The rare violence raised concern about a crackdown ahead of more planned protests after Friday prayers in different cities throughout the oil-rich kingdom. The pro-Western monarchy is concerned protests could open footholds for Shiite powerhouse Iran and has accused foreigners of stoking the protests, which are officially forbidden.

Despite the ban and a warning that security forces will act against them, protesters demanding the release of political prisoners took to the streets for a second day in the eastern city of Qatif. Several hundred protesters, some wearing face masks to avoid being identified, marched after dark asking for "Freedom for prisoners."

Police, who were lined up opposite the protesters, fired percussion bombs, followed by gunfire, causing the crowd to scatter, a witness said, speaking on condition of anonymity for fear of government retaliation.

The cut in the rating - to Aa2 from Aa1 - drove the euro to session lows against the dollar and the premium investors charge for Spanish 10-year debt instead of German Bunds expanded to its widest point in two months at 232 basis points before narrowing again to 226. The Bank of Spain will release its own report on banks' capital needs after markets close on Thursday.

The European Central Bank backed Spain's planned measures to shore up the sector, while Prime Minister Jose Luis Rodriguez Zapatero defended Spain's economic fundamentals as reasonable. The government and central bank have forecast no more than 20 billion euros (17.2 billion pounds) would be needed to recapitalise weak banks.

But Moody's said the overall cost was likely to be nearer 40-50 billion euros. In a more stressed scenario recapitalisation needs could even rise to around 110-120 billion euros, it said. Ratings agency Fitch later estimated at 38 billion euros the shortfall in Spain's banking system in a base-case stress test it conducted separately.

Moody's still rates Spain as a high grade investment proposition. By way of comparison, the agency rates Portugal two notches lower and Greece far down with junk status.

"Jesus of Nazareth - Holy Week: From the Entrance into Jerusalem to the Resurrection," is the second installment of Benedict's planned trilogy on Jesus. Part I, which covered Jesus' early ministry, shot to the top of the best-seller lists in Italy when it was published in 2007. In the book, Benedict exonerates the Jews as a people for Christ's death. He also insists that Jesus never advocated violent revolution, as some liberation theologians have suggested, saying violence was not His way no matter how valid the motivation.

Benedict has spoken out frequently to denounce religiously motivated violence against Christians in the Middle East, Pakistan and elsewhere. "The cruel consequences of religiously motivated violence are only too evident to us all," he noted in the book. The Vatican and its foreign-language publishers have gone to remarkable lengths to promote the new book, coordinating the release of excerpts, scheduling prime-time press conferences and releasing the 362-page text to coincide with the run-up to Holy Week, when the faithful commemorate Jesus' crucifixion and resurrection.

In the book, Benedict concludes that the Jews as a people weren't responsible for Jesus' death, but only a few Jewish leaders and their supporters, affirming that the centuries of mistrust of Christians toward Jews was deeply misplaced. While the Catholic Church has been teaching that for nearly 50 years, the fact that the pope said it so authoritatively prompted praise from major Jewish groups and a thank you note from Israeli Prime Minster Benjamin Netanyahu.

"I commend you for forcefully rejecting in your recent book a false charge that has been a foundation for the hatred of the Jewish people for many centuries," Netanyahu wrote the pope after excerpts of the book were released last week.

In the book, Benedict also asserts that the Catholic Church shouldn't concern itself now with trying to convert Jews, though HE STRESSES THE NEED FOR ALL CHRISTIANS TO "VISIBLY" UNITE - A VEILED CALL FOR OTHER CHRISTIANS TO CONVERT TO CATHOLICISM.

Every day, America produces a fresh batch of barricaded gunmen, some of whom want to lure police into a shootout. Roughly 50 police officers are killed every year, most in shootings, and many during arrests or ambushes. Which is where the Lenco BearCat G3 rolls in.

"If somebody looks out and sees a Ford Crown Victoria sitting out there, they may not take you very seriously," Warren County, Virginia, Sheriff Daniel T McEathron told a local newspaper in October, "but if they look out the window and see this thing sitting there, they're going to know you're serious."

The BearCat G3 claims the vast majority of armored personnel carrier sales to SWAT teams in the United States. Fashioned from a Ford F-550 commercial truck chassis, Massachusetts-based Lenco builds about 200 such vehicles in year, in grades from "VIP SUV" to combat-ready with gun turrets. The massive roller is actually a smaller version of the BEAR, or Ballistic Engineered Armored Response vehicle, which Lenco builds for armies and law enforcement agencies around the world.

In the west, Gaddafi claimed victory in recapturing Zawiya, the city closest to the capital that had fallen into opposition hands. The claim could not immediately be verified; phone lines there have not been working during a deadly, six-day siege. State TV showed a crowd of hundreds, purportedly in Zawiya's main square, shouting "The people want Colonel Gaddafi!" but the location of the rally could not be independently confirmed.

Western journalists based in Tripoli were taken late Wednesday to a stadium on the outskirts of Zawiya that was filled with Gaddafi loyalists waving green flags in a similar scene, complete with fireworks. Libyan TV cameras filmed the celebrations as food, drinks and cooking oil were distributed.

Witnesses reported that people were buried under debris from buildings damaged by the quake, which was centered in Yunnan province's Yingjiang county, the official Xinhua News Agency said.

The website of the Chinese government earthquake monitoring station said the magnitude 5.8 quake struck just before 1 pm (0500 GMT) at a depth of 6 miles (10 kilometers). The US Geological Survey measured the quake at a magnitude of 5.4 and at a deeper 21 miles (35 kilometers).

At least 14 people were killed and 157 other people were hurt, said Ren Xueli, an official with the Yunnan Disaster Relief Center. Another official on duty at the center, Gao Shaotang, said many houses had been toppled. Xinhua said the army was sending soldiers to the site for rescue efforts. The mountainous area lies 1,500 miles (2,400 kilometers) southwest of Beijing, close to the border with Burma.

Lord Hutton, the Labour former work and pensions secretary charged by the coalition with reviewing public sector pensions, will publish his final report on Thursday, and it now looks likely to act as a starting gun for extended industrial action against the government's austerity programme.

The report will recommend that 6 million nurses, teachers, local government and other public sector workers should pay more into their pension pots, retire later and receive less when they do. All state employees will be affected, and it will create the first legal basis for simultaneous strikes across the public service unions.

Under the plans, the normal pension age of 60 would increase to match the state pension age, which by 2020 will be 66 for men and women. The changes should be brought in by the end of this parliament, though the armed forces should get longer to implement them, Hutton says.

Hutton has called on the unions and government to negotiate, saying the status quo is not tenable long term. "These proposals aim to strike a balanced deal between public service workers and the taxpayer. They will ensure that public service workers continue to have access to good pensions, while taxpayers benefit from greater control over their costs," he said.

Dave Prentis, the general secretary of the biggest public sector union Unison, said: "On top of a pay freeze, and the threat of redundancy, they now face a pensions raid. This brings the threat of industrial action closer."

The yield on 10-year bonds briefly surged to 7.8 per cent after the Chinese rating agency Dagong downgraded the country's debt to BBB+. "These levels of interest rates are not sustainable over time," said Carlos Costa Pina, secretary of the Portuguese Treasury, blaming the latest upset on the lack of a coherent EU debt strategy rather than any failing by Portugal to deliver on austerity.

Mr Costa Pina rebuffed calls by leading economists in Portugal for an EU-IMF bail-out rather than drawing out the agony. "It is not justified. Portugal doesn't need external help, it needs urgent measures by the EU to restore market confidence." David Owen from Jefferies Fixed Income said last week's shock move by the ECB to pre-announce rate rises had tightened credit and effectively doomed the country. "The ECB by its actions has made it inevitable that Portugal will need a bail-out. There are parallels with the actions of the Bundesbank during the ERM crisis in 1992," he said.

Mr Owen said the ECB is playing brinkmanship with EU leaders, pressuring them to come up with a grand solution to the debt crisis at summits this month. It is a dangerous game. "Spain is not yet safe. It has 2.5 trillion euros of combined household and company debt. That is an awful lot," he said

"The EU will do too little, too late: the markets will dictate the solution," said Louis Gargour from LNG Capital, speaking at a Euromoney bond forum. He said Greece is already in the grip of an unstoppable debt spiral, spending 14.3 per cent of tax revenue on interest costs. He expects 50 per cent 'haircuts' on the debt, perhaps along the lines of the Brady Plan following Latin America's debt crisis.

The Greek crisis is going to from bad to worse. Ten-year yields spiked to 12.78 per cent yesterday and unemployment jumped sharply to 14.8 per cent in December, a reminder that the social trauma of austerity has yet to hit. Greece is undergoing the harshest fiscal squeeze ever tried by a modern Western economy, yet public debt will end above 150 per cent of GDP by 2013 even if it complies with EU-IMF terms. "We should default and return to the Drachma to punish foreign loan sharks who have bled us dry," said Avriani, a paper linked to the ruling PASOK party.

The insurgents told the relatively reliable Al-Sharq Al-Awsat, as translated by the Lebanese news portal Iloubnan.info, that the government is using mercenary pilots from Syria, Algeria, Ukraine, Serbia and Romania to fly air force warplanes because Libyan pilots are no longer considered reliable.

Muammar Gaddafi's air force staged new raids on rebels on Tuesday as rebels said they rejected attempt by intermediaries for Gaddafi to talk with the provisional national council. A council spokesman said there is nothing to talk about until Gaddafi leaves the country. "We're not going to negotiate with him. He knows where the airport is in Tripoli and all he needs to do is leave and stop the bloodshed," the official said, according to Voice of America.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

"The US economy has become alarmingly dependent on government stimulus," said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. "Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits."

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, "either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion," she said.

In a speech to the London School of Economics on Tuesday, Miliband called for social democratic parties in those countries to try to regain ground by focusing on wealth creation and greater control of privatised utilities.

"Not since the first world war has there been this kind of domination from the right. The whole era of democratic suffrage," said Miliband. He added: "Left parties are losing elections more comprehensively than ever before. They are losing from government and from opposition; they are losing in majoritarian systems and PR systems."

"Just for good measure, they are losing whatever position the party had on the Iraq war and they are fragmenting at just the time the right is uniting."

There was a 6.3 magnitude aftershock shortly after the main quake, the meteorological agency said. In Tokyo, office buildings swayed and creaked for about 30 seconds during the quake.

Japan lies on the "Ring of Fire" - an arc of earthquake and volcanic zones that stretches around the Pacific Rim and where about 90 percent of the world's quakes occur. In 1933, about 3,000 people were killed around Ofunato by an earthquake and tsunami that had a maximum wave height of 94 feet (28.7 meters), according to the USGS. In 1896, a magnitude 8.5 earthquake generated a tsunami that killed 27,000 people in the area.

There were also reports of protests in other Yemeni cities, amid widespread unrest in the region. The Yemeni protesters, mostly students, have been camped out in front of the university since mid-February. They want Mr Saleh to stand down and are calling for more job opportunities, an end to corruption, and a fairer distribution of wealth.

As large crowds tried to build up the camp, security forces fired rubber bullets, tear gas and live rounds. Medics told BBC Arabic that 20 people had been shocked by electric stun guns and that 85 people had suffered the effects of tear gas. Several thousand women had also joined the march to mark International Women's Day. Opposition spokesman Muhammad Qahtan said the incident had been "a massacre". "It is a crime by security troops against students engaged in a peaceful sit-in," the Associated Press quoted him as saying.

Tuesday also saw protests in the southern city of Aden and in Ataq. In Ataq, hundreds of children took part in anti-Saleh demonstrations chanting "No studying, no teaching until the president falls," Reuters reports. Yemen is one of a number of countries in the North African and Middle East region that have seen increasing unrest since the presidents of Egypt and Tunisia were ousted in popular revolts. The president has been power for 32 years, facing a separatist movement in the south, a branch of al-Qaeda, and a periodic conflict with Shia tribes in the north.

They said they would "recycle" the fish carcasses into fertiliser. "We need to get rid of them," Redondo Beach Police Sergeant Phil Keenan was quoted by the local Daily Breeze newspaper as saying. "This is going to create a terrible pollution and public health issue if we don't." With the temperature on Tuesday already passing 68F (20C), the dead fish were beginning to smell.

Roughly 1,400 boats are moored at the harbour, including about 500 with full-time residents. In some places, the dead fish were so thick boats were unable to leave the marina, officials said. Local officials said they had found no traces of toxins or pollutants, and that they believed the fish had used up all the oxygen in the marina. He said it seemed likely that the fish had got lost after entering the marina and had been unable to find their way out. "We're confident that it is a naturally occurring, but unusual event," said Andrew Hughan, spokesman for the California fish and wildlife department. Redondo Beach is about 16 miles (26km) south-west of Los Angeles.

In May 2008, Vallejo filed for bankruptcy. The filing drew little national attention; most people were too busy watching banks fail to worry about cities. But while the banks have largely recovered, Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city's firehouses were closed. Last summer, a fire ravaged a house in one of the city's better neighborhoods; one of the firetrucks came from another town, 15 miles away.

Is this America's future?

Cities across America are facing dire financial distress. Meredith Whitney, a banking analyst turned independent adviser who correctly predicted the banking meltdown, has issued an Armageddon-like prediction of mass municipal defaults. Others - notably Newt Gingrich - have suggested that state governments as well as cities should be allowed to file for bankruptcy. Congress held a hearing to examine the idea.

These forecasts of apocalypse have touched a nerve. Americans, still reeling from the devastating impact of the mortgage debacle, are fearful that the next economic disaster is only a matter of time. To anyone reading the headlines of budget deficits and staggering pension liabilities, it takes little imagination to conclude that the next big one will be government itself.