taly's prime minister has said the country is on course to control its own debt difficulties after a meeting with German Chancellor Angela Merkel. Though he also revised annual deficit estimates upwards.

"Italy does not need assistance," Mario Monti said in a joint press conference with visiting German Chancellor Angela Merkel. "Italy's budget deficit in 2012 will be 2 percent of gross domestic product - half of the European average, and next year the country will have a surplus in structural terms."

That deficit prognosis did represent an upward revision of prior estimates, which had stood at just 1.3 percent of GDP.

The technocrat prime minister, who is not affiliated with an individual political party in Italy, also said that he was working on reducing Italy's overall national debt - as well as its annual overspending.

Thousands of soldiers could face compulsory redundancy over the next two years as the army pushes through radical reforms that will be outlined on Thursday.

With the army needing to axe 20,000 posts because of budget cuts, commanders are pushing to downsize as quickly as possible rather than prolong the process.

This means the next two tranches of redundancy will be huge - and are likely to coincide with the draw-down from Afghanistan, leaving the army to start afresh in 2015.

Though it is hoped many soldiers will leave under the voluntary redundancy scheme, the Ministry of Defence acknowledges the target cannot be reached without pushing some to the door.

Thousands of soldiers could face compulsory redundancy over the next two years as the army pushes through radical reforms that will be outlined on Thursday.

With the army needing to axe 20,000 posts because of budget cuts, commanders are pushing to downsize as quickly as possible rather than prolong the process.

This means the next two tranches of redundancy will be huge - and are likely to coincide with the draw-down from Afghanistan, leaving the army to start afresh in 2015.

Though it is hoped many soldiers will leave under the voluntary redundancy scheme, the Ministry of Defence acknowledges the target cannot be reached without pushing some to the door.

Detectives investigating phone hacking have arrested a 26-year-old man on suspicion of conspiracy to pervert the course of justice, Scotland Yard said.

The man was arrested at a residential address in Surrey early on Thursday and will be questioned at a London police station.

The arrest was made as part of the Operation Weeting investigation into the hacking of voicemails. The man is the 24th person arrested as part of the investigation.

ACTA has received a knockout blow from the European Parliament as the majority of MEPs voted in favor of rejecting the controversial trade agreement, which critics say would protect copyright at the expense of freedom of speech on the Internet.

MEPs voted overwhelmingly against ACTA, with 478 votes against and only 39 in favor of it. There were 146 abstentions.

"In am proud to say that the highly controversial Anti-Counterfeiting Trade Agreement (ACTA) will not come into force in the European Union," the Treaty's rapporteur in the European Parliament, David Martin MEP, wrote on his blog after the session.

Martin recommended that Parliament reject the treaty as it would not effectively tackle online piracy.

The anti-ACTA mood was strong among MEPs during the session, with some members holding banners reading "Hello democracy. Goodbye ACTA".

The ACTA-killing vote came despite an attempt by supporters of the treaty to postpone the crucial vote at the Parliamentary plenary session on Wednesday. However, as Martin writes, MEPs "were able to build a strong majority and defeated the call for a postponement."

The crisis returns with full force, as markets have digested the implications of last week's summit, and as the economy deteriorates; Reuters reports that Spain is about to decide a €30bn austerity programme, on top of the existing package, to be spread over several years; measures include cuts in unemployment benefit, pensions, higher VAT, higher energy taxes, and pay cuts for civil servants; the Spanish government seems to be under the impression that this will cut the deficit; measures are expected to be announced next week; PMI surveys suggest that the eurozone is firmly in recession territory, with the main index at below 50 for the last ten month; Germany is not joining the downturn, as the service sector stagnates; Insee, Istat and Ifo all say the eurozone is now in recession; Finland has stepped up its opposition to last week's summit agreement, saying the taxpayers must have seniority; Jan Kees de Jager tunes down his opposition to secondary market bond purchases; the eurogroup will hold an extraordinary meeting July 20 to deal with Spain and Greece; discussions with Greece about modifications to the programme start July 24; the Spanish package will require a special session of the Bundestag, which will interrupt its holidays for that purpose; the Greek government hopes to negotiate a for-point programme to relieve austerity, while offering a more ambitious schedule on some of the other conditions; Angela Merkel and Francois Hollande want to create the position of a Super-Mr-Euro, a souped-up eurogroup chief, who attends G20 meetings; Hans-Werner Sinn organises a public platform against the banking union; Wolfgang Munchau says summit may have increased probability of a eurozone collapse; the Spanish prosecutor, meanwhile, goes after Rodrigo Rato and other prominent PP members.

25 years ago, a Study Group on the "Integration Strategy of the European Community" chaired by Tommaso Padoa-Schioppa published a Report that later became the basis for Economic and Monetary Union in Europe. That Report referred to a long-term "social contract" between the Community and its Member States, based on competitive markets, monetary stability, an equitable distribution of the gains in economic welfare, and actual growth performance.

...

To us, the root cause of the current crisis lies in the contradiction between a single, supra-national currency and the continuation of nation-state based economic policies. Surmounting that contradiction requires neither the creation of a "European Super-State" nor a return to individual nation-states and national currencies. What is needed is a sui-generis form of fiscal federalism, which derives from the functional deficiencies of the current common currency framework while respecting to the largest possible extent the budgetary autonomy of euro area member countries. We argue that the single currency needs as much fiscal federalism as necessary for its appropriate functioning, but as little as possible. We present proposals to achieve this objective, deriving them from the main challenges that the euro-area had to face during the first decade of its existence.

...

The third element is a rebalancing of fiscal rights and fiscal duties in the common currency area. We argue that euro area countries should become subject to much stricter budgetary surveillance and be willing to give up some elements of their sovereignty when they are cut-off from the market. The core principle should be: sovereignty ends when solvency ends. But at the same time, the euro-area as a whole should ensure that adequately priced access to sovereign financing is generally possible, also in crisis times. To allow for the implementation of that third element, we suggest the creation of a European Debt Agency (EDA) that would allow a flexible refinancing possibility to countries in exchange for a stepwise transfer of sovereignty. The EDA would (i) be jointly and severally guaranteed by all euro-area countries, (ii) serve as a normal financing instrument for an amount of 10% of GDP to all countries, (iii) provide relatively easy access to additional funding in crisis times for relatively small amounts (up to an additional 10% of a country's GDP), (iv) but then ask for much stricter conditionality in pre-defined steps of rising debt amounts with additional debt amounts implying a stepwise transfer of budgetary oversight to the EDA. Should a country require more than 60% of its GDP as EDA-backed financing, it would need a green light from EDA before being able to adopt its budget or exercise otherwise its budgetary sovereignty. Not respecting a red light would not be legally excluded, but would automatically entail the exclusion of any EDA financing and trigger a sovereign default. As an alternative, a full transfer of sovereignty to the EDA could also be envisaged for countries reaching a 60% debt to GDP ratio, but this would require far-reaching changes in national constitutional law.

Nomura's Richard Koo has written a fascinating account of his meeting with "a number of influential politicians, academics, and senior government officials" in Berlin last week.

[snip]

What really piqued our interest was Koo's account of the German sense of opportunity in this crisis:

These politicians were not even satisfied with the state of structural reforms in their own country, arguing that Germany still had much work to do.

Well, the IMF agrees there. Anyway, here's the crucial stuff, with our emphasis:

But based on their experience of the difficulty of implementing these reforms, they believe firmly that this represents a once-in-a-lifetime opportunity to pursue similar initiatives in southern Europe.

When Germany implemented its reforms around 2005, there was no time to waste because German businesses were moving one factory after another to the low-wage countries of eastern Europe. Even so, they said there was tremendous political opposition.

What they learned from this experience was that such reforms were possible only under crisis-like conditions. That experience contributed to their view that the current economic crisis represented an excellent opportunity for fundamental reforms in southern Europe.

(h/t Arrêt sur images)

Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.

ECB presser here live http://www.ecb.europa.eu/press/tvservic ...

Draghi... admitting banks not lending cause of risk-aversion...

"Credit being led by demand ..."

@izakaminska

"Let's define deflation "protracted and generalised fall in the price level" that disanchors inflationary expectations."

Moving on to macro-prudential supervision from a parallel universe: @dlacalle

Grandisimo Draghi "any new task in supervisory area should be separated from monetary policy".

Moving on... @Sam1Fleming

Draghi says growth now weakening across the whole of the euro area. Cuts today were not coordinated by central banks.

Question time. I bet you were not expecting this one: @MatinaStevis

"The decision was unanimous on all grounds" says Mr Draghi. ‪#ECB

"The decision was unanimous" says Draghi. Wow. Bundesbank caves in to pressure.... They'll back Eurobonds within the year!

@davidmwessel

Draghi: Euro area growth is 'hovering around zero' & downside risks 'now materializing'

Even after Barclays' former CEO apologizes, it's expected that there'll be more revelations about Britain's interest rate manipulation scandal.

Bob Diamond, former chief executive of Barclays Bank, has apologized to a UK parliamentary enquiry for the activities of his bank, which he described as "reprehensible."

On Tuesday, Diamond had been forced to resign, becoming the highest-profile victim of the current scandal. Two other senior Barclays executives had resigned earlier.

Diamond said in a statement on his resignation that the pressure on Barclays had reached a level that threatened the future of the bank. "I cannot let this happen," he added. The 60-year-old had been with the bank for 16 years.

The two car companies have never been very far apart, but as of August, Porsche will be the property of Volkswagen. VW announced that the speedy completion date late on Wednesday in an obligatory notice to the markets.

The world's largest car company, Volkswagen, will complete its takeover of Porsche on August 1. VW said in its notice to investors on Wednesday that this new completion date was "roughly two years earlier" than the Wolfsburg-based company previously expected.

VW already owned 49.9 percent of Porsche AG and the two companies were negotiating terms of a final takeover.

Volkswagen will acquire the remaining 50.1 percent for roughly 4.46 billion euros ($5.56 billion), to be paid to Porsche AG's holding company, Porsche SE. Porsche will also acquire a single voting share in VW in return.

Porsche will become another string to VW's expansive automotive bow

The deal has been classified not as a purchase but as internal restructuring, making it tax-exempt under German law. That's the reason why one VW share had to be involved in this "exchange."

BANDAR ABBAS, Iran -- The hulking tanker Neptune was floating aimlessly this week in the warm waters of the Persian Gulf, a fresh coat of black paint barely concealing its true identity as an Iranian ship loaded with hundreds of thousands of barrels of oil that no one is willing to buy.

An estimated 65 Iranian tankers are being used to store oil.

The ship's real name was Iran Astaneh, and it was part of a fleet of about 65 Iranian tankers serving as floating storage facilities for Iranian oil, each one given a nautical makeover to conceal its origin and make a buyer easier to find. The Neptune had been floating there for a month, and local fishermen said there were two even larger tankers anchored nearby.

Iran, faced with increasingly stringent economic sanctions imposed by the international community to force it to abandon any ambitions to develop nuclear weapons, has been reluctant to reduce its oil production, fearing that doing so could damage its wells. But Iran has insufficient space to store the crude it cannot sell. So while it furiously works to build storage capacity on shore, it has turned to mothballing at sea.

"We have never seen so many just waiting around," said Rostam, a fisherman and smuggler who regularly works these waters.

Gold is poised to drop for a second day on speculation that the European Central Bank may cut interest rates, boosting the dollar against the euro and curbing demand for the metal as an alternative asset.

Immediate-delivery gold was little changed $1,616.30 an ounce at 2:20 p.m. in Singapore after earlier gaining as much as 0.2 percent. August-delivery bullion dropped as much as 0.6 percent to $1,611.60 an ounce on the Comex in New York before trading at $1,615.20.

The ECB will probably reduce the benchmark rate 25 basis points to a record low of 0.75 percent today, according to the median forecast in a Bloomberg survey of economists, as policy makers battle the region's debt crisis. The Bank of England may raise its target for bond purchases today, boosting it by 50 billion pounds ($78 billion), another survey shows.

Credit guarantee companies, as the name suggests, provide guarantees for borrowers. Private borrowers may not be able to borrow money from banks direct because they do not have government backings, or they do not have enough assets to demonstrate to the banks that they are credit-worthy. Thus credit guarantee companies come in at this point where they provide guarantee to banks after they have verified that the borrowers are good. In return, these companies collect fees from borrowers. If the borrowers default on its loans, the credit guarantee companies, of course, have to cover the losses for banks.

But it turns out that companies often ended up guaranteeing loans for each other.

...

This is exactly what's happened. Tianyu Construction Co. went bust early this year, and because of the complex web of connections where companies guaranteed loans for each other, a large number of companies have been affected by the bust of Tianyu Construction Co. According to Caixin's report on 26 June, 62 companies are affected to a varying degree because of the bankruptcy of Tianyu.

...

The most remarkable and shocking thing about this crisis is that a little more than a week after the Caixin report, the number of affected companies has risen to more than 600. That is according to 21st Century Business Herald. One of the latest victim of the crisis is a company is "Hu pai", or Tiger, as we will call it. Tiger was a sizeable company with RMB6 billion revenue and RMB200 million profits in 2011 and it was one of the top 500 private companies in China. Tiger is, according to the report, three levels away from Tianyu in the chain of guarantees. Since March this year, Huaxia Bank, Bank of China, China Construction Bank and Agricultural Bank of China have called a total of about RMB135 million. The company has roughly RMB1.5 billion loans outstanding. According to the report, the size of the chains of guarantees may include some RMB10 billion of loans.

Mexican electoral authorities are recounting more than half the ballot boxes used in the weekend's presidential election after finding inconsistencies in the vote tallies.

Of the 143,000 ballot boxes used during Sunday's vote, 78,012 will be opened and the votes recounted, said Edmundo Jacobo, executive secretary of Mexico's Federal Electoral Institute.

Electoral officials expect the recount plus the final, official overall count on the presidential vote to be ready by Sunday, said Ana Fuentes, an IFE spokesman.

Mexico's electoral law states that votes should be recounted if there are inconsistencies in the final tally reports, if there is a difference of one percentage point or less between the first and second place finishers or if all the votes in a ballot box are in favor of the same candidate.

ISTANBUL -- After losing his most important supporters outside Syria, President Bashar al Assad said his office "doesn't mean anything to me" and he's willing to give up it up, though preferably after national elections.

"If the president's departure is in the interest of Syria, the president should naturally go. This is self-evident," he told the Turkish newspaper Cumhuriyet. "You should never stay in office one day if the people do not want you; and the elections are the means through which the people show whether they want you or not."

Assad gave the interview Sunday, a day after Russia and China joined the United States and other major powers to call for a transitional government with full executive powers to replace Assad's one-man rule.

Some 2,000 people have joined a sit-in protest at Bamako's Independence Square monument, calling for army intervention in the north where Islamists have enforced strict sharia law, destroyed ancient shrines and trapped residents with landmines.

"If the army doesn't want to go to war, then give us the means to liberate our territory!" Oumar Maiga, leader of a northern citizens' collective, who took part in Wednesday's protest said.

Islamist groups Ansar Dine and MUJAO, believed to have links to al-Qaeda in the Islamic Maghreb, took control of the ancient towns of Gao and Timbuktu last week after violent clashes with the MNLA, a former ally that in April helped them oust the Malian government from the north.

They have applied sharia law to the region, and since last weekend destroyed seven sacred sites in the ancient town of Timbuktu, including a sacrosanct door leading to an internal shrine in the 15th century Sidi Yahia mosque.

At least four people have been killed and 21 injured after security forces clashed with demonstrators protesting a planned $4.8 billion gold mine by US-based Newmont in northern Peru.

The latest death came a day after Peru's government declared a state of emergency on Wednesday in three northern provinces after protests against the mining project turned violent.

Prime Minister Oscar Valdes announced the death at a Lima news conference though without providing details.

A former Roman Catholic priest, Marco Arana, was also arrested hours earlier in Cajamarca, where the emergency was imposed, further inflaming tensions.

Peru:

MercoPress: Peru declared a state of emergency in an area of the northern Andes after three people died in clashes between police and opponents of Newmont Mining Corp. 4.8 billion dollars Minas Conga project.

LAHT, LIMA, Peru - At least 49 people were injured Wednesday in the city of Abancay, capital of the southern Peruvian Andean region of Apurimac, during clashes with police who were trying to open an important road blocked by protesting teachers, media reports said.

BUENOS AIRES, Jul 4 2012 (IPS) - By simultaneously admitting Venezuela into its fold and suspending Paraguay's membership, Mercosur has sparked dissension within the trading bloc that threatens the future legal architecture of the Southern Common Market.  The resolution to admit Venezuela at the Mercosur summit on Jun. 29, in the Argentine province of Mendoza, does not have the approval of Paraguay, whose parliament has not ratified full membership for the South American oil producer, as required by the bloc's charter, the Treaty of Asunción.  On Tuesday, Uruguay's vice-president, Danilo Astori, called the move an instance of "institutional aggression." He added: "It's a major institutional blow, perhaps the most serious in 21 years (of Mercosur)."

Mexican Elections Agency: Over Half of Ballots to Be Recounted:  Some 54.5 percent of the elections packages, which were received from 78,012 polling places, "will be opened and recounted under full security," according to the Federal Electoral Institute executive secretary

Colombia:

Colombia Reports: Colombian ex-police chief Mauricio Santoyo Velasco handed himself over to U.S. authorities in the state of Virgina on Tuesday morning amid accusations of collaboration with crime syndicate Oficina de Envigado, reported newspaper El Espectador.

Follow-up report HERE.

Colombia Reports: Colombia is investigating whether a former capo of the Norte del Valle cartel had Colombia's former chief prosecutor, a congressman and 16 generals on his payroll, radio station La FM reported Wednesday.  According to the radio station, extradited drug trafficker Juan Carlos Ramirez, alias "Chupeta," noted his monthly payments to state officials in a diary that had been in the possession of Colombian police authorities since 2006 but not handed over to prosecutors until March this year.

Venezuela: MOSCOW - Belarus will participate in the construction of a space base in the eastern Venezuelan state of Aragua to be used for launching satellites, Venezuelan Ambassador to Belarus Americo Diaz Nuñez said Wednesday.

LAHT: HAVANA - Fifty-three people contracted cholera in Manzanillo, a city in the eastern province of Granma, and three died from the bacterial disease, the Cuban government said Tuesday.

The nuclear accident at Fukushima last year was a "man-made disaster" and not only due to the tsunami, a Japanese parliamentary panel said in its final report on the catastrophe.

"Governments, regulatory authorities and Tokyo Electric Power [TEPCO] lacked a sense of responsibility to protect people's lives and society," the Diet's Fukushima Nuclear Accident Independent Investigation Commission said on Thursday.

"They effectively betrayed the nation's right to be safe from nuclear accidents. Therefore, we conclude that the accident was clearly 'man-made'," it said.

The six-reactor nuclear plant was severly damaged after the March 2011 earthquake and tsunami knocked out cooling systems to reactors, leading to meltdowns and the release of radioactivity.

"According to this commission's study, on March 11, it is believed that the Fukushima Daiichi nuclear power plant was in a vulnerable condition with no guarantee it could withstand earthquakes and tsunamis," the report said.

South Korea says it will start whaling under a loophole in a global moratorium that allows scientific research, outraging conservationist nations by using the same tactic as Japan.

At sometimes heated talks of the International Whaling Commission (IWC) in Panama on Wednesday, South Korea said it would announce later how many whales it would kill and when but insisted that it did not need foreign approval.

Kang Joon-Suk, South Korea's head envoy, said consumption of whale meat "dates back to historical times" in his country and that the minke whale population had recovered since a 1986 global moratorium went into effect.

"Legal whaling has been strictly banned and subject to strong punishments, though the 26 years have been painful and frustrating for the people who have been traditionally taking whales for food," he told the conference.

Whale meat remains popular in the South Korean coastal town of Ulsan, which serves meat from whales "accidentally" caught in nets. Activists have voiced suspicion that whales are often killed deliberately under the guise of accidents.

Karelia, Russia - These forests of pine, spruce and birch trees on Russia's north-west frontier with Finland stretch in every direction to the horizon. When the sun shines, the dazzling green is fragmented by lakes of sky-blue water.

Yet the impact of humankind is everywhere. Tracks criss-cross the woodland, accommodating logging vehicles - diggers with robotic chainsaws and trailer trucks. At road intersections, ribbons tied around trees signpost areas earmarked for clearing.

Swedwood Karelia LLC, a wholly owned subsidiary of Swedish furniture giant IKEA, owns a logging concession of around 300,000 hectares here. Its factory on the edge of the town of Kostomuksha processes logs into planks. Eventually, they will end up as flat-packs in hundreds of IKEA's stores worldwide.

London's newly built Shard Tower, the tallest building in Western Europe, will be officially inaugurated with a musical light show over the capital.

London's newest and biggest skyscraper, the controversial Shard Tower will be officially inaugurated with 12 lasers and 30 searchlights lighting up the night sky over the capital.

The lasers will reach out at 10.15pm local time on July 5 to other major landmarks including the London Eye, the Gherkin and Tower Bridge to music played by the London Philharmonic Orchestra.

The 310-metre tall building is 95 percent funded by Qatar. A royal delegation has flown in to mark the completion of the exterior of the building. The interior will not be finished until next year.

The 95-story Shard, so called because of its resemblance to a gigantic glass splinter, stands on the banks of the river Thames near London Bridge. It dominates the capital's skyline and overwhelms nearby St. Paul's Cathedral.

French investigators will release a final report into what caused the mid-Atlantic crash of a Rio-to-Paris Air France flight that killed 228 people in 2009.

The report, to be published on Thursday by the French aviation safety authority BEA, is eagerly awaited amid a bitter row between Airbus and Air France over who bears responsibility.

It may blame a combination of human error and technical malfunction. This was the finding of a preliminary report and also, according to a source, of a separate judicial inquiry to be released next week.

The Airbus A330 vanished at night and during a storm on June 1, 2009. It took days before debris was located in the remote equatorial Atlantic Ocean area, and far longer until the wreckage was recovered.

Toxoplasma gondii is arguably the most interesting parasite on the planet. In the guts of cats, this single-celled protozoan lives and breeds, producing egg-like cells which pass with the cats bowel movements. These find their way into other animals that come in contact with cat crap. Once in this new host, the parasite changes and migrates, eventually settling as cysts in various tissues including the host's brain, where the real fun begins. Toxoplasma can only continue its life cycle and end up a happy adult in a cat's gut if it can find its way into a cat's gut, and the fastest way to a cat's gut, of course, is to be eaten by a cat. Incredibly, the parasite has evolved to help ensure that this occurs. For example, Toxoplasma infection alters rat behavior with surgical precision, making them lose their fear of (and even become sexually aroused by!) the smell of cats by hijacking neurochemical pathways in the rat's brain.

Of course, rats aren't the only animals that Toxoplasma ends up in. Around 1/3 of people on Earth carry these parasites in their heads. Since Toxoplasma has no trouble affecting rats, whose brains are similar in many ways to our own, scientists wonder how much the parasite affects the big, complex brains we love so much. For over a decade, researchers have investigated how this single-celled creature affects the way we think, finding that indeed, Toxoplasma alters our behavior and may even play a role in cultural differences beween nations.

The idea that this tiny protozoan parasite can influence our minds is old news. Some of the greatest science writers of our time have waxed poetic about how it sneaks its way into our brains and affects our personalities. Overall, though, the side effects of infection are thought to be minor and relatively harmless. Recently, however, evidence has been mounting that suggests the psychological consequences of infection are much darker than we once thought.

In 2003, E. Fuller Torrey of the Stanley Medical Research Institute in Bethesda, Maryland his colleagues noted a link between Toxoplasma and schizophrenia - specifically, that women with high levels of the parasite were more likely to give birth to schizophrenics-to-be. The hypothesis given for this phenomenon is that while for most people who are infected, Toxoplasma has minor effects, for some, the changes are much more pronounced. The idea has gained traction - a later paper found, for example, that anti-psychotics worked just as well as parasite-killing drugs in restoring normal behaviors in infected rats, affirming the similarities between psychological disorders and Toxoplasma infection.

Lady Ashton announced she'll employ a Higgs Boson from August. This will finally give weight to the EU External Action Service.

with the caption: "The Kukident Generation"

(Kukident must be used to fix the false teeth in the picture, and yes, the blanket is electrically heated, though the hearing aid likely carries its own battery.)

I have aged a bit, it seems.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin