AFP - Italy's lower house of parliament Thursday approved an unpopular austerity package totalling 25 billion euros (32 billion dollars) aimed at bringing the public deficit under control and reassuring markets.

Sponsored by the centre-right government of Prime Minister Silvio Berlusconi, the law passed by 321 to 270 votes, with four abstentions.

The law was approved by the Senate two weeks ago and was the object of a confidence vote on Wednesday.

Although Germany's capital is short on big businesses, small enterprises are abundant, with creative industries in particular blossoming faster than in other cities. In Berlin, this creative boom is aided by a project which helps SMEs to deal with the bureaucratic procedure of obtaining EU regional funds.

The financial crisis has left thousands of homes vacant in the US city of Milwaukee. Residents there are placing part of the blame for the mess at Deutsche Bank's door.

Police dispersed violent protests across the Bangladeshi capital Dhaka with tear gas Friday, as more than 8,000 garment workers took to the streets to protest low wages. Bangladeshi workers are paid the lowest industry salary worldwide.

Renault has announced a net profit of 780 million euros for the first six months of 2010, reversing a €2.7 billion loss over the same period last year, on the back of a 23% rise in sales.

Stricken carrier British Airways has reported a net loss of 122 million pounds (€146 million) in the three months through to June due to a series of cabin crew strikes and the disruption caused by a volcanic ash cloud from Iceland.

Upgrading and electrification on the Zürich - München corridor is set to cut timings by 40 min from 2016 to around 3 h 30 min, with the number of services `almost doubled'; there are currently four return EuroCity trains a day.

Opening of the Gotthard base tunnel is expected to give a Stuttgart - Lugano timing of under 5 h in 2018, while infrastructure upgrades in southern Germany will trim 30 min off the current 3 h timing between Basel and Frankfurt by 2022.

A previous attempt to improve services between the two countries and Austria, branded as TEE Rail Alliance, was launched in 2000, but came to nothing.

INDIA: Japan International Co-operation Agency signed a further loan agreement for the 1 483 km Western Dedicated Freight Corridor on July 26, making the planned route between Delhi and Mumbai Japan's largest official development assistance project.

The latest loan provides the Indian government with ¥1·6bn repayable over 40 years to fund design reviews and tender preparation for the 552 km second phase of the Western DFC, which will be suitable for 100 km/h running and 30 tonne axleloads.

AUSTRALIA: On July 12 Victorian Premier John Brumby unveiled the routes for two rail links in Melbourne as part of the A$38bn Victoria Transport Plan launched in 2009.

The A$4·3bn Regional Rail Link involves the development of a new commuter service from West Werribee to the city, entailing construction of new tracks on the existing corridor through Sunshine and Footscray and new stations at Tarneit and Wyndham Vale. The project is designed to separate regional and suburban services, providing dedicated tracks for regional trains from Geelong, Bendigo, and Ballarat and increasing capacity on suburban routes.

The A$4·5bn Metro Rail Tunnel would link Dynon and St Kilda Road with five underground stations. This would carry a 'metro -style' service from Sunbury to St Kilda, increasing capacity by 12000 passengers/h.

The number of jobless people in Spain continued to climb in the second quarter, with figures released on Friday showing unemployment at its highest level since 1997.

The National Statistics Institute (INE) said its latest household employment survey revealed that 32,800 additional people had joined the dole queue in the three months to the end of June, taking the total to 4.65m, or 20.09 per cent of the active population.
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Friday's unemployment rate compares with 20.05 per cent at the end of March this year. INE said the number of jobless had risen by more than 500,000 since this time last year. The latest survey showed that new job offers failed to keep pace with an increase in the labour force. The number of households with all its members out of work also increased by 9,800 to 1.31m.

Sweden's economy grew at its fastest pace for more than three years in the second quarter, burnishing its status as one of the best-performing European economies as the country's centre-right government battles for re-election in September.

Surging exports to China and other emerging markets helped lift growth by 3.7 per cent from last year and by 1.2 per cent from the first quarter, exceeding most economists' expectations. Rising household consumption also played a part - suggesting recovery is gaining a stronger grip after Sweden's deepest recession since the second world war.
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As with Germany, the Swedish recovery has been driven by strong demand from the developing world, with manufacturers such as Volvo, the world's second-biggest truck maker, and SKF, the largest maker of ball bearings, announcing strong second-quarter results this month.

Economists warn that the export-led recovery could weaken in the second half of the year as growth slows in China.

But there were signs that domestic demand was starting to make more of a contribution in Sweden, with household consumption up 2.5 per cent from last year and imports 28 per cent higher, outpacing the 25 per cent jump in exports.

A full-fledged disintegration of the eurozone would trigger the worst economic crisis in modern history, devastate every country in Europe including Germany, and inflict a deflationary shock on the US. There would be no winners, warns the Dutch bank ING in a new report "Quantifying the Unthinkable".

"Complete break-up would have effects that dwarf the post Lehman Brothers collapse. Governments would find themselves having to bail out banks again, worsening already fragile government finances. The risk of at least a temporary break-down in payments systems would be enormous, " said the report by Mark Cliffe, Maarten Leen, and Peter Vanden Houte.

"Initial trauma is sufficiently grave to give pause for thought to those who blithely propose EMU exit as a policy option," it said, a rebuke to those German politicians and economists who have talked openly of shaking out weaker members.

Here is the ING study (pdf) Hat tip Jean Quatremer

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char

China's rapid recent growth has made it increasingly likely that its gross domestic product, in US dollar terms, will be larger this year than Japan's. However, the vagaries of international currency movements mean such a result is far from assured.

Observers eagerly awaiting what will be a symbol of shifting global economic power on Friday seized on a remark by Yi Gang, director of the State Administration of Foreign Exchange, about China's growth prospects.

"China is in fact already the second-biggest economy. With the expansion of the economic base, the growth rate should certainly gradually slow down," Mr Yi, who is also deputy central bank governor, said in an interview on the Safe website.

However, Mr Yi's comment fell far short of formal seizure of a title that Japan has held for just over four decades, especially given that he did not specify whether he was talking about China's GDP at market prices or in purchasing power parity terms.

In PPP terms, often a more telling measure of economic weight, China has already been the second-largest economy for years.

The problem, ultimately, is that there is no neat cordon sanitarie between the firms enjoying explicit or presumed government support (anyone with an operating brain cell knows Goldman, for instance, will not be allowed to fail) and their counterparties. That was the lesson of the LTCM near-death in 1998, yet no effective measures were put in place then. And the fact that backstopped firms channel funds to non-backstopped firms and thus support risk-taking in less regulated parts of the system is a long-recognized problem. The most radical and effective measure is narrow banking, or restricting depositaries to investing in only very safe assets, first proposed by Irving Fisher and others during the Great Depression.

The U.S. financial system remains fragile and banks subjected to additional economic stress might need as much as $76 billion in capital, according to the results of International Monetary Fund stress tests.

The findings, released today as part of a broader IMF report on the U.S. financial system, suggested that while the nation's banking system is stable, it remains vulnerable. Home prices, commercial real estate loans and economic growth have the potential to cause shocks that could expose banks to more losses.

Under one scenario, small and regional banks as well as subsidiaries of foreign banks would need $40.5 billion in additional capital to meet a benchmark capital ratio of 6 percent Tier 1 common equity from 2010 to 2014. Under the adverse scenario, those needs rise to $76.3 billion, according to the report.

Twenty-one years ago, Li Lu was a student leader of the Tiananmen Square protests. Now a hedge-fund manager, he is in line to become a successor to Warren Buffett at Berkshire Hathaway Inc.
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Mr. Li's ascent on Wall Street has been no less dramatic. He spent his childhood shuttling between foster families after his mother and father were sent to labor camps during the Cultural Revolution. After the Tiananmen Square protest, he escaped to France and came to the U.S. Investors in his hedge fund have included a group of senior U.S. business executives and the musician Sting, who calls Mr. Li "hardworking and clever."