FIAT DEALERS GARAGES

Microsoft announced on Monday that it would design and sell its own "Surface" tablets to showcase Windows 8 and take on Apple and Google in devices that are capturing more and more of the computing market.

It kept PC makers largely in the dark about its plans, according to sources, marking a radical departure from its previous close collaboration with its hardware partners.

Oliver Ahrens, Acer's senior VP and president for Europe, Middle East and Africa, said Microsoft was trying to copy some of Apple's strategy, but he was doubtful it would succeed.

"I don't think it will be successful because you cannot be a hardware player with two products," he said in an interview, adding that the former darling of the tech sector would also have to adapt its brand to compete with Apple.

"Microsoft is working with two dozen PC vendors worldwide, including the local guys, whereas Apple is alone, it can more or less do what it wants," he said. "Microsoft is a component of a PC system. A very important component but still a component."

He was also worried that Microsoft would shift resources to building a consumer hardware brand and retail operation, and in the process take its eye off the ball in making sure Windows 8 was a success for the PC industry.

"Instead of enhancing the user experience for Win 8 (...) they open a new battlefield," he said.

"I worry that this will lead into a defocus internally for Microsoft, and then we have to suffer because we are working with their products."

OLYMPIC PERFORMANCE

Taiwan-based Acer, which ranked fourth in PC shipments in the first quarter, has had its own problems after failing to adapt to changes in the market including in particular the rise of Apple's iPad last year, but Ahrens said the group was now getting back on track.

He said Windows 8, which does not yet have a launch date, was "extremely important" for Acer, and it would have four or five devices tied in with its launch, including tablets and a high-definition slimline "Ultrabook" notebook.

Ahrens said the new products would be supported by an advertising campaign focused on the user experience rather than the specifications of the machines, which has been the traditional approach of PC makers.

"Acer wants to be more about value than volume," he said, adding that the company needed to do higher end products to lift the status of the whole brand.

Acer, an Olympics sponsor, will also be in the spotlight next month as the PC provider to the London games.

"Everything is run by Acer - the scoring systems, the internal IT," said Acer UK managing director Neil Marshall. "It will demonstrate that we have the commercial ability to deliver this type of project."

Ahrens said the second quarter, which ends in nine days, would see about a 50 percent rise in revenue in the Europe, Middle East and Africa region, as the group continued its recovery from the lows of a year ago.

The region accounted for 37 pct of revenue in the first quarter, according to a company presentation.

"Q3 will be more challenging because it's a transition quarter from Windows 7 to Windows 8," he said.

(Editing by Anthony Barker)

* Spanish 5-year borrowing costs at 15-year high

* Banking sector audit sees 62 bln euro capital shortfall

* Euro finance ministers opt to pay money through EFSF

* Greece asks for two extra years to deliver cuts

By Jan Strupczewski and Julien Toyer

LUXEMBOURG/MADRID, June 21 (Reuters) - Spain's medium-term borrowing costs spiralled to a euro-era record on Thursday and independent auditors said Spanish banks may need up to 62 billion euros in extra capital, to be filled mostly by a euro zone bailout.

Euro zone finance ministers met in Luxembourg to discuss how to channel up to 100 billion euros ($126 billion) in aid to Spanish lenders weighed down by bad debts from a burst property bubble. The bailout was first agreed two weeks ago, but details of exactly how much is needed and how it will be distributed are still being hammered out.

Many in the markets see the package as a mere prelude to a full programme for the Spanish state, which Madrid vehemently denies it will need.

"We have already started working on the design of the aid with the Commission, the European Central Bank and the International Monetary Fund," Spanish Economy Minister Luis de Guindos told reporters as he arrived for the talks. "We will present the request in the next few days."

Spain's financial plight took centre stage a week before a European Union summit tackles long-term plans for closer fiscal and banking union in a bid to strengthen the euro's foundations, after bailouts for Greece, Ireland and Portugal failed to end a 2-1/2-year old debt crisis.

To pave the way, the leaders of Germany, Italy, France and Spain will meet in Rome on Friday.

Two independent audits by consultants Roland Berger and Oliver Wyman found that Spanish banks would need between 51 and 62 billion euros in extra capital in extra capital to weather a serious downturn in the economy and new losses on their books.

The Bank of Spain said the 100 billion euros offered to Madrid gave a wide margin to correct these capital needs. Spain's three biggest banks would not need extra capital even in a stressed scenario, it said.

The government said it did not expect to shut down any banks and preferred to restructure those in difficulty. European Competition Commissioner Joaquin Almunia has said at least one bank may have to be wound down.

In Luxembourg, officials said the finance ministers decided Spain could initially apply to the euro zone's temporary rescue fund, the European Financial Stability Facility, for the money, with the loan taken over by the permanent bailout fund the European Stability Mechanism (ESM) once it is up and running after July 9.

"This was decided informally, because there is no formal request from Spain yet," one euro zone official said.

Such a solution avoids a problem which had scared investors. Debt issued by the ESM must be paid back first in case of a Spanish default, relegating private creditors down the pecking order. Because the new bailout debt will originate from the EFSF it will be issued without the ESM's seniority requirement.

THREATENING YIELDS

Earlier on Thursday, Madrid sold 2.2 billion euros in medium-term bonds, drawing strong demand almost entirely from domestic banks. Yields on 5-year paper rose to a 15-year high of 6.07 percent, a level regarded by analysts as unaffordable for any prolonged period.

The runaway Spanish yields contrasted with a French auction at which the yield on 5-year benchmark paper hit an all-time low of 1.43 percent.

"The first worry is can they (Spain) fund from the markets? They raised 2.2 billion versus a 2 billion target, so they can raise the money," said Achilleas Georgolopoulos, a strategist at Lloyds in London.

"Then the (question is), are the yields threatening for the medium term? And yes, clearly they are much higher than the previous auction ... But still they can continue for a few months to fund at these levels."

The ministers were also expected to ponder the next steps with Greece, following the formation of a coalition of mainstream parties committed to the country's 130 billion euro EU/IMF bailout but determined to renegotiate some of its terms.

Athens will ask lenders for two more years to hit fiscal targets and an extension to unemployment benefits as it seeks to soften the punishing terms of the bailout that saved the country from bankruptcy, a party official said.

Greek officials have said this would entail an extra 16-20 billion euros in foreign funding. It sets up a showdown with Greece's euro zone partners, in particular paymaster Germany, which have offered modifications but no radical re-write of the conditions attached to the lifeline agreed in March.

"We can always discuss conditions of the loan. But let us not forget one thing: This is not one-way development aid," Luxembourg Finance Minister Luc Frieden told Reuters Insider television.

RESCUE FUND TO THE RESCUE?

The German government and opposition reached a deal that will allow parliament to approve the ESM next week, but Germany's top court may delay the rescue fund's start date, saying it needed time to study the treaty.

The ESM cannot come into effect without approval by Europe's biggest economy. Ratification also requires the signature of the president and a nod from the constitutional court in Karlsruhe.

The parliamentary floor leader of Merkel's conservatives appeared to dash French and southern European hopes of nudging Berlin towards common euro area debt issuance, saying there would be no mutualisation of debt in Europe.

Italian Prime Minister Mario Monti suggested, on the sidelines of this week's G20 summit, using the euro zone's rescue funds to buy the bonds of Spain and Italy in the secondary market to bring down their borrowing costs.

Monti hosts Spanish premier Mariano Rajoy, German Chancellor Angela Merkel and French President Francois Hollande in Rome on Friday and is also expected to raise the idea there.

Merkel has played down the proposal, which investors said might be counter-productive unless the ECB stepped in decisively in support.

A day before the four-way meeting, Italy disclosed that it is missing its target to lower the budget deficit to 1.7 percent of gross domestic product and will have to cut spending by a further four billion euros to meet the goal.

Any European bond-buying would come with strings attached, equivalent to the sort of bailout programmes that Rome and Madrid are trying to avoid because of the stigma attached.

Given the limited capacity of the temporary EFSF and planned permanent ESM rescue funds, with at most 500 billion euros available, a senior EU source said such intervention would make sense only if the ESM had a banking licence enabling it to borrow from the ECB. Germany has so far opposed that idea. (Additional reporting by Leigh Thomas in Paris, Nigel Davies and Paul Day, John O'Donnell in Brussels, Annika Breidthardt, Robin Emmott, Charlie Dunmore and Axel Threlfall in Luxembourg. Writing by Paul Taylor and Mike Peacock Editing by Peter Graff)

The State Department identified the three as Abubakar Shekau, calling him the "most visible" leader of the group, and Abubakar Adam Kambar and Khalid al-Barnawi, who it said were tied both to Boko Haram and to al Qaeda's north African wing.

"These designations demonstrate the United States' resolve in diminishing the capacity of Boko Haram to execute violent attacks," it said, saying that Boko Haram or associated militants were responsible for more than 1,000 deaths in the past 18 months.

The action by the State and Treasury Departments, first reported by Reuters on Wednesday, followed growing pressure on the Obama administration to take stronger action against Boko Haram, which has stepped up attacks on Christian places of worship this year in its drive to establish an Islamic caliphate in northern Nigeria.

U.S. officials say the decision to list individual Boko Haram members, rather than apply the more sweeping "Foreign Terrorist Organization" label to the group as a whole as some U.S. lawmakers have demanded, reflected a desire not to elevate the group's profile.

"We took this measure to designate these three because they are clearly kingpins of Boko Haram and clearly all of them have advocated terrorism as a weapon," State Department spokeswoman Victoria Nuland told a news briefing.

"We're continuing to look at the question of a broader designation."

MOVE CALLED 'INSUFFICIENT'

Two Republican lawmakers who led the campaign for a broader designation said the move against the three was insufficient, saying the intelligence community needed every available tool to combat Boko Haram

"Given Boko Haram's trajectory and intent to carry out terrorist attacks against Western targets, including possibly the Homeland, we must take the growing threat seriously," Representatives Peter King and Patrick Meehan said in a statement.

The action freezes any assets the three men have in the United States, and bars U.S. persons from any transactions with them.

The United States has signaled growing concern over Islamist extremist groups operating in Africa, particularly al Qaeda in the Islamic Maghreb, or AQIM, which has expanded its influence in the lawless Sahel region and funds operations by collecting kidnap ransoms or siphoning off the drug trade.

The United States has also sought to curb the influence of al Shabaab, the militant group that has seized control of large areas of south and central Somalia and has been blamed for attacks elsewhere in East Africa.

Both AQIM and al Shabaab are already on the official U.S. list of foreign terrorist organizations, which makes them key targets in the U.S. anti-terrorism campaign.

The State Department has been under pressure to act against Boko Haram for months.

In January, Lisa Monaco, the Justice Department's top national security official, sent a letter to the State Department arguing the Nigerian group met the criteria for a "foreign terrorist" listing because it either engaged in terrorism that threatens the United States or had a capability or intent to do so.

But a group of academic experts on Africa sent a letter to Secretary of State Hillary Clinton last month urging her not to take the step, saying it could backfire by enhancing the group's reputation among potential recruits and other militants.

Nuland said the United States recognized that Boko Haram was a "loosely constructed" organization encompassing a number of viewpoints, and would encourage Abuja's efforts to broaden dialogue with groups in mainly Muslim northern Nigeria that have long complained of poor treatment by the central government.

The State Department also designated a leader of the Basque separatist group ETA, Aitzol Iriondo Yarza, currently detained in France pending extradition to Spain.

(Reporting by Andrew Quinn; Editing by Peter Cooney)