MADRID (Reuters) - Spain's borrowing costs shot up at a bond auction on Thursday and its troubled banks suffered a double blow, with shares in part-nationalized Bankia diving and 16 lenders - including the euro zone's biggest - having their credit ratings cut. Official data confirmed Spain was back in recession and a newspaper reported a big outflow of deposits from Bankia, but the government said it had taken a fundamental step to strengthen Spain's credibility by agreeing big budget cuts with the country's free-spending regions. ...

WASHINGTON (Reuters) - President Barack Obama will seek to cement a bond with France's new leader at the White House on Friday before heading to Camp David for a G8 summit where he is set to press Europe to do more to fix the region's deepening economic crisis. Francois Hollande, sworn in this week as French president, has already made waves by challenging Europe's austerity focus and saying he will pull French combat troops from Afghanistan by the end of this year. ...

ATHENS (Reuters) - Greek voters are returning to the establishment parties that negotiated its bailout, a poll showed on Thursday, offering potential salvation for European leaders who say a snap Greek election next month will decide whether it must quit the euro. The poll, the first conducted since talks to form a government collapsed and a new election was called for June 17, showed the conservative New Democracy party in first place, several points ahead of the radical leftist SYRIZA which has pledged to tear up the bailout. ...

LONDON (Reuters) - Rupert Murdoch sowed the seeds of the phone hacking scandal that has tarnished his reputation by forcing Britain's most respected newspapers into "a Faustian bargain" with the powerful, a former editor of the UK's Times newspaper said on Thursday. Harry Evans told a British media inquiry how as editor of the Times he battled attempts by Murdoch to compel him to support British Prime Minister Margaret Thatcher. At the Leveson inquiry last month, Murdoch denied influencing the editorial stance of the Times papers. ...

BEIJING (Reuters) - Three retired Chinese Communist Party officials issued a call on Friday for leaders to disclose their family wealth before a looming succession, warning that a scandal over the fallen politician Bo Xilai has exposed dangerous abuses of power. The retired officials, led by Ma Xiaoli, have long been out of power and proposals from them and other party reformers have little prospect of shaping China's leadership succession, which will be settled at the party's 18th congress later this year. ...

PARIS (Reuters) - France's new left-wing government started work on Thursday with pledges to combat excessive austerity but better manage public finances, marking the debut with a 30 percent cut in pay for President Francois Hollande and all ministers. The sizeable wage reduction was endorsed at a first meeting of the 34-minister team, a day after Germany's government awarded rises to its ministers and Chancellor Angela Merkel, whose pay will overtake Hollande's. ...

WASHINGTON (Reuters) - The Pentagon will seek to provide Israel with an additional $70 million in the coming months for its short-range rocket shield, known as the "Iron Dome," Defense Secretary Leon Panetta said after a meeting with his Israeli counterpart on Thursday. So far, the United States has provided $205 million to support the Iron Dome, manufactured by Israel's state-owned Raphael Advanced Defense Systems Ltd. The system uses small radar-guided missiles to blow up in midair Katyusha-style rockets with ranges of 3 miles to 45 miles, as well as mortar bombs. ...

UNITED NATIONS (Reuters) - A U.N. panel of experts that monitors compliance with sanctions on North Korea is investigating reports of possible weapons-related deals between Pyongyang and Syria and Myanmar, the panel said in a confidential report seen by Reuters on Thursday. "The DPRK (North Korea) continues actively to defy the measures in the (U.N. sanctions) resolutions," the panel said in the report, which it submitted to the U.N. Security Council's North Korea sanctions committee earlier this week. ...

SANTO DOMINGO (Reuters) - Voters in the Dominican Republic's presidential election on Sunday will choose between two candidates vying to be seen as agents of change, even though one represents the ruling party and the other is a former president. Making the choice even harder, both candidates represent center-left political parties in a race devoid of major ideological differences and lacking a conservative option. ...

AMMAN (Reuters) - Syrian President Bashar al-Assad said on Wednesday that countries trying to "sow chaos" in Syria could be infected with it themselves, an apparent warning to Arab Gulf nations that back the insurgency aimed at forcing him from power. Assad's remarks, to a Russian TV channel, came after U.N. staff monitoring an increasingly shaky ceasefire were caught up in an attack that killed at least 21 people, and had to spend a night with rebel forces. ...

The man once considered China's most-wanted fugitive was sentenced to life in prison for smuggling and bribery in a lurid corruption case that reached into the highest echelons of the Communist Party and involved a decade-long extradition fight.

A crowded bus plunged into a river bank in central Vietnam, killing 34 people and injuring 21 others in one of the country's deadliest road accidents.

Taiwan President Ma Ying-jeou has leveraged growing economic ties with China to reduce tensions to their lowest level since the two sides split in 1949. China's incessant effort to draw the democratic island closer politically has been on the back burner, and as Ma's second term begins Sunday the question is whether he can keep it there.

Myanmar's President Thein Sein was resting at his home in Yangon on Friday after military doctors paid a house call but an adviser said his condition was "nothing to worry about."

A rocket has lifted off in Japan in the country's first commercial launch of a foreign satellite — one from South Korea designed to monitor the environment.

About 70 Christian youths in the Philippines have chanted "Stop the Lady Gaga concerts" at a rally calling for the singer's shows in Manila next week to be canceled.

The head of the Miss World beauty queen franchise says she plans to travel to Fiji "as soon as possible" to address the problems that turned last month's pageant in the island nation into a fiasco.

The Algerian singer Warda, whose sultry voice and range helped make her one of the giants of Arab song, has died. She was 72.

Egypt's vice police on Thursday arrested the owner of a belly dancing TV station on suspicion of operating without a license, inciting licentiousness and facilitating prostitution, a security official said.