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URGENT: Video shows beheading of second American journalist

DUBAI (Reuters) - The Islamic State militant group released a video purporting to show the beheading of U.S. hostage Steven Sotloff, the SITE monitoring service reported on Tuesday. A masked figure in the video also issued a threat against a British hostage, a man the group named as David Haines, and warned governments to back off "this evil alliance of America against the Islamic State", the monitoring service said. (Reporting by William Maclean, Editing by Angus MacSwan)

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Luxembourg's Yves Mersch appointed to ECB Executive Board

BRUSSELS (Reuters) - Luxembourg's Yves Mersch won a position on the European Central Bank's Executive Board on Friday after months of dispute with European Parliament legislators who objected to his appointment because of a lack of women in the bank's senior ranks.

European leaders meeting in Brussels approved the appointment of Mersch, who is currently the governor of Luxembourg's central bank. He will join the board on December 15 for an eight-year term, the European Council said in a statement.

"I am pleased with the positive outcome of a very long procedure," Mersch said in a statement.

Mersch's appointment had been held up by the European Parliament, which says member states have not tried hard enough to find suitable women for the position, and by Spain, which wants its own candidate.

Last month, lawmakers in the parliament rejected Mersch's candidacy to the board that forms the nucleus of the ECB's policymaking Governing Council.

Mersch said he had taken note of the critical voices from the European Parliament and that its rejection in October had mainly - but not only - been an "expression of concern that a great deal remains to be achieved on gender balance".

The decision by the council of EU member countries to press ahead regardless will strain relations with the European Parliament and could delay agreement on rules to boost bank capital reserves, in which the lawmakers have a say.

"Citizens across the EU have been astounded to discover the lack of gender diversity in the ECB, and indeed in other EU organizations," said Sharon Bowles, who chairs the European Parliament's influential economic and monetary affairs committee.

"Today's decision undermines and discredits work being undertaken to make the EU's economic governance system more democratically accountable," she said in a statement.

Martin Schulz, president of the European Parliament, struck a more muted tone in a speech he delivered to leaders.

"When key positions are filled in the future, we expect you to observe the principle of gender parity," he said.

Mersch pointed out the European Parliament had repeatedly confirmed his personal and professional competence. "Therefore, I am very confident that a constructive dialogue with the European Parliament will be pursued in the future," he added.

Mersch is an inflation-fighting hardliner whose views are close to those of the Bundesbank, the German central bank, which has lacked a close ally on the Executive Board since German Juergen Stark quit last year.

Spain, whose ECB Executive Board member Jose Manuel Gonzalez Paramo ended his term earlier this year, argued in favor of a woman taking the job and its Economy Minister Luis de Guindos said Madrid wanted a Spanish candidate for the post.

The controversy over Mersch's appointment has angered central bankers and policymakers who say the delay in filling the vacancy is causing practical problems.

Austria's Gertrude Tumpel-Gugerell and Sirkka Hamalainen of Finland are the only two women to have occupied posts on the ECB's Executive Board since it was set up in 1998. There are currently no women at the top of the central bank.

(Reporting by Robin Emmott, John O'Donnell and Eva Kuehnen in Frankfurt; editing by Rex Merrifield and Todd Eastham)