The Spanish press is dominated by Eta’s attack in Mallorca, which left two police officers dead. El País reports that José Antonio Alonso, spokesperson for the ruling PSOE party, says there is “zero” chance of dialogue with the Basque separatist group. El Mundo, meanwhile, says the incident marks “50 years of terror, 50 years of blood and 50 years of fear”.

One of the big stories in France today is the announcement of Renault’s huge first-half loss of €2.71bn. According to Le Figaro, these are the worst results in the company’s history, far beyond the 12.5bn francs lost in 1984 (equivalent to €1.9bn today). France’s second biggest carmaker has been the victim not only of the economic crisis, the paper reports, but also of its ties with Nissan, Avtovaz and AB Volvo. The FT also has the story.

The Irish Independent reports that the government may use its new role as “the biggest property owner in the world” to promote its economic and social policy through land re-zonings, planning permissions and provision of services like roads and communications. Ireland yesterday unveiled a draft law giving its “bad bank” scheme wide powers to deal with the legacy of a devastating property crash.

Finally, in an interview with the FT, Dalia Grybauskaite, who became Lithuania’s first woman president when she was sworn in this month, has admitted that her country could be forced to seek help from the International Monetary Fund if it fails in efforts to raise more money from foreign capital markets to prop up its teetering economy. Ms Grybauskaite, who is incidentally a martial arts black belt nicknamed the “Iron Lady”, said the finance ministry was considering “one more shot” at raising money this year after a €500m bond issue in June.

The German MP whose official car was stolen in Spain – where she was on holiday – continues to drive the agenda of her national press. Süddeutsche Zeitung reports today that the Social Democrats will not name Ulla Schmidt (who is currently Germany’s health minister) in their team for the September elections until they know the results of an investigation into the theft of her car.

Nicolas Sarkozy appeared on French television yesterday to reassure people about his health. The French president was hospitalised on Sunday after falling ill while jogging. He said he had simply been momentarily “overcome by fatigue”; the incident was not, as the Elysée said earlier this week (in a statement they subsequently retracted), related to any “cardiac” problems. Libération has the story.

La Libre Belgique reports that the takeover of Fortis Bank by BNP Paribas earlier this year has led to the loss of 529 jobs. The takeover was part of a rescue plan for the bank sponsored by the Belgian government.

Finally, the FT reports that Eurozone consumers see inflation as “vanquished” and increasingly expect prices to tumble in the year ahead, according to a European Commission survey which it says could stoke fears of deflation.

Today sees the last cabinet meeting in France before the summer recess. Top of the agenda is a controversial proposal to reform the country’s postal service. Libération reports that the reform would introduce a part-privatisation of the post office next year, which unions complain will damage working conditions and service. The draft legislation will be debated by parliament in September. The unions plan to mark the discussions with a nationwide day of strikes and demonstrations.

In Germany, a scandal over the use of official cars has stalled the Social Democrat party’s campaign for the Septemeber general election, writes Die Presse. Ulla Schmidt, health minister and a Social Democrat, recently had her official chauffeur-driven Mercedes stolen in Spain, where she was on holiday. Yesterday it was reported found. Several other ministers, all of whom happen to be Social Democrats, subsequently admitted that they were also using their official vehicles during vacation – but of course only for official business. Polls show the Social Democrats lagging 15 per cent behind Chancellor Angela Merkel’s centre-right coalition.

Ivo Banac, a Balkans scholar at Yale University, tells Sarajevo-based Dnevni Avaz that the EU has no strategy in Bosnia and Herzegovina. “When we look a little more closely at what these people are doing – especially prominent figures like Carl Bildt [Swedish foreign minister] – one has to clasp one’s head in despair,” he says. He adds that Javier Solana, the EU’s foreign policy chief, has done everything to reduce the role of the US in the Balkans.

Finally, to Belgium, where Guy Vanhengel,  the country’s new budget minister, says Belgians face a period of “austerity” owing to a projected budget deficit of €20bn in 2009 (equivalent to around 7 per cent of gross domestic product). Achieving a balanced budget by 2015 would be “very, very, very, very, very, very difficult”, he tells La Libre Belgique.

The German and Austrian press devote much coverage to Volkswagen’s takeover of Porsche, also reported in depth in the FT this morning. According to Germany’s Die Welt, the takeover has sparked renewed debate over the so-called VW law, which protects the car company against hostile takeovers. Centre-right MEP Klaus-Heiner Lehne is quoted as saying the European Commission should challenge the law – but it’s unlikely to do so, the paper argues, because Commission President José Manuel Barroso wouldn’t want to incur the wrath of German Chancellor Angela Merkel.

Elsewhere in the Germanophone press, Frankfurter Allgemeine Zeitung reports on Iceland’s application to join the EU, saying it may take longer than expected to reach its more-than-likely successful conclusion. Die Presse writes that negotiations over access to the country’s fisheries, a key sector of its troubled economy, may present an obstacle.

On the comment pages of Czech newspaper Hospodárské noviny, meanwhile, Václav Klaus, the Republic’s president, argues that the EU is using the economic crisis to push forward a centralising agenda.

Finally, in Belgium, three men’s escape from prison aboard a hijacked helicopter is, unsurprisingly, the story of the day. The aircraft is said to have flown into the Bruges jail and picked up the three inmates, including bank robber Ashraf Sekkaki, who pulled off a similar stunt five years ago. La Libre Belgique, among others, has the report.

Further comment today on Tony Blair’s candidature for the EU presidency (should the position come into being under the Lisbon Treaty, of course).

Le Figaro makes the case for the former British prime minister, saying that with a job description yet to be defined, a prestigious title and the option of staying in office after the two-and-a-half-year term comes to an end, the position would suit him perfectly. However, the writer questions why Gordon Brown felt it so urgent to announce his support for his former boss, arguing that early candidatures have a habit of fizzling out.

Meanwhile, Frankfurter Allgemeine Zeitung suggests that the recent stabilisation of the national economy could give way to a second leg of the recession. Though consumer demand has started to recover, by autumn companies will start reducing their workforce as production capacity exceeds demand, the report says.

In other recession-related news, the Irish Independent says central bank governor John Hurley didn’t do enough to prevent the financial crisis. “There seemed to be an obsession with not upsetting the banks, even if that meant the entire financial system was put at risk and consumers/taxpayers ended up being huge losers.” Brian Cowen, taoiseach and former finance minister, also comes in for some flak.

Bloggers are reacting to a series of articles in the Economist which ask where macroeconomics went wrong. Writing on the Econbrowser blog, Menzie Chinn, professor of economics at the University of Wisconsin, argues that the financial press has falsely depicted macroeconomics as a “monolithic” discipline, in part because of its tendency to focus on Wall Street economists.

Finally, Belgium celebrates its Fête nationale today. In a televised speech made last night, King Albert II called for higher ethical standards and greater regulation in the financial system.

Plenty of banking news in the European press today. Some selected highlights:

Germany is considering nationalising parts of its banking sector by force, according to Süddeutsche Zeitung. The government has reached the conclusion that its bad bank scheme stands no chance of increasing credit flows, the report argues, and it is now looking to the US and the UK for ways of doing so. The apparent move has been driven by fears of further economic trouble coinciding with a general election at the end of September.

French banks believe the stress tests they are due to undergo will be more stringent than those imposed on their US counterparts, reports Les Echos. Twenty banks are to take the tests this summer, under conditions set by the ECB. The results are due out in September.

Meanwhile, the much-discussed European Parliament alliance between the British Conservatives and Poland’s Law and Justice Party (PiS) continues to fill column inches.

In an article headlined ‘Too conservative for Conservatives’, Poland’s Gazeta Wyborcza writes (with a translated version in English) that the alliance between the two parties in the newly formed European Conservatives and Reformists may be one of those “brilliant” moves on the part of the PiS which could “eventually … turn into a disaster”.

Among the few Euro-bloggers active today, US journalist Dave Keating asks whether Iceland figures in the heated debate over enlargement. He argues that “neither side should really have any objection to it … Iceland will give the anti-federalists more consumers in the common market, and the federalists know that as a traditional Western democracy there won’t be any trouble integrating Iceland politically and culturally into the EU”.

Jerzy Buzek’s election as president of the European parliament yesterday provided a temporary let up in the speculation surrounding who will land the more powerful jobs leading the Commission and as first permanent president of the Council. Very temporary.

Daniel Cohn-Bendit, the Franco-German Green MEP still best known for his May 1968 antics, is now suggesting José Manuel Barroso should get the Council job “as a “perfect compromise” and a “face-saving” move for both the European Parliament and the EU heads of state and government,” reports Euractiv, a Brussels-beltway news service. (That would leave the Commission job open for a centre-left candidate, one assumes).

Otherwise, much bemusement in Strasbourg yesterday as the new batch of MEPs took their seats. The arrival of an unprecedented number of far-right parliamentarians caused a bit of a stir: “One member from the Hungarian party Jobbik was seen in paramilitary fatigues, and another wore traditional dress. But both were overshadowed by the arrival of a center-right Czech member who had cycled from Prague to Strasbourg and appeared in the chamber in his cycling shirt and shorts,” writes the International Herald Tribune.

“The institution may be mocked, but the deals done in the European parliament will make a difference,” Quentin Peel insists in today’s FT.

Jerzy Buzek is the new president of the European Parliament. There isn’t much power associated with the job, but it will be seen as a symbol of new member states gaining influence in Brussels. “For my country, it’s very important,” Mr Buzek told the Financial Times before the vote. “And for new member states – I hear it in parliament all the time – it would have a lot of symbolic importance.”

Perhaps Mr Buzek’s election really does reflect a change in power structures. “Poland was so eager to win the post that, according to one senior E.U. official, speaking on condition of anonymity, Prime Minister Donald Tusk held no fewer than 15 meetings to lobby other heads of state and party leaders,” says the International Herald Tribune.

Finally, a new batch of Eurosceptic MEPs take office today – roughly a fifth of the 736 now sitting. “I think it is very important that the pro-European MEPs co-operate well so the anti-Europeans cannot make their voices heard so strongly,” Hans-Gert Pöttering, the outgoing President of the Parliament, told the Times.