AIG executives in Europe are adamant they should not have to return their controversial bonuses and some feel that pressure on them to do so may amount to blackmail, according to a company employee and internal emails. AIG Financial Products unit head Gerald Pasciucco told a staff meeting for UK and Paris employees on Monday that he thought a demand for repayments was to a certain extent "blackmail," said a London-based recipient of one of the retention bonuses from the bailed-out insurer.

A wave of indignation swept over France when it became known Tuesday that the head of a large auto parts company who was edged out because of poor results walked away with a severance package worth more than $4 million, The Washington Post reported.

Carmaker Renault on Friday announced a production boost at one of its French plants but distanced itself from a minister's comments that the move amounted to transfer of foreign auto jobs back to home soil, Reuters reported. As the world's leading carmakers battle to survive the worst sales crisis for decades in an industry now flirting with protectionism, French Industry Minister Luc Chatel characterised the temporary output increase as a first sign that aid measures for the country's auto sector were working.

The European Commission said on Friday that it had launched an in-depth investigation into the restructuring of Belgian-French financial group Dexia, Reuters reported. The Commission said in a statement it intended to make sure the restructuring plan would guarantee the long-term viability of the group, hit hard by the financial crisis. But the executive arm of the 27-nation European Union also authorised guarantees worth $16.9 billion from the Belgian and French governments to aid in the sale of FSA, the bank's U.S. subsidiary.

Europe's three biggest economies showed signs of steepening economic declines in data released Tuesday, The Wall Street Journal reported. Industrial production in France and the U.K. crumbled during January. At the same time German exports, driver of the region's biggest economy, dropped sharply. The difficulties at big manufacturers and exporters have dashed hopes that Europe's economies hit bottom in the fourth quarter. The services sector is faring no better.

European Union governments agreed Thursday to raise the coverage level for bank deposits to €50,000 ($63,565) from the end of June and to €100,000 from the end of 2010, The Wall Street Journal reported. The decision aims to "help restore confidence in the banking sector by strengthening depositor protection," said the Council of the European Union, the EU institution where governments are represented. The EU had set a previous minimum coverage level of €20,000.

As two French banks struggle to weather the financial turbulence, Paris has decided to accelerate their merger, take a controlling stake in the combined company and install a management team of its own, the International Herald Tribune reported. Finance Minister Christine Lagarde said Monday that the French government would inject up to €5 billion, or $6.4 billion, into the bank that will be formed from the merger of Caisse d'Épargne and Banque Populaire, through the purchase of bonds that could be converted into shares.

The European Union's emergency summit on March 2 to discuss growing protectionism is a make-or-break moment for the 27-nation bloc. At stake is its greatest achievement -- the single market for goods, people and capital. A row over France's latest car-industry bailout plan threatens to drive a wedge between member states. How the EU responds will have consequences not just for the EU but for global free trade. Unfortunately, the omens don't look promising. On the face of it, the French plans look like a clear case of state aid--illegal under EU rules.

EU finance ministers on Tuesday urged coordinated action to tackle the economic crisis, against a backdrop of increasing criticism over French "protectionist" moves in its auto sector, Agence France-Presse reported. With Europe in a growing recession the ministers agreed to work together on ways to deal with their banks' "toxic assets" which are hampering lending. They also looked at the progress of a €200 billion ($260 billion) stimulus package designed to kick start their ailing economies. Overall the cry went out to avoid the temptation of protectionism at all costs.

A high-level meeting over a French plan to offer assistance to its car industry ended on Wednesday night with France insisting that the measures would not be protectionist, but Brussels warning that some restructuring of the sector would be needed, the Financial Times reported. The meeting was scheduled this week between Neelie Kroes, the EU competition commissioner, and Luc Chatel, the French industry minister.