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David Cameron will face a battle to secure parliamentary backing for any EU budget deal that falls short of a real-terms cut after he suffered his first major Commons defeat on EU spending.

The rebel amendment demanded that the next seven-year EU budget, which will run from 2014-2020, should be "reduced in real terms".

The vote is not binding on the government. But No 10 sources made clear that the prime minister would lay down a "red line" at the EU summit, which opens on 22 November, to reject a planned 5% increase in the budget to ensure that it rises only in line with inflation.

A leading left-of-centre thinktank is calling on Downing Street to negotiate a "grand bargain" with its European partners in which Britain would abandon its multibillion-pound EU rebate in exchange for a 25% cut in the budget. The Institute for Public Policy Research says the 25% cut, which would see the budget reduced from £120bn to £89bn, would save Britain £1.2bn from its £12.8bn contribution. This would neutralise any loss from ending Britain's EU rebate.Will Straw, associate director of the IPPR, said: "Britain should attempt a 'grand bargain' with Europe, offering to give up the rebate, but only in return for a smaller overall budget, meaningful reform of the CAP [Common Agricultural Policy], and greater measures to enhance growth. To ensure that giving up the rebate is palatable to the British public, it should be contingent on a reduction in the overall size of the budget so that Britain's contribution to the EU becomes smaller than it is today."

The poll also showed that a majority of those surveyed favour smaller budget cuts than those stipulated by the European Union, a further sign that the notoriously frugal Dutch are suffering from "bailout fatigue" and resent the high cost of rescuing profligate peripheral euro zone countries."Voters from different parties share the same view - disgust or disappointment over the political action and the political parties," De Hond said in a statement, adding that two thirds of those polled agreed with the statement "I'm tired of all the party politics".

Annual budget cuts of 14 to 16 billion euros are needed for the Netherlands to meet European Commission targets. Without them, its public deficit is forecast to hit 4.6 percent of GDP in 2013, well above the 3 percent agreed with the Commission.

If the Netherlands does not cut spending and breaks EU budget rules, it is likely to lose its coveted triple-A credit rating, leading to higher borrowing costs.The level of state debt rose to 65.2 percent of GDP at the end of 2011 from 62.9 percent in 2010, Statistics Netherlands said last month.

The National Security Agency routinely shares raw intelligence data with Israel without first sifting it to remove information about US citizens, a top-secret document provided to the Guardian by whistleblower Edward Snowden reveals.

the US government handed over intercepted communications likely to contain phone calls and emails of American citizens. The agreement places no legally binding limits on the use of the data by the Israelis.

The deal was reached in principle in March 2009, according to the undated memorandum, which lays out the ground rules for the intelligence sharing.The five-page memorandum, termed an agreement between the US and Israeli intelligence agencies "pertaining to the protection of US persons", repeatedly stresses the constitutional rights of Americans to privacy and the need for Israeli intelligence staff to respect these rights.But this is undermined by the disclosure that Israel is allowed to receive "raw Sigint" – signal intelligence. The memorandum says: "Raw Sigint includes, but is not limited to, unevaluated and unminimized transcripts, gists, facsimiles, telex, voice and Digital Network Intelligence metadata and content."According to the agreement, the intelligence being shared would not be filtered in advance by NSA analysts to remove US communications. "NSA routinely sends ISNU [the Israeli Sigint National Unit] minimized and unminimized raw collection"

China has said its military spending will increase by 7.5% in 2010, ending a long run of double-digit growth.It will spend 532.1bn yuan ($77.9bn:£51.7bn) over the year, the spokesman of the country's annual parliamentary session announced.

According to Chinese figures, this is the first time in more than 20 years that the military budget increase has dipped below 10%.

The spending spree began in the late 1980s, when China embarked on an ambitious programme to upgrade its armed forces. Since then it has bought and produced its own high-tech weapons, and reduced the number of personnel in an attempt to have fewer, but better trained, troops. Salaries and other benefits for officers and ordinary soldiers have also been improved.

The head of Kyrgyzstan's new interim government yesterday revealed that her country was broke and said that the former president who was overthrown in a street-led revolution this week had left only $80m in the budget.

Otunbayeva said that the ousted president Kurmanbek Bakiyev had plundered the economy, installing his sons in key government positions and flogging off strategic state industries for a fraction of their true value.

She said the country's leading telecoms firm had been sold to an offshore company in the Canary Islands, belonging to a friend of the president's son Maxim. "We had an absolutely scandalous situation where Kyrgyzstan had become a family-run regime,"

A busted bubble led to a massive Keynesian stimulus that averted a much deeper recession, but that also fueled substantial budget deficits. The response – massive spending cuts – ensures that unacceptably high levels of unemployment (a vast waste of resources and an oversupply of suffering) will continue, possibly for years.

even as Europe’s leaders promised that help was on the way, they doubled down on the belief that non-crisis countries must cut spending. The resulting austerity will hinder Europe’s growth, and thus that of its most distressed economies: after all, nothing would help Greece more than robust growth in its trading partners. And low growth will hurt tax revenues, undermining the proclaimed goal of fiscal consolidation.

The ECB argued that taxpayers should pick up the entire tab for Greece’s bad sovereign debt, for fear that any private-sector involvement (PSI) would trigger a “credit event,” which would force large payouts on credit-default swaps (CDSs), possibly fueling further financial turmoil. But, if that is a real fear for the ECB – if it is not merely acting on behalf of private lenders – surely it should have demanded that the banks have more capital.

In every one of the big European states, trust has gone into "a vertiginous decline". Five years ago, no country, not even Britain, showed more than half its voters hostile to Europe, and most were strongly supportive. Now, according to the EU's own Eurobarometer, distrust runs at 53% in Italy, 56% in France, 59% in Germany, 69% in the UK and 72% in Spain. The EU has lost the support of two thirds of its citizens. Does it matter?

"Anti-Europeanism" was growing across Europe even before the credit crunch – witness the Lisbon treaty referendums. It is reflected in the rise of nationalist parties and is rampant even among such one-time EU loyalists as Spain, Italy, Greece and Germany. As the head of the European Council on Foreign Relations, José Ignacio Torreblanca, said of yesterday's poll, "The damage is so deep that it does not matter whether you come from a creditor or debtor country … citizens now think their national democracy is being subverted."

Dreams make dangerous politics, and when they require the imposition of "yet more Europe" against the run of public opinion, they are badly in need of a reality check. The new requirement that the EU (in this case Germany) imposes budgets on indebted states goes far beyond anything domestic voters seem likely to tolerate.Barroso's dream is becoming the vision espoused by the Columbia professor of European history István Deák, who demanded last year in the New York Times "a new imperial construct" as the only alternative to save the continent from a "revival of tribalism". To Deák this new empire was "a sacred task … an almost religious goal: a new European faith that belongs to no church".

The Russian prime minister, Dmitry Medvedev, has swatted aside warnings that his government faces a middle class revolt if it does not embrace deeper economic and political reforms.

A session on Russia at the annual World Economic Forum in Davos on Wednesday heard that the Russian Federation faces several negative scenarios, including the potential threat of civil unrest. A straw poll of WEF associates in the audience found nearly 80% saw better governance as Russia's biggest challenge.

Alexey Kudrin, a professor at Saint Petersburg State University, said there were "serious, negative" warnings coming from Russia's business community. He outlined a scenario in which falling oil prices send Russia's budget forecasts off track, forcing the government to hike taxes and slash spending on social programmes, and freezing reform efforts.

"We'll be strengthening our presence in the Asia-Pacific, and budget reductions will not come at the expense of this critical region."

Xinhua said the US role could be good for China in helping to secure the "peaceful environment" it needed to continue its economic development.

But it added: "While boosting its military presence in the Asia-Pacific, the United States should abstain from flexing its muscles, as this won't help solve regional disputes. "If the United States indiscreetly applies militarism in the region, it will be like a bull in a china shop, and endanger peace instead of enhancing regional stability."

A single regulator to oversee banks across all 27 European Union states could be in place as early as 2013 according to the European Commission. A controversial new bank bailout fund financed by a tax on financial institutions is also planned. The proposal includes an EU-wide deposit guarantee scheme to protect savers in the event of a bank collapse.

European banks are the biggest lenders to EU governments. The guarantee scheme would reduce banks' risk from lending to indebted governments such as Portugal. So indebted governments could benefit from artificially low borrowing costs by piggy-backing loan guarantees from Germany without addressing their underlying economic problems. For that reason, Sabine Lautenschlaeger insists that banking union should go hand-in-hand with fiscal union to ensure all EU governments adhere to strict budget policies. And that insistence could stall the whole banking union process.

Mr Barroso's plan would create a bank rescue fund from levies on financial institutions across the EU, effectively reducing company profits and shareholder dividends. This could also remove the possibility of one set of taxpayers, for example, in Germany, having to bail out savers in another country such as Spain.

In the early years of China's rise to economic and military prowess, the guiding principle for its government was Deng Xiaoping's maxim: "Hide Your Strength, Bide Your Time." Now, more than three decades after paramount leader Deng launched his reforms, that policy has seemingly lapsed or simply become unworkable as China's military muscle becomes too expansive to conceal and its ambitions too pressing to postpone.

The current row with Southeast Asian nations over territorial claims in the energy-rich South China Sea is a prime manifestation of this change, especially the standoff with the Philippines over Scarborough Shoal.

In what is widely interpreted as a counter to China's growing influence, the United States is pushing ahead with a muscular realignment of its forces towards the Asia-Pacific region, despite Washington's fatigue with wars in Iraq and Afghanistan and the Pentagon's steep budget cuts.And regional nations, including those with a history of adversarial or distant relations with the United States, are embracing Washington's so-called strategic pivot to Asia.

EU partners have warned that no more bailout money will be handed to Greece, which is expected to run out of cash in weeks, unless it meets its budget and reform pledges. Tsipras says the EU is bluffing and that he wants to keep Greece in the euro."If one country leaves the euro, the euro zone collapses," he told Greek TV on Thursday. "If they don't give us the next loan installment, the euro zone will collapse the day after."

Analysts say it will be a Pyrrhic victory for whoever wins - Samaras will find it hard to govern for long with an empowered Tsipras protesting at the gates and Tsipras will realise he is inheriting a state on the verge of bankruptcy without bailout funds."It's possible that we will have a collapse no matter who is in government," said Yanis Varoufakis, a professor of economics at Athens University. "There is no easy solution."