malaysia that bargaining was still possible.

Asked if Tehran has rejected the deal, Mottaki said: “No.”

This may be welcome news in Western capitals. Yet many will see it as suspiciously like another stalling tactic.

Iran’s negotiations with the West have been a master class in slo-mo diplomacy. Since uranium enrichment was restarted three years ago, Iran has been able to draw out a showdown by offering just enough to the West when the heat became uncomfortable.

“Iran believes time is on their side for now,” said Mustafa Alani, a regional analyst at the Gulf Research Center in Dubai.

That is because there’s little in the UN plan that Iran likes and no serious domestic pressure for unpopular compromises. Standing firm, meanwhile, brings some immediate dividends.

Ahmadinejad and his hard-line allies can claim the high ground as defenders of Iran’s national dignity and strides in nuclear technology. It’s particularly tempting for Ahmadinejad, a rare opportunity to cross the political no man’s land after June’s disputed elections. Even his harshest opponents take pride in Iran’s nuclear accomplishments.

Ahmadinejad played this to full effect Sunday. In a posting on a government Web site, he was quoted as describing the nuclear negotiations as a match between Goliath Iran and an annoying insect.

“While enemies have used all their capacities … the Iranian nation is standing powerfully and (Iran’s foes) are like a mosquito,” he said.

He further scolded the West for what he called a history of broken promises. Iran, he said, “looks at the talks with no trust.”

The trust gap comes with a long back story. Before the 1979 Islamic Revolution, Iran says it made a deal with France for a 10 percent stake in a nuclear plant and was expected to receive 50 tons of UF-6 gas, which can be turned into enriched uranium. But Iran claims it never received even a gram.

To Iranian leaders, that’s just another example of perceived Western bullying, which also include sanctions and a lack of pressure on Israel to open itself to international nuclear scrutiny.

Israel is widely considered to have nuclear arms, but has never publicly disclosed details – and has left open the option of military action to block Iran from acquiring nuclear weapons.

In the current context, Iranian authorities also raise worries about Iran’s self-sufficiency or of being at the mercy of the West for reactor fuel. Those are powerful themes inside Iran – making it unlikely that Iranian leaders would stoke such anxieties and then agree to the UN package.

Iran insists its nuclear program is only for research and energy production and has reportedly floated a counterproposal: to enrich uranium to reactor-ready strength at home with monitoring by the UN’s nuclear watchdog group.

But Western leaders are not biting on Iran’s Plan B.

On Friday, the European Union expressed “grave concern” about Iran’s nuclear program and “persistent failure to meet its international obligations.” In Washington, the reaction has been more muted, but President Barack Obama does not favour open-ended talks.

Congress also could give the White House new sanctions leverage, this time to penalize foreign firms that sell and ship refined petroleum products to Iran. That is perhaps Iran’s most vulnerable point. Right now, it must already import about 40 percent of its gasoline and other fuel products.

But there’s no sign of panic from Tehran. The country has ridden out US and international sanctions for years and can look to its economic ties with China and Russia as major buffers.

For the moment, it appears Iran instead is banking on the gravitas of the groundbreaking talks that opened new channels with the United States.

The West may be reluctant to step away from a level of outreach that would be hard to recapture. Yet there is certainly an expiration date on Washington’s patience.

“The president’s time is not unlimited,” White House press secretary Robert Gibbs said Friday. Indian Express

If that plan fails, however, Medvedev said other options remain on the table. While he did not cite those options, the Russian leader has said further sanctions against Iran were possible if it did not open its nuclear program to inspections to prove it was not trying to build a bomb.

Obama and Medvedev, meeting on the sidelines of the Asia-Pacific Cooperation Council, said Iran was one of the topics they discussed.

“Unfortunately, so far at least, Iran appears to have been unable to say yes to what everyone acknowledges is a creative and constructive approach,” Obama said. “We are now running out of time with respect to that approach.”

Russia and the U.S. are among six nations leading an effort to ensure Iran does not use what it maintains is a civilian nuclear program to develop an atomic bomb. But Moscow also has close ties with Iran and is helping build its first nuclear power plant, forcing Russia into a delicate balancing act.

Fears about the nature of Iran’s nuclear program were heightened in September with the disclosure of a uranium enrichment facility near the holy city of Qom. U.N. inspectors visited the site last month, as the United States continued quiet preparations for the possibility of stiffening U.N. sanctions or those the United States has applied on its own.

Iran agreed to the inspections during a landmark meeting with the U.S. and other world powers at the beginning of October in Geneva, where the idea of Tehran shipping uranium to Russia for further enrichment was first raised.

Under the plan, Iran would send 2,420 pounds of low-enriched uranium to Russia in one batch by the end of the year in order to receive the nuclear fuel it needs for a research reactor that makes medical isotopes.

The United States supports such peaceful or beneficial uses of nuclear technology in Iran but has long suspected that part of the Iranian nuclear development program is aimed at covert production of a weapon.

The isotopes arrangement is a way to buy time and build confidence on both sides. By Western estimates, the plan would take put amounts of the low-enriched uranium Iran has stockpiled out of reach for conversion into the highly enriched fuel needed for nuclear weapons.

The arrangement is not a guarantee that Iran could not develop a bomb if it chose to, but is thought to delay the likelihood of that breakthrough. The deal would be the most tangible payoff for Obama’s program of careful outreach to Iran this year, a diplomatic overture dimmer by political violence and alleged vote-rigging in Iran’s elections last June.

Iran’s diffuse political power structure has been in disarray since the election and the unprecedented street protests that followed. Squeezed by dissent inside the country and by international pressure over the nuclear program from outside, Iran has given conflicting signals.

Iranian politicians have rejected the proposed deal but the government says it is still considering it.

“The recent actions of this country (U.S.), presenting unimportant and irrational proposals in the nuclear issue which they have called just and fair, all indicate that the alleged change was nothing but a deceitful symbol aimed at deceiving naive politicians,” Parliament Speaker Ali Larijani said Sunday in Iran.

Obama said he and Medvedev agree that the U.S. and Russia will continue to urge Iran “to take the path that leads them to meeting its international obligations.”

Obama added, “We can’t count on that, and we will begin to discuss and prepare for these other pathways.”

Medvedev said the U.S. and Russia are not satisfied with the pace of the effort and reiterated Obama’s point about reaching an end to it.

“In this case, our goal is clear: It is transparent, up-to-date, peaceful program – not a program that would raise questions or concerns from the international community. We’re prepared to work further and I hope that our joint work will yield in positive results,” he said. “In case we fail, the other options remain on the table in order to move the process in a different direction.”

Mike McFaul, an official with the White House National Security Council, told reporters at a briefing in Singapore that a timetable for sanctions against Iran was not discussed.

The administration prefers international sanctions if Iran balks but also quietly supports legislation in Congress that would give Obama a broad new array of authority to target Iran’s energy sector by penalizing foreign firms that sell and ship refined petroleum products to Iran. The regime is heavily dependent on gasoline, kerosene and propane imports.

The legislation would also allow the administration to go after insurance and reinsurance concerns that cover oil tankers and their cargo. The U.S. could also target companies that provide Iran with covert technology used to crack down on protesters and democracy advocates as it did during demonstrations last summer after a disputed national election. Asbury Park Press

The announcement came as the Taliban struck again in the capital. A suicide car bomber blasted a U.S. convoy near an American military base in Kabul, injuring nine American soldiers and 10 contract security guards. Three Afghans were killed in the attack – the biggest in Kabul in the last two weeks.

Prime Minister Gordon Brown said the NATO strategy must be to encourage a greater role for Afghan forces so that international troops “can start coming home.”

His remarks were made a day after he met with NATO Secretary-General Anders Fogh Rasmussen. The NATO chief said that other allied nations have privately pledged more help, but Rasmussen stopped short of saying that countries would send more troops.

“We need our other NATO allies to help,” Brown told the BBC in a London interview.

He said he has been contacting governments both inside and outside the 45-member NATO-led coalition, asking them to send more soldiers to train and mentor Afghan forces so they can take responsibility for security in their own country. He estimated as many as 5,000 troops could be raised from that effort.

Brown has already agreed to send 500 more soldiers to Britain’s 9,000-member force in Afghanistan, despite declining support for the war among the British public.

His assurances that other countries would boost their troop numbers appeared to be an attempt to show the British public that others are willing to assume a heavier burden in Afghanistan, despite public unease over rising casualties and an Afghan government perceived as corrupt and resistant to reform.

“There has got to be burden-sharing amongst the alliance, and I am sending people around Europe to persuade other countries that they should commit more troops,” Brown said. “We are having some success. But as the debate over these last few months has shown, there is a lot more that we have to do.”

NATO said Friday that more troops and resources are needed, but other countries are unlikely to commit more forces until Obama announces his decision.

U.S. toll in Afghanistan

As of Thursday, Nov. 12, 2009, at least 837 members of the U.S. military had died in Afghanistan, Pakistan and Uzbekistan since the U.S. invasion of Afghanistan in late 2001, according to the Defense Department. The latest deaths reported by the military: Swanson, Justin J. 21, Marine Lance Cpl.; Anaheim. By Robert H. Reid, San Francisco Chronicle

He said the best way to avoid war was to prepare for it. In response, Colombia said it would seek UN help.

Venezuela blames the tension with its neighbor on closer military ties between Colombia and the US.

Colombia says US forces are there to help in the fight against rebels and drug traffickers.

“Let’s not waste a day on our main aim: to prepare for war and to help the people prepare for war, because it is everyone’s responsibility,” Mr Chavez said during his TV and radio show Alo, Presidente.

Mr Chavez has also ordered 15,000 troops to the border, citing increased violence by Colombian paramilitary groups.

The BBC’s Jeremy McDermott in Bogota, Colombia, says that normally such declarations would not cause alarm, but because of the current tensions there are fears of a possible spark on the border which could lead to further violence.

Frozen ties

In response to Mr Chavez’s comments, Colombian President Alvaro Uribe said his government would seek help from the UN Security Council and also the Organization of American States.

“Colombia has not made nor will it make any bellicose move toward the international community, even less so toward fellow Latin American nations,” a statement by Mr Uribe said.

Ties between Colombia and Venezuela have been frozen since July when Bogota said it would let the US army use its military bases for anti-drugs operations.

The agreement has caused alarm among some of Colombia’s neighbours, who object to an increased US military presence in the region.

When news of the deal first broke in August, Mr Chavez warned that “winds of war” were blowing across the continent. BBC News