Greece's major political parties on Sunday agreed to form a national unity government that will lead the country to new elections after putting in place a debt-slashing deal, in the hope of averting financial catastrophe for the country and winning back the trust of its European partners, Dow Jones reported. The deal was made possible after Prime Minister George Papandreou agreed to step down to make way for a new prime minister under a commonly accepted government.

That the Greek economy is in a downward spiral from a relentless program of austerity is well known. Greek manufacturing saw one of its sharpest falls ever in October, and this year overall production is expected to contract by more than 6 percent. What has not yet shown up in the official figures, though, is the extent to which the crisis atmosphere has brought the economy to a virtual standstill, the International Herald Tribune reported. Auto sales have essentially halted and are at their lowest level since 1993. People who do have cars have trouble paying to operate them.

The French government is finalizing an austerity package that could be unveiled as early as Monday, said a person familiar with the matter, as it seeks to meet its deficit reduction targets and hold on to its prized triple-A credit rating against a backdrop of slowing growth, The Wall Street Journal reported. French President Nicolas Sarkozy has already said he would need to pass an additional €6 billion to €8 billion ($8.3 billion to $11 billion) of austerity measures, the second set of government initiatives to shore up state coffers in just over two months.

In a tumultuous day of political gamesmanship, Prime Minister George A. Papandreou on Thursday called off a referendum on Greece’s new debt deal with the euro zone after winning a measure of support from his opposition and managed to repair, at least for a day, a major rupture in relations with Europe, the International Herald Tribune reported. The decision to abandon his idea of holding a popular vote on the European debt deal did not end the political turmoil here; Mr.

In the frantic political seizure triggered by Athens’ abortive referendum plan, European leaders broke what was once the eurozone’s big taboo: that Greece could default and leave the eurozone, the Financial Times reported. The possibility has long been discussed in private, not least in Germany. But for the eurozone’s leadership – especially France – the avoidance of default and preservation of the euro’s integrity was a core goal of the seemingly endless series of rescue plans and negotiations to keep Greece from crumbling under the weight of its public debt.

The government is seeking an overall reduction of €15 billion to €20 billion in its burden of debt, Minister for Finance Michael Noonan has said, the Irish Times reported. In an address to the Institute of International and European Affairs in Dublin on “Ireland in Europe”, the Minister said a medium-term process was in place with the European Commission and the European Central Bank on the issue. “We want the overall burden of debt to be reduced and this is the argument we will use when we are talking about the promissory note in Anglo Irish Bank,” he said.

Britons will spend less this Christmas than a year ago as falling disposable incomes temper the traditional urge to splash out, according to a report published on Thursday, Reuters reported. Retail research group Decipher forecast retail spending would fall 0.6 percent year-on-year in December, or about 200 million pounds, with a 1.4 percent rise in food sales offset by a 2.2 percent drop in spending on general merchandise products, particularly electrical goods. "People do like to put their worries to one side at Christmas.

Administrators of the UK arm of MF Global face a larger task than expected, as the UK operation is where most of the group's exposure to shorter-dated European sovereign debt was held, Reuters reported. US$17bn of repo-to-maturity deals involving European sovereign debt have been fingered as the transactions that ultimately forced MF Global, Inc to file for Chapter 11 insolvency in a New York bankruptcy court on Tuesday.

The leaders of Germany and France told Greece on Wednesday it would not receive another cent in European aid until it decides whether it wants to stay in the euro zone, Reuters reported. They also made clear that saving the euro was ultimately more important to them than rescuing Greece.

The latest Greek government crisis has overshadowed the agenda for a summit of world leaders this week, The Wall Street Journal reported. The Group of 20 industrial and developing economies, meeting in Cannes, France, had hoped to focus much of its attention on the rest of the euro zone, including implementation of last week's European plan to support the currency bloc and on broader global concerns about exchange rates and financial regulation. Instead, they may be back to square one.