Germany hasn't ruled out International Monetary Fund aid for Greece, a spokesman said Friday, Dow Jones reported. Ulrich Wilhelm, Chancellor Angela Merkel's main spokesman, told reporters Friday that because Greece hasn't requested aid from Germany or the European Union, there's no basis for making a decision. "It's an open question," Wilhelm said, adding that whether and how to provide aid for Greece would be "decided quickly" if Greece were to make such a request. "The government has not ruled out financial aid from the IMF," Wilhelm said.

Michel Barnier, the European commissioner in charge of financial market regulation, said he would propose controls to curb speculative trading in credit default swaps, (CDS) a form of debt insurance that has been blamed for worsening Greece's economic problems, Telegraph.co.uk reported. His measures will target so-called naked selling of CDS, where insurance contracts are sold to buyers who do not own the debt. The cost of CDS on Greece rocketed when fears grew that the country could default on its debt.

Across Europe, from profligate Greece to newly strait-laced Ireland, countries are promising deep, painful cuts in public spending even as they face the likelihood of a new recession, The New York Times reported. To protect the value of the euro, satisfy investors and appease Europe’s economic taskmaster, Germany, the region’s most heavily indebted nations consider that they have no choice but to slim down. Reviving economic growth and reducing unemployment must wait until countries put their fiscal houses in better order, the thinking goes.

German Chancellor Angela Merkel welcomed a proposal to set up a European lender of last resort, saying that the European Union’s ability to act as a bloc is on the line over the Greek financial crisis, Bloomberg reported. “Our instruments are not sufficient,” Merkel told members of the foreign press association in Berlin today. “The European Union must be able to respond to the challenges of the moment.” Merkel was speaking after officials in Berlin and Brussels said European leaders are in talks to establish what may become the European Monetary Fund and limits on credit-default swaps.

France has proven surprisingly stable in the European economic storm. As Greece struggles to avoid default or bailout, Spain and Portugal watch anxiously, Sweden falls back into recession, Germany argues about historically high budget deficits and Britain grapples with deficits and debt of Hellenic proportions, France looks solid and even wise to many, The New York Times reported.

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.

The bankruptcy of a European Union nation or an exit from the euro would be the end of the euro region, Carl Heinz Daube, head of Germany’s debt agency, told a conference organized by Euromoney in London, Bloomberg reported. German government bond yields are likely to stay within a range in 2010, he said. Germany has a “clear picture” of how to bring down the country’s deficit, he said. Read more.

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.

Germany officials reported no growth for the fourth quarter of 2009 on Friday. While some fear that the slowdown might signal the beginning of another slump, others just see it as a bump in the road to continued recovery, Spiegel Online reported. A number of experts attributed the unexpected drop to factors such as the end of Germany's cash-for-clunkers program in September and the harsh weather conditions that have gripped Germany for most of the winter. "Just look out your window and you know why," Andreas Rees, the chief German economist at UniCredit, told the Associated Press.