France

European Central Bank President Jean-Claude Trichet pressed Greece to halt its flirtation with International Monetary Fund aid and work with European allies to tame its record budget deficit, Bloomberg reported. As protesters besieged the Greek Finance Ministry to denounce €4.8 billion ($6.5 billion) of tax increases and spending cuts, the Athens government said the absence of European support might force it into the hands of the IMF.

A plan led by Germany and France to bail out Greece with as much as €30 billion ($41 billion) in aid began to take shape amid intense and risky jockeying between Athens and Berlin over timing and terms, The Wall Street Journal reported. Greek officials said they expected to seal a deal by Friday, when Greek Prime Minister George Papandreou meets in Berlin with German Chancellor Angela Merkel, but senior German officials insisted a bailout wasn't imminent.

A standoff between Greece and its euro-zone partners over the timing and terms of a potential rescue is nearing a crucial juncture as the cash-strapped country faces a key test of investor willingness to keep funding its ballooning deficit, The Wall Street Journal reported. The haggling over possible European aid for Greece has become a game of chicken between Athens and the core economies of the euro zone, led by Germany and France.

Germany and France have suggested in recent days that rescuing Greece may be necessary to safeguard the euro zone, but both countries may have a more pressing motivation in the move—protecting their own banks, The Wall Street Journal reported. German and French banks carry a combined $119 billion in exposure to Greek borrowers alone and more than $900 billion to Greece and other countries on the euro-zone's vulnerable periphery: Portugal, Ireland and Spain. Together, France and Germany's banking sectors account for roughly half of all European banks' exposure to those countries.

Greece has one apparently simple option for reining in a budget deficit that has roiled financial markets: Clamp down on widespread tax evasion, which costs the country an estimated €15 billion ($20.5 billion) a year, an amount that would pay off a big chunk of the budget deficit. The trouble is, tax evasion in this Mediterranean country is extremely difficult to eradicate, The Wall Street Journal reported.

Government-finance specialist Dexia SA agreed on a restructuring deal with European regulators Friday, ending months of indecision over its future, The Wall Street Journal reported. The lender, which was handed a €6.4 billion ($8.7 billion) lifeline when it became engulfed in debt during the credit crisis, promised to sell off about 35% of its balance sheet to offset the competitive advantages it gained from state subsidies and guarantees. Before the credit crisis, Dexia was a major lender to local governments.

European leaders are quietly considering whether to come to the aid of their troubled neighbor Greece amid fears that the nation might default on its debts and unleash another round of financial crisis, The New York Times reported. Only a month after Dubai was rescued by its neighboring emirate Abu Dhabi, Germany, France and other European powers are discussing whether Greece might need a bailout too. After a decade of debt-fueled profligacy, Greece is confronting what amounts to a run on the bank.

Auto makers are bracing for a brutal 2010 in Europe, as economic troubles and the end of government scrappage programs threaten to drag down sales, The Wall Street Journal reported. High unemployment and the inability of many consumers to access credit are keeping customers out of showrooms. At the same time, sales are likely to be further depressed in the absence of government incentive programs that last year encouraged consumers to trade in old vehicles for new ones.

Never before has Europe’s monetary union seemed so fragile, The New York Times reported in an analysis. Day by day, fears are growing that Greece or another weak country may default on its sovereign debt obligations, forcing the richer countries in Europe to ride to the rescue or risk having one or more of its most vulnerable members leave the 16-nation euro zone. Many European economists discount such a fracture as a remote possibility. But that doesn’t mean Europe has safely emerged from crisis.

Gordon Brown received a twin blow today when a leading ratings agency warned Britain to get a tighter grip on its record budget deficit and figures revealed that the slump of the past 18 months was now officially the deepest since the second world war, The Guardian reported. Fitch said that the UK – along with France and Spain – needed to "articulate more credible and stronger fiscal consolidation during the course of 2010 to underpin confidence in the sustainability of public finances".