(Adds German regulator Bafin)

  By Huw Jones

  LONDON, Aug 30 (Reuters) - Banks in the European Union do not need a huge injection of capital to cope with the challenges of the region's sovereign debt crisis, the bloc's banking watchdog said.

  " The European Banking Authority is not calling for an urgent and massive recapitalisation of EU banks," the EBA said on Tuesday.

  " The stress test recently conducted by the EBA showed that EU banks have significantly strengthened their capital positions and are able to withstand adverse macroeconomic scenarios, a view not changed by the additional disclosure of sovereign exposures," it said.

  The EBA was responding to a report in Financial Times Deutschland that EBA Chairman Andrea Enria was concerned about the thin capital structure of EU banks and might ask for stronger powers.

  Also, International Monetary Fund head Christine Lagarde had said on Saturday that European banks needed a " mandatory substantial capitalisation" to prevent renewed world recession.

  The EBA said it was monitoring the risks for EU banks and giving EU institutions its views on possible policy options.

  " The main EU banks have significantly strengthened their liquidity buffers, lengthened the maturity profile of their liabilities and covered most of their funding needs for 2011. However, going forward it will be important that normal access to medium and long-term funding markets is restored," the EBA said.

  German financial regulator Bafin said it opposed plans by the EBA to seek extra powers for the European rescue fund EFSF to recapitalise troubled banks.

  A Bafin spokesman said it was aware of the EBA request but did not consider that to be the EBA's task.

  Eight European banks failed the EU stress test in July and have to raise a total of 2.5 billion euros ($3.6 billion) capital, less than had been expected before the tests. Another 16 banks that narrowly passed also have to take action.

  Some investors say EU banks still face a capital headache.

  " European banks are in the deepest hole of all. Over the past five years, the European financial sector has shed 900 billion euros in capitalisation and two thirds of its value," said Jacques Chahine, chairman of European investment firm J.Chahine Capital.

  " Although the sector has raised 450 billion euros in capital over the same period, this has clearly been inadequate to cover increased risk on sovereign debt. We believe banks will have to be recapitalised by an additional 450 billion euros to cover that risk," he said.

  Separately on Tuesday, the International Accounting Standards Board said European financial institutions should have booked bigger losses on Greek government bond holdings during the recent results season. ($1 = 0.688 euro)

TRIPOLI (Reuters) - An estimated 50,000 people have been killed since the beginning of Libya's uprising to oust Muammar Gaddafi six months ago, a military commander with the country's interim ruling council said on Tuesday.

  " About 50,000 people were killed since the start of the uprising," Colonel Hisham Buhagiar, commander of the anti-Gaddafi troops who advanced out of the Western Mountains and took Tripoli a week ago, told Reuters.

  " In Misrata and Zlitan between 15,000 and 17,000 were killed and Jebel Nafusa (the Western Mountains) took a lot of casualties. We liberated about 28,000 prisoners. We presume that all those missing are dead," he said.

By Samia Nakhoul and Alexander Dziadosz

  TRIPOLI/BENGHAZI (Reuters) - Libya's interim leader on Tuesday gave forces loyal to deposed ruler Muammar Gaddafi a four-day deadline to surrender towns still under their control or risk a military showdown.

  As the hunt for Gaddafi himself goes on, Libyan officials accused neighbouring Algeria of an act of aggression for admitting his fleeing wife and three of his children.

  Algeria's Foreign Ministry said Gaddafi's wife Safia, his daughter Aisha and his sons Hannibal and Mohammed had entered Algeria on Monday morning, along with their children.

  That stirred a diplomatic row just as Libya's interim council works to consolidate its authority and capture places still loyal to Gaddafi, notably the coastal city of Sirte.

  " By Saturday, if there are no peaceful indications for implementing this, we will decide this matter militarily. We do not wish to do so but we cannot wait longer," Mustafa Abdel Jalil, head of Libya's interim council, told a news conference.

  Anti-Gaddafi forces have converged on Sirte from east and west, but have stopped short of an all-out assault in hopes of arranging a negotiated surrender of Gaddafi's birth-place.

  " Zero hour is quickly approaching," military spokesman Colonel Ahmed Bani told a news conference in Benghazi.

  " We're not negotiating with the (Gaddafi) regime. We're talking to the elders of the various affiliates and tribes," he said, adding that Gaddafi loyalists were thwarting the desire of most civilians to " join the free Libya liberated areas" .

  Gaddafi's whereabouts have been unknown since his foes seized his Tripoli compound on August 23, ending his 42-year rule after a six-month revolt backed by NATO and some Arab states.

  GADDAFI " WENT TO SABHA"

  Britain's Sky News, citing a young bodyguard of Gaddafi's son Khamis, said the leader had stayed in Tripoli until Friday when he left for the southern desert town of Sabha.

  It quoted the captured 17-year-old as saying Gaddafi met Khamis, a feared military commander, at around 1:30 p.m. on Friday in a Tripoli compound that was under heavy rebel fire. Gaddafi had arrived by car and was soon joined by Aisha.

  After a short meeting, they boarded four-wheel drive vehicles and left, the bodyguard told a Sky reporter, adding that his officer had told him: " They're going to Sabha."

  Along with Sirte, Sabha is one of the main remaining bastions of pro-Gaddafi forces.

  A NATO spokesman said reports of talks over Sirte were encouraging, but said the alliance, which has kept up a five-month bombing campaign, was targeting the city's approaches.

  " Our main area of attention is a corridor... (leading up) to the eastern edge of Sirte," Colonel Roland Lavoie said.

  Some anti-Gaddafi officers have reported that Khamis Gaddafi and former intelligence chief Abdullah al-Senussi were both killed in a clash on Saturday. This has not been confirmed and the NATO spokesman said he had no word on Khamis's fate.

  More NTC forces were heading for Bani Walid, a Gaddafi tribal stronghold 150 km (95 miles) southeast of Tripoli.

  " Three units were sent from Misrata towards Bani Walid this morning ... Our fighters are now 30 km from Bani Walid," said Mohammed Jamal, a fighter at a checkpoint on the road to the town. " Hopefully Bani Walid will also be liberated soon. Right now there are still many Gaddafi supporters there."

  TENSE RELATIONS WITH ALGERIA

  A spokesman for the National Transitional Council said it would seek to extradite Gaddafi's relatives from Algeria, which is alone among Libya's neighbours in not recognising the NTC.

  Nearly 60 countries have acknowledged the NTC as Libya's legitimate authority. Russia, China, India, South Africa and Brazil are among those which have so far withheld recognition.

  Algeria's acceptance of Gaddafi's wife and offspring angered Libyan leaders, who want the ousted autocrat and his entourage to face justice for years of repressive rule.

  Abdel Jalil, the NTC chairman, who was once Gaddafi's justice minister, called on the Algerian government to hand over any of the former leader's sons on its wanted list. He said he expected the fugitives to move on from Algeria before long.

  Algeria, which previously opposed sanctions and a no-fly zone against Gaddafi, has an authoritarian government which is anxious about Arab revolts lapping near its borders.

  " I would argue the Algerian regime is making a major blunder, miscalculating monstrously," Fawaz Gerges, an analyst at the London School of Economics, told the BBC.

  " The Algerian regime itself is not immune from the revolutionary momentum taking place in the Arab world."

  A visit to a Tripoli beach compound used by Gaddafi's children and members of his elite revealed a life of opulence and privilege that many Libyans could barely dream of.

  Saadi Gaddafi's chalet was strewn with designer clothes, including some unworn suits, and about 100 pairs of shoes. Aisha's house boasted 13 bedrooms and gold-plated cutlery.

  Anti-Gaddafi fighters now sleep in the bedrooms of their former rulers, whose gated compound has tennis courts, football pitches and dining centres, along with magnificent sea views.

  Many Libyans were overjoyed at the fall of Gaddafi, which followed that of longtime rulers in Egypt and Tunisia earlier this year, but have been chilled by evidence of mass killings in Tripoli as his forces fought losing battles with rebels.

  A week after Gaddafi's fall, Tripoli's two million people remain without running water or electricity. Banks, pharmacies and many other shops are still closed. The stench of garbage and sewage still pervades the city, despite clean-up efforts.

  A council spokesman said a pumping station for Tripoli's water supply that lies in the pro-Gaddafi town of Sabha had been damaged and could not be reached for repair.

  However, a report by the European Union's humanitarian office (ECHO), said pro-Gaddafi forces in Sirte had cut two-thirds of the water supply to Tripoli, most of which comes from the " Great Man-made River" , a huge project built under Gaddafi that pumps out water from under the Sahara desert.

  In the port city of Misrata, scene of heavy fighting earlier in the conflict, security forces were holding 332 former Gaddafi fighters in a school, where the captives sat on mattresses in the classrooms, some reading the Koran.

  There was no evidence the men had been mistreated.

  " These are Gaddafi soldiers who surrendered in battles around Misrata and Zlitan," said senior warder Haitham Mohammed. " We will eventually take them to court."

  Some prisoners told Reuters, in the presence of the warder, that they had been tricked into fighting for Gaddafi.

  " We were told we were fighting foreigners, al Qaeda, so we fought to liberate Misrata but when we came here we were surprised," said one, named Ali Sadiq Hamuda.

  " I'm ashamed that I came here with wrong ideas but now I have discovered the truth -- the Gaddafi regime was bad."

(Refiles to fix spelling of Feldmann in last paragraph)

  * Board approves revamp of best-selling plane

  * New 737 to compete with Airbus offering

  * Boeing shares up 1.8 pct (Adds share price, comment)

  By Karen Jacobs and Tim Hepher

  ATLANTA/PARIS, Aug 30 (Reuters) - Boeing Co, moving to counter a competitive offering from rival Airbus, said it will roll out a more efficient version of its best-selling 737 narrowbody with a new engine in 2017.

  Boeing cited order commitments for 496 of the new planes from five airlines.

  The new model will compete with the revamped A320neo family from Europe's Airbus, a similar model due to be equipped with fuel-saving engines and delivered in 2015.

  The Boeing jet will have engines from CFM International, a joint venture between General Electric Co and France's Safran. The board approved the re-engine plan, Boeing said in a statement on Tuesday.

  The 737 and A320 compete in the market for jets with around 150 seats, the biggest segment of the global jetliner market and estimated to be worth $2 trillion over the next 20 years.

  Shares of Boeing were up 1.8 percent, or $1.16, to $65.76 in morning trading.

  Boeing said its new 737 was expected to have 16 percent lower fuel burn than the current offering from Airbus, 4 percent lower fuel burn than the Airbus A320neo, and lower overall operating costs.

  It did not give much technical information about the revamped 737 engine in its statement. CFM said the specs of the engine to be used exclusively on the plane were still being fine-tuned with Boeing.

  " The two companies are now working to define the final LEAP-1B engine configuration," CFM International said in a statement. FOLLOWS AIRBUS SUCCESS

  Boeing opted for the quick-fix " re-engining" plan, shelving for now a longer-term redesign of its single-aisle 737, after Airbus racked up 1,000 orders for the re-engined A320neo. The A320neo promises 12 to 15 percent fuel savings and offers engines from Pratt & Whitney and CFM.

  " They're seeking to hold on to an equal position in the narrowbody market with a minimal expenditure of company resources," aerospace analyst Richard Aboulafia of the Teal Group said.

  Last month, Airbus grabbed the largest share of a record order in July from AMR Corp's American Airlines, once an exclusive Boeing customer. As part of that deal, American signaled it intended to order 100 of the re-engined 737s..

  Boeing, which last week got U.S. government approval to enter its carbon-composite 787 Dreamliner into commercial passenger service, cited " overwhelming demand" for the revamped 737 as high oil prices spur airlines to seek fuel-saving aircraft.

  RBC Capital Markets analyst Rob Stallard said most of Boeing's existing 737 fliers would likely give the revamped 737 a serious look. He added orders on par with what the A320neo has garnered were possible.

  " With formal launch, Boeing can now get on and sell the 737 New Engine Family," Stallard said in a client note.

  The company said Bob Feldmann, who worked in its defense division, would be general manager of the new engine 737 family. (Reporting by Karen Jacobs in Atlanta and Tim Hepher in Paris editing by John Wallace, Dave Zimmerman)

(Repeats item first carried late on Monday)

  By Emily Kaiser

  SINGAPORE, Aug 29 (Reuters) - Figuring out what the People's Bank of China is doing can be as perplexing as parsing a statement from Alan Greenspan, the notoriously opaque former U.S. Federal Reserve chairman.

  Now that the U.S. central bank has made it clear that any further economic assistance will have to wait until September -- if it comes at all -- the world is even more reliant on China, the second largest economy, to do what it can to support growth.

  Letting the yuan `rise more rapidly is arguably the most potent option available. It would send an immediate signal that Beijing is confident in China's economic strength despite growing global gloom, and that it is committed to a longer term goal of curbing its reliance on exports.

  " On any objective gauge, the Chinese currency should be higher today than it is," Reserve Bank of Australia Governor Glenn Stevens said on Friday.

  " I think it would be beneficial to the global economy, and beneficial to the Chinese people for there to be more flexibility in that price. There is no shortage of people telling Chinese authorities that," he said.

  Indeed, this has been a recurring theme with China for the better part of the past decade. Many economists argue that the less pressure the world places on Beijing, the more likely policymakers are to loosen their grip on the yuan.

 

  In the past three weeks, China has come tantalizingly close to signalling some sort of a policy shift. The PBOC has fixed the yuan mid-point at a series of record highs, and did so yet again on Monday.

  A flurry of articles and editorials in government-controlled newspapers have argued that the time is right for faster appreciation.

  But just when investors and economists smelled a change, the PBOC stepped back and let the yuan drift sideways for a week. Reuters spoke with several analysts at Chinese government think-tanks, who said expectations of a big move were misplaced.

  Liang Youcai, senior economist at the State Information Centre, said a sharp yuan rise could backfire by attracting more investment money into China, worsening the inflation pressures that the PBOC wants to counter.

  Still, the yuan has risen about 0.8 percent against the dollar so far this month. That may sound modest, but considering it rose just 2.3 percent over the first seven months of the year combined, it shows Beijing has stepped up the pace even though growth concerns have intensified.

  Back in 2008, China responded to the global financial crisis by halting the yuan appreciation, and did not reverse course until June 2010 -- a full year after the U.S. economy officially exited the recession.

  " This time, Chinese policymakers appear to be still in observation mode," said Grace Ng, an economist with JPMorgan in Hong Kong.

  MIXED SIGNALS

  Beijing is well known for its policy cautiousness. Even when state-linked newspapers were talking up the chances of a swifter yuan rise, some government officials stressed that now would be a dangerous time to do so because growth is slowing in China's two biggest export markets, the United States and Europe.

  The mixed messages may reflect disagreement among Chinese officials about the ideal policy path -- another factor that points to Beijing proceeding slowly.

  The PBOC itself has said repeatedly that inflation remains its no. 1 concern, suggesting it is inclined to keep tightening monetary policy despite concerns that the global economic malaise could deepen China's slowdown.

  Several major banks including UBS lowered their growth forecasts for China through 2012 last week, largely because of concern that exports will fade.

  Actions speak louder than words, especially when the words are inconsistent. A closer examination of the yuan's recent moves suggests Beijing is allowing a bit more flexibility.

  Tellingly, China has let the yuan to rise against the currencies of several of its key trading partners, not just the U.S. dollar. On a trade-weighted basis, the yuan is at a three-month high.

  Back in September 2010, the last time investors got their hopes up for a speedier yuan rise, Beijing did allow the currency to rise more rapidly against the dollar but it moved in the opposite direction on a trade-weighted basis.

  Jim Walker, founder of Asianomics in Hong Kong, is not holding his breath for decisive action this time around either.

  " We've been waiting for two years for a significant move in the renminbi (yuan) and we haven't got one," he told Reuters.

  FOLLOW THE LEADER

  For China's Asian neighbors, a stronger yuan would provide a bit of cover for them to let their own currencies rise more quickly without jeopardizing exports. That can be a useful tool for containing stubbornly high inflation.

  Singapore and Indonesia have been among the most aggressive in using currency appreciation to combat price pressures. Both have shown success, although Singapore's inflation picked up more than economists had expected in July.

  The biggest benefit for the world may be psychological. If China endorses a faster yuan rise, it may quell concerns that the economy is faltering as global growth slows.

  Letting the currency do some of the work in fighting inflation would also give the PBOC a bit of wiggle room to hold off on further interest rate rises, which would put an unwelcome drag on economic growth.

  But Walker, the Asianomics founder, said China cannot hope to contain price pressures when interest rates are below the inflation rate, even if it lets the currency rise faster.

  " Frittering around with the renminbi is fine. It will marginally tighten monetary policy. But until you send the right signal about the cost of capital, problems will remain," he said. (Additional reporting by Kevin Yao in Beijing Editing by Mathew Veedon)

* Seeking court approval to let creditors vote on plan

  * Says it has resolved several creditor objections

  * Hearing could spill into Wednesday (New paragraphs 1-10, adds details from hearing)

  By Nick Brown

  NEW YORK, Aug 30 (Reuters) - Lehman Brothers Holdings Inc < LEHMQ.PK> told a bankruptcy judge on Tuesday it has resolved or pushed off eight of the 18 objections to its plan outline to pay creditors back $65 billion and end the biggest bankruptcy in U.S. history.

  The company, seeking bankruptcy court permission to let creditors vote on its plan, reached new settlements with affiliates in Singapore and the Netherlands, Lehman lawyer Harvey Miller said at a U.S. Bankruptcy Court hearing.

  It still faces objections from Fidelity National Title Insurance Co, Mason Capital Management LLC, Centerbridge Credit Advisors LLC and others, Miller said.

  Lehman has faced off with angry creditors for years but is now dealing with a relatively small list of objections for a case its size because it was able to get powerful critics, including distressed investors and former trading partners, on its side prior to the hearing.

  Approval of the outline would provide a glimmer of light for an end to the three-year bankruptcy, allowing creditors to hold a Nov. 4 vote on the payout plan.

  But the hearing is likely to be a lengthy process, with Judge James Peck budgeting nearly two days for the process and warning a packed courtroom they were likely in for a " long day."

  AN ORDERLY PROCESS

  Invoking Winston Churchill, Miller said he hoped the hearing represents the " beginning of the end" of Lehman's bankruptcy, rather than the " end of the beginning."

  But obstacles remain to its emergence and its ability to start paying back the investors who lost billions. Even after creditors and the court approve the reorganization plan, Lehman must meet certain financing and other conditions outlined in it, a process that could take days, weeks or months, a company spokeswoman said last week. Lehman has said it hopes to begin creditor payouts in the first quarter of 2012.

  Judge Peck told a packed courtroom he wanted an orderly hearing, saying he would listen to legitimate objections to the plan outline, but said objections to the plan itself should be reserved for the confirmation stage of the plan process.

  " I am not going to permit the hearing to become what amounts to a preview of coming attractions of what will be presented at the time of" plan confirmation, Peck said, asking lawyers to " behave as grownups." Video feeds were set up in two additional rooms as hundreds gathered for the hearing.

  $360 BLN IN CLAIMS

  The investment bank faces about $360 billion in allowed claims, Miller said. That figure represents an increase from earlier estimates of about $320 billion. Creditors will recover about $65 billion, or an average of 20 cents on the dollar.

  Lehman has support from most of its largest creditors, including two groups that hold a combined $100 billion in claims, nearly one-third of the total claims against Lehman.

  Those groups include a bondholder group led by hedge fund Paulson & Co, and derivatives creditors such as Goldman Sachs Group Inc < GS.N> and Morgan Stanley < MS.N> . Asian affiliates holding about $20 billion in claims have also pledged support.

  Lehman filed for bankruptcy on Sept. 15, 2008, with $639 billion in assets. The filing was six times larger than any previous U.S. bankruptcy and was considered to be a key catalyst to the financial crisis.

  The case in In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555. (Reporting by Nick Brown editing by Andre Grenon and Gunna Dickson)

(Recasts, updates throughout, changes dateline to New York)

  NEW YORK, Aug 30 (Reuters) - Brent crude rose to the highest level in more than three weeks as markets weighed a sharp drop in consumer confidence against the threat of another tropical storm that formed far from land in the Atlantic.

  As Hurricane Irene looked to have caused no long-term damage to oil refineries or infrastructure along the East Coast, the market was cautious ahead of the strengthening Tropical Storm Katia in the Atlantic.

  The storm was about 630 miles (1,010 km) west-southwest of the southernmost Cape Verde Islands and expected to become a hurricane late on Wednesday or early on Thursday.

  It was unclear where it would travel, but very early models showed it missing Hovensa LLC's Hovensa refinery in St. Croix and passing north of Puerto Rico on Sunday morning.

  Brent crude traded up $1.56 to $113.56 a barrel at 10:55 a.m. (1455 GMT), after hitting $113.87, the highest level since Aug. 2. U.S. crude, traded up $1.12 to $88.39 a barrel.

  Oil came under pressure in early New York trade after data showed U.S. consumer confidence in August fell to the lowest level in more than two years.

(Repeat of item initially published on Sunday, Aug. 21)

  By Jason Lange

  WASHINGTON, Aug 22 (Reuters) - With the global economy sputtering and financial markets on the rocks, the world needs reassurance the U.S. central bank stands ready to save the day.

  Federal Reserve Chairman Ben Bernanke will make a speech on Friday at a lodge in Wyoming's Jackson Hole, where policymakers and academics meet once a year to talk shop.

  Last year, Bernanke used the podium to suggest the Fed could help growth by buying long-term bonds, a prelude to a program enacted soon afterward that did just that.

  However, no grand new plan is expected to be hatched at this year's meeting.

  In part that's because the Fed already unveiled a new policy tool this month when it pledged to keep interest rates near zero into 2013.

  Central banks rarely make such promises, so consider that a big move.

  But the world grows more nervous every day that a new recession lurks around the corner. Economists see rising risks that U.S. growth could evaporate, while Europe languishes in a debt crisis. Even strong performers like China and Brazil show signs of slowing.

  Moreover, stocks have plunged, further threatening the economy because consumers could pull back if they sense their retirement savings are dwindling.

  So at the very least, Bernanke will be expected to hold our hands a little when he speaks.

  " Markets are increasingly hoping there will be some signs that the Fed will coming running to the rescue," said Paul Dales, an economist at Capital Economics in Toronto.

  Most economists expect Bernanke will explain what's in his policy toolbox while promising to use those tools if necessary.

  Markets will hush when he begins his speech, and he will be mindful not to disappoint. < ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

  ANALYSIS-ECB bond buying plan faces test [ID:nL5E7JE05D]

  ANALYSIS-Fed's bullets could be blanks [ID:nN1E77G1K4]

  For IFR's forecasts for the week ahead in U.S. economic

  data, please click on http://link.reuters.com/fav33s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

  EURO BACKSTOP

  One danger looming over the world economy -- and which could goad Bernanke into more action -- is the prospect that the European crisis could worsen.

  Investors are nervous that some countries might not pay back their debts, so they are demanding some European governments pay higher interest rates to borrow.

  Ireland, Portugal and Greece currently cannot borrow on the market, and now market forces appear to be tilting against larger countries, threatening to create a much larger crisis.

  Policymakers are scrambling to contain this, with the European Central Bank buying Italian and Spanish bonds this month.

  But the ECB is internally divided over that move, creating further anxiety for investors. On Monday, the central bank will release figures that could show how committed it is to propping up Italy and Spain.

  A bad reaction by investors to that data -- or to revised readings due during the week on U.S. and British second-quarter economic performance -- could increase pressure on Bernanke to act.

  Indeed, many people in the market expect the Fed will eventually launch QE3, the name given to what would be the third installment of a program to help the economy by buying assets on the market.

  " Expectations are for more to happen. It's just a question of exact timing of when it happens," said Goldman Sachs economist Andrew Tilton in New York.

  When Bernanke takes the podium, his speech will be measured against that expectation. (Reporting by Jason Lange Editing by Dan Grebler) (jason.lange@thomsonreuters.com +1 202 310 5487 Reuters Messaging: jason.lange.reuters.com@reuters.net))

* BoE newcomer Broadbent concerned over weak economy

  * In first interview, says has softened hawkish stance (Adds Broadbent comment on policy options)

  LONDON, Aug 22 (Reuters) - Bank of England policymaker Ben Broadbent has softened his hawkish stance on inflation because of concerns over economic weakness, he said in an interview on Monday, his first since joining the rate-setting Monetary Policy Committee.

  The former Goldman Sachs economist succeeded arch-hawk Andrew Sentance on the BoE's nine-man rate-setting body, but has not copied Sentance's stance, voting to leave monetary policy unchanged in June, July and August.

  The UK economy is squeezed between high inflation -- more than double the BoE's two percent target -- and low growth, and a Reuters poll consensus last week was for interest rates to be kept at record lows at least until next October

  " It's clear that the outlook has softened since earlier this year, and the latest forecasts both internationally and for the domestic economy are for continued growth but at a rate lower than people expected some months ago and certainly lower than one would expect in a, quote, normal economic recovery," Broadbent told BBC Radio 4.

  " I was probably on that (hawkish) side of the debate when I arrived at the Bank earlier this year ... I was concerned that a long period of above-target inflation might dislodge medium-term expectations of future inflation and find their way into other prices and wages," he added.

  " That hasn't happened and, as I say, the outlook for growth domestically as well as globally has weakened in the last three or four months, so I would describe myself now as much more in the middle of the debate."

  Broadbent said the MPC's assumption was that there had been a permanent loss of output in Britain and appeared to hint at a scenario in which more quantitative easing would be considered.

  " I still believe there's significant spare capacity in the economy , and that means that interest rates are low ," he said.

  " I f that outlook changed in a way which would lower the prospects for inflation over the medium term, maybe more could be done."

  The Bank last week inched closer to launching a second round of quantitative easing after two policymakers unexpectedly dropped their call for higher interest rates.

  Only long-standing dove Adam Posen called for more QE this month but other policymakers considered it.

  The BoE has held rates at a record low of 0.5 percent since March 2009 and purchased 200 billion pounds of financial assets, mostly gilts, with newly-created money between then and January 2010. (Reporting by Keith Weir and Olesya Dmitracova editing by Stephen Nisbet)

By Michael Georgy

  NALUT, Libya (Reuters) - Now that Muammar Gaddafi's four-decade rule appears to be over, the disparate groups of rebels who drove him from power could face a graver danger: each other.

  Without the cause of fighting Gaddafi to unite them, the fighters from all walks of life must come up with an effective leadership to run a country suffering from factionalism, tribal rivalries and ethnic divisions.

  Signs of trouble emerged long before the rebels made their dramatic sweep from the Western Mountain region to Tripoli, cheered by Libyans who will soon want a smooth-running government, jobs, better schools and the oil wealth that rarely trickled down to them during Gaddafi's reign.

  Rebels who complained about Gaddafi's alleged human rights abuses as they prepared for battle at the frontlines also spent a great deal of time criticizing their comrades, mainly because they were from a different village, or ethnic group or seemed to have more resources.

  Libyan rebel Husam Najjair, an Irish citizen, seemed disillusioned with the rebel movement he joined, leaving everything behind in Dublin.

  " There could be some very big problems. Everyone is going to want to run the show. That's when it will get messy," he told Reuters. " Everyone must be disarmed."

  Is there one unifying figure who can lead Libya and prevent the rebels from turning on each other? Right now the resounding answer seems to be no.

  " There isn't one rebel leader who is respected by everyone. That's the problem," said Kamran Bokhari, Middle East Director at STRATFOR global intelligence firm.

  Gaddafi ran the North African oil producing-country like a personal cult, without state institutions that would make any transition easier for the rebels, who have plenty of spirit but lack a proper chain of command.

  The most prominent rebel leader is Mustafa Abdel Jalil, chairman of the National Transitional Council (NTC), a diverse group of Gaddafi opponents based in the eastern city of Benghazi.

  It consists of former government ministers and longstanding opposition members who represent wide-ranging views including Arab nationalism, Islamists, secularists, socialists and businessmen.

  A former justice minister, soft-spoken Abdel Jalil was described as a " fair-minded technocrat" in a U.S. diplomatic cable released by WikiLeaks.

  A mild-mannered consensus builder in his late 50s, he was praised by Human Rights Watch for his work on Libya's criminal code reform. Abdel Jalil resigned as justice minister in February when violence was used against protesters.

  But like other former members of Gaddafi's inner circle, he will always be viewed with suspicion by some rebels who want completely new faces with no past links to the regime running the country.

  The prime minister of the rebels' shadow government, Mahmoud Jibril, a former top development official under Gaddafi, has extensive foreign contacts and has been the rebels' roving envoy.

  But his travels have frustrated some colleagues and foreign backers so his experience and contact building will have been wasted if he is not part of any new administration.

  Another high-profile rebel who may play a future leadership role is Ali Tarhouni. The U.S.-based academic and opposition figure in exile returned to Libya to take charge of economic, financial and oil matters for the rebels.

  IRAQ LESSONS

  Tensions between life-long opponents of Gaddafi and his supporters who recently defected to the rebel side may undermine efforts to choose an effective leadership.

  If hardliners prevail, Libya could make the same mistake that analysts say was made in Iraq after the 2003 U.S. invasion that toppled Saddam Hussein.

  His Baath Party supporters and army officers were purged en masse, creating a power vacuum that led to instability for years as everyone from his secular backers to al Qaeda waged a violent campaign against Iraq's new U.S.-backed rulers.

  " You cannot make a rule that anyone who worked for Gaddafi cannot work with us. It's not practical at all," said Ashour Shamis, a United Kingdom-based Libyan opposition activist.

  Such an approach would sabotage any bid to bring back capable people to undertake perhaps the most critical task of all -- revitalizing the oil industry.

  Those who want to put aside animosities for the sake of rebuilding the country's energy sector may want to turn to its former top official Shokri Ghanem for help.

  Western-educated Ghanem, who defected, has decades of experience in the oil sector and is a former prime minister credited with liberalizing the Libyan economy and accelerating the opening of the country to global petroleum investment.

  Bringing people like Ghanem back will depend to a great extent on whether rebels will be willing to put aside their differences and take a practical view of Libya's future.

  FACTIONALISM

  Judging by realities on the ground, it won't be easy.

  Take the Western Mountains region, where rebels recently made the most dramatic gains as they moved in on Tripoli.

  The fighters showed far more discipline as they swept through towns and villages in the plains and eventually reached Tripoli.

  Beneath the surface, the rebels were torn apart by divisions and factionalism and fears that Gaddafi's agents had infiltrated them. Berber and Arab villages look at each other with disdain.

  Rebels refer to themselves as the fighters from village x or village y, not the rebels of Libya. When journalists want to reach frontlines, they are told to get written permission from whichever rebel is in charge of a specific area.

  Najjair constantly went on about how his Tripoli Brigade was the best-suited to seize the capital because its members were all from Tripoli. Those same rivalries are likely to linger when it comes time to choosing leaders, from ministers to provincial governors to mayors, and drawing up budgets.

  After all, many of the rebels are educated - from doctors to teachers to accountants to engineers - so they are likely to insist on a say on how the country is run.

  A hint of what could be in store is the still unexplained July 28 killing of the rebels' military commander, Abdel Fattah Younes, a former top Gaddafi security official, after he was taken into custody by his own side for questioning.

  The killing has raised fears that the NTC is too weak and fractured to halt a slide into bloodshed as rival factions, including Islamists, bid for power.

  An increasing number of fighters in the Western Mountains, for instance, are growing long, thick beards, the trademark of Islamists who are likely to reject close ties with the West in a new Libya, while others cry out for foreign investment.

  They may also argue that the rebels from the Western Mountains and the city of Misrata should be given the most powerful positions in any new government since they did most of the fighting while the ones in Benghazi dealt with administration.

  The bitterness was palpable on the frontlines along the desert plains in the West, even though different rebel groups got along enough to stage the advance together.

  The rebels from Benghazi were portrayed as outsiders who were often late in delivering weapons and other supplies to their counterparts.

  Rebels in the leadership structure will have to figure out ways to defuse tensions among their ranks while trying to turn Libya into a country with a competitive economy.

  " Running the country will be much tougher for the rebels. Finding people who everyone accepts will be the challenge," said Bokhari.

(Refiles to insert dropped word " moved" in first paragraph)

  * European shares up, Wall St opens higher

  * Oil falls on hopes for end to Libya conflict

  * Gold sets record high again near $1,900 an ounce (Updates to U..S markets, adds details, changes dateline, previous LONDON)

  By David Gaffen

  NEW YORK, Aug 22 (Reuters) - Oil prices slipped and world stocks rose on Monday above recent 11-month lows on hopes the conflict in Libya could be ending as energy shares moved higher after last week's equity market selloff.

  U.S. stocks jumped at the open, led by Exxon Mobil Corp, which rose 2 percent. Investors, however, offset buys of risky assets by continuing to buy gold. Persistent worries that the sovereign debt crisis in euro zone peripheral countries may spread to bigger economies in the region encouraged flows into gold, pushing it to another record high.

  The cost for euro zone banks to borrow money from one another rose again on Monday, heading back toward their highest levels since late 2008, as U.S. banks remained wary of lending to European counterparts in the face of the intractable debt crisis.

  Brent crude oil fell 1.6 percent. The potential for a restart of Libyan oil flows into the market if the Gaddafi regime collapses weighed on the benchmark oil price. If Libyan production comes back it would ease gasoline prices, a potential boost to economies worldwide.

  Libyan government tanks and snipers put up scattered resistance in Tripoli after rebels swept into the heart of the capital, cheered on by crowds hailing the end of Muammar Gaddafi's 42 years in power.

  The Dow Jones industrial average was up 171.80 points, or 1.59 percent, at 10,989.45. The Standard & Poor's 500 Index rose 19.24 points, or 1.71 percent, at 1,142.77. The Nasdaq Composite Index gained 53.62 points, or 2.29 percent, at 2,395.46.

  European stocks rose 1.8 percent.

  The benchmark MSCI world equity index gained 1 percent on Monday but has fallen for five weeks in a row and looks to be heading for its worst monthly performance since October 2008, when markets were reeling after the collapse of Lehman Brothers.

  Gold hit a third consecutive all-time high near $1,900 an ounce after staging its biggest weekly gain in 2-1/2 years last week.

  The euro rose 0.3 percent. The dollar held above a record low around 75.94 yen hit on Friday, thanks to concerns about intervention by Japanese authorities. It was at 76.74.

  The U.S. currency fell 0.2 percent against a basket of major currencies.

  Investors are waiting to see whether the Federal Reserve flags further stimulus when bankers gather in Jackson Hole, Wyoming later this week, a year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy.

  Additional bond purchases by the Fed could help reflate asset prices, but many view the chances of a third round of quantitative easing as limited and expect the Fed to take gradual measures to boost the economy. (Editing by Padraic Cassidy)