German chancellor Angela Merkel’s hard-line stance on Greece has come under attack from a top European Central Bank policymaker, who warned that the cost of inaction could be far worse than offering temporary financial support, the Financial Times reported. The unusually-strong criticism by Lorenzo Bini Smaghi, an ECB executive board member, highlighted frustration in Frankfurt at Berlin’s intransigence, which is threatening a showdown among eurozone political leaders at their summit in Brussels starting on Thursday.

Germany has set out three fundamental preconditions for any rescue package for Greece, including involvement of the International Monetary Fund, and a commitment by its European Union partners to tough new rules to control public debt and deficits in the eurozone – including necessary EU treaty changes, the Financial Times reported. A senior government official in Berlin said there would be no agreement at this week’s EU summit on a specific rescue package for the debt-strapped Greek government.

German Chancellor Angela Merkel on Sunday said Greece doesn't need financial support and European Union leaders shouldn't make the question of aid for Greece the focus of their summit later this week, The Wall Street Journal reported. In an interview with Deutschlandfunk radio, Ms. Merkel warned other European leaders against unsettling financial markets by raising "false expectations" that there will be a decision on aid for Greece this week.

Greece and Europe's other intensive-care economies face a threat that can't be solved by cutting public spending or raising taxes: a loss of competitiveness, The Wall Street Journal reported. And in the eyes of those struggling economies, the villain is Germany—the euro zone's largest economy—which has emerged in recent years as the region's most competitive.

Greek Prime Minister George Papandreou is racing to secure an explicit pledge of European aid and cut his country’s borrowing costs as €20 billion ($27 billion) of debt comes due in the next two months, Bloomberg reported. With investors still demanding Greece pay 3 percentage points more than Germany on its 10-year debt, Papandreou says Greece can’t afford to hold out much longer at current market rates. His government still needs to raise another €10 billion to repay bonds maturing on April 20 and May 19.

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.