By Matt Spetalnick

In a first-week flurry of activity focussed squarely on rolling back some of predecessor George W. Bush's policies, Obama set a one-year deadline for shutting Guantanamo, barred harsh treatment of terrorism suspects held there and also closed secret CIA jails overseas.

The prison at Guantanamo Bay in Cuba -- where prisoners have been detained for years without charge, some subjected to interrogation that human rights groups say amounted to torture -- had damaged America's moral standing in the world.

"The world needs to understand that America will be unyielding in its defence of its security and relentless in its pursuit of those who would carry out terrorism or threaten the United States," Obama said after signing executive orders.

But he insisted that in this "twilight struggle," he wanted to send "an unmistakable signal that our actions in defence of liberty will be (as) just as our cause."

Even while working behind closed doors with advisers to confront the worst financial crisis in decades, Obama used his early public appearances to put foreign policy and national security on the front burner.

"We can no longer afford drift and we no longer can afford delay," Obama said as he waded into the thicket of diplomacy with a visit to the State Department to preside over the announcements of new conflict envoys.

Former Sen. George Mitchell, a seasoned international diplomat, was named to help revive moribund Israeli-Palestinian peace efforts, which Bush was criticized for failing to give enough attention.

Obama seized the opportunity to pledge to "actively and aggressively seek a lasting peace between Israel and the Palestinians, as well as Israel and its Arab neighbours" and work to maintain a durable cease-fire in the Gaza Strip.

Former U.N. Ambassador Richard Holbrooke was appointed envoy for Afghanistan and Pakistan. Obama has ordered a full review of U.S. strategy in Afghanistan, where he has pledged to boost troop numbers.

Osama bin Laden and other top al Qaeda militants are believed to be hiding in the mountainous border region of Pakistan near Afghanistan.

LITANY OF FOREIGN POLICY CHALLENGES

The announcements came as Obama, who was sworn in on Tuesday, acted to tackle a litany of foreign policy challenges bequeathed to him by Bush and highlighted during the Illinois Democrat's run for the White House.

Those include pursuing a policy of much broader engagement overseas than the Bush administration, which was criticized for go-it-alone "cowboy diplomacy," and refocusing the fight against terrorism away from the unpopular Iraq war and back onto the Afghan conflict.

Obama made no direct mention of U.S. foe Iran but seemed to allude to the Islamic republic when he said, "Going forward, we must make it clear to all countries in the region that external support for terrorist organizations must stop."

Obama has pledged to engage diplomatically with Tehran, in contrast to the Bush administration strategy of trying to isolate it.

Obama's orders on Guantanamo, established by the Bush administration after the September 11 attacks of 2001, signalled his determination to reverse some of his predecessor's security policies that drew outrage from human rights advocates.

Deciding to close the prison is the first step in a long, complicated process to decide the fate of its 250 inmates, many of whom have been denied normal U.S. due process of law.

The United States wants to try about 80 of the prisoners on terrorism charges. It has cleared 50 other detainees for release but has yet to return them to their home countries because of concern they could be tortured or persecuted.

A separate presidential decree requires the CIA to close secret detention centres overseas that generated controversy in Europe and prohibits creation of such sites in the future.

On the domestic front, with markets volatile, Obama held his second daily meeting with top economic advisers to try to chart a course out of the worst financial crisis in decades.

In a stark sign of the problems, new government data showed the number of U.S. workers lining up for jobless benefits surged last week and home-building slumped to a record low in December as the economy's downward spiral accelerated.

(Additional reporting by Caren Bohan, Jeff Mason, Ross Colvin, David Alexander and Alister Bull; Editing by David Wiessler)