“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.” While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said.

Sarkozy’s comments are among the strongest by an EU leader to signal the bloc would bail out Greece if necessary as they try to warn investors off making further bets against the euro and Greek bonds. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt.

“Speculators and the markets should know that solidarity means something and that, if there’s a problem, we are there,” said Sarkozy today. “The sooner we say that and the more firmly we say that, the more rapidly we settle the problem.”

The spread between the yield on Greek 10-year bonds and their German counterparts fell to the lowest in three weeks on March 3. Papandreou, who meets President Barack Obama on March 9, said he wants a “normalization” in Greek market interest rates after the deficit-cutting steps. Greece faces more than 20 billion euros in debt redemptions in April and May.

Green Light

Sarkozy wouldn’t say what steps the EU would take and German Chancellor Angela Merkel, who runs Europe’s largest economy, has so far refused to give the green light to any aid package. Merkel said after meeting Papandreou on March 5 that the question of a bailout “‘absolutely doesn’t arise.” Her coalition partner, Guido Westerwelle, said he won’t sign a “blank check” for Greece.

“Nobody can doubt how reluctant the Germans are, and I am starting to think that if official money is needed in May, then there may first be a major discussion between the Germans and the French how to do this,” said Erik Nielsen, chief European economist at Goldman Sachs Group Inc. in London, in an e-mailed note. “It really comes down to some very fundamental issues of how the euro-zone will function going forward.”

European Monetary Fund

German Finance Minister Wolfgang Schaeuble indicated that his government is already thinking about how another Greek crisis can be avoided, saying that the euro region should consider creating an institution similar to the International Monetary Fund.

“We shouldn’t rule anything out, including the creation of a European Monetary Fund,” he said in an interview with the Welt am Sonntag newspaper published today.

The comments come after proposals for a European Monetary Fund were put forward last month by Deutsche Bank AG Chief Economist Thomas Mayer and Daniel Gros, director of the Centre for European Policy Studies in Brussels.

The EMF could ease the disruption caused by the failure of a euro member to pay its bills by offering investors new EMF bonds in exchange for the defaulted securities, they said. Investors would be required to take a “haircut.”

“Setting up a European Monetary Fund is superior to the option of either calling in the IMF or muddling through on the basis of ad hoc interventions,” Mayer and Gros wrote in an article in the Economist last month.

Flaws in the euro region’s governance were also indentified by former Federal Reserve Chairman Paul Volcker, who said in an interview on March 6 that the lack of a political union to back up the European Central Bank is a “structural crack.”

“Maybe fortunately it’s tested with a country as small as Greece, which doesn’t present an insuperable financing problem,” he said.

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But such a move could water down the impact of a such a consumer watchdog, especially when compared to the stand-alone agency first proposed by President Obama. It would also be a big reversal for the Senate Banking committee, which has accused the Fed of letting down consumers, contributing to the economic meltdown.

Housing a new consumer regulator in the Fed is not set in stone, but lawmakers on the Senate Banking panel are talking it over these next few days, say sources who are not authorized to speak about the negotiations.

Protecting consumers who buy financial products like mortgages, credit cards and even auto loans has been the big sticking point holding up Senate progress on legislation to overhaul the financial system.

Senate banking Chairman Chris Dodd, D-Conn., has been working with Sen. Bob Corker, R-Tenn., on consumer protection, after it became clear that Dodd couldn’t make headway with the ranking Republican member on that panel, Sen. Richard Shelby, R-Ala.

The new consumer protection proposal is poised to, again, delay the Senate banking panel from releasing final draft legislation until later this week or early next week, sources say. While the Senate has been working for months on the issue with little success, the House has already passed legislation, which includes a stand-alone consumer agency.

Hoping to push things along, Dodd conceded that the agency didn’t have to stand alone, as long as it had teeth. Committee staff have also said that Dodd has been less concerned about where the agency is housed and more concerned with how much power, independence and funding the regulator would have creditreport.

Details about that have yet to be released. What is known is the new consumer regulator would write rules governing financial products like mortgages and credit cards.

Bank lobbying groups and banking analysts are withholding final judgment until they see details, but some signaled tentative support for the general idea of housing a consumer regulator at the Fed. Their position has been to fight anything that separates consumer protection from those who watch for the safety and soundness of banks.

"Structurally speaking, the idea has merit," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, a bank lobbying group.

But most consumer groups called the idea of moving a new consumer regulator into the Fed a "grave mistake."

They point out that the Fed’s failure on consumer protection is exactly what prompted the push for a new consumer protection regulator in the first place.

"It would belie common sense to even make that suggestion, given the history of the Fed in not enforcing the fair lending and consumer protection laws that were already under its aegis," said John Taylor, president of the National Community Reinvestment Coalition.

"It’s time for Senator Dodd to stop negotiating with Senators who have dug into battle trenches with the big banks in their attempt to block any meaningful consumer protections, and move a bill that will give the rest of the Senate a chance to vote for Main Street and support real reform," said Carmen Balber, Washington director for Consumer Watchdog, an advocacy group. 

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“The central bank should consider underwriting debt to help the government create funds for fiscal stimulus,” Kamei said at a parliamentary hearing in Tokyo today. By law, the Bank of Japan is prohibited from buying debt directly.

Kamei, who heads a junior coalition party, said the central bank alone won’t be able to eradicate price declines and that fiscal policy is also needed. Finance Minister Naoto Kan replied by saying fiscal discipline must always be exercised even though spending can help prop up the economy and beat deflation.

“It’s necessary to provide funds for bold fiscal spending” with direct purchases of debt from the central bank, Kamei said. “Without fiscal stimulus funds, Minister Kan can’t resolve the economy’s output gap. He’s not a magician.”

Kamei is head of the People’s New Party. He has championed that increased government spending is key to spurring growth and last year forced the government to delay unveiling a stimulus package Kamei said was too small.

“Japan can’t overcome this economic crisis unless the Bank of Japan shows its commitment by going as far as” underwriting debt to pay for government spending, Kamei said paydayloans.

Kan, a member of the ruling Democratic Party of Japan, has put heat on the central bank to do more to halt price declines and last month indicated he wanted Bank of Japan Governor Masaaki Shirakawa to implement an inflation target. The finance chief said he wants to stamp out deflation as soon as this year and reiterated that he wants the bank to target inflation of 1 percent or higher.

‘Be Ambitious’

“Given that various efforts to overcome deflation have failed, I won’t say we can immediately overcome this in a few months,” Kan said. “If I were allowed to be ambitious, I’d say I want prices to rise within the year” adding that “that is just my hope.”

Consumer prices excluding fresh food, the central bank’s key gauge of inflation, slid 1.3 percent in January from a year earlier, an 11th straight decline, the government said last week.

Shirakawa, also speaking to lawmakers, said he is committed to keeping policy very accommodative and that having the benchmark overnight lending rate at 0.1 percent has helped lower borrowing costs for companies.

The bank currently buys 1.8 trillion yen ($20 billion) of government bonds from lenders each month.

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What prices are doing: The benchmark 10-year note ticked down 1/32 to 99-14/32, pushing the yield up to 3.69% from 3.68% late Tuesday. Bond prices and yields move in opposite directions.

The 30-year bond lost 2/32 to trade at 99-26/32 and its yield was 4.63%. The 2-year note ticked down 2/32 to 100 and yielded 0.86%.

What’s driving prices: On Wednesday morning Bernanke testified about monetary policy before the House Financial Services Committee. He expressed belief that government action has helped start an economic recovery, but many concerns persist — namely, the state of the job market.

Bernanke repeated that the federal funds rate, which is the central bank’s primary tool for monetary policy, is likely to stay low for an extended period make quick cash.

What experts are saying: "Bond prices are moving lower on the back of that testimony," said Peter Cardillo, chief market strategist at Avalon Partners.

Also giving support to safe-haven Treasurys, Cardillo noted, was a "dismal and discouraging" report that showed sales of new homes plunged 11.2% in January to the lowest level on record.

The government also auctioned 5-year notes Wednesday. The bid-to-cover ratio, a measure of demand, was 2.75, compared to 2.8 at the last 5-year note auction in January.

Cardillo said he expects Treasury trade to be choppy in the short- to medium-term, depending on economic data. Unemployment figures will be key, he said, and the benchmark 10-year yield could near the 4% level. 

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The Consumer Price Index, the government’s key inflation reading, rose 2.6% during the past 12 months, according to a report from the Labor Department. In December, prices rose 2.7% from the previous year.

The core CPI, which is more closely watched by economists because it strips out volatile food and energy prices, rose 1.6% over the past year. That’s the lowest level since September, when prices rose at a rate of 1.5%.

January: For the month of January, overall prices rose 0.2%. Economists surveyed by Briefing.com had forecast a 0.3% rise.

In a surprise drop, the core CPI fell 0.1% in the month, the largest decline since December 1982. Analysts had expected a 0.1% increase.

The drop came amid falling prices of housing and shelter, which fell 0.5%. The index for lodging away from home fell the most — 2.1%, while rent prices were unchanged.

The drop in overall core CPI for January was a bit of a fluke because of the volatile lodging prices, said Mark Vitner, an economist at Wells Fargo Securities.

"We’re probably seeing a lag response of businesses cutting back on meetings and traveling, and that’s weighing on the core CPI," he said. "So the number is a little exaggerated — we’re not going to get declines like this month over month."

Prices of new vehicles and airline fares dropped as well, while medical care prices rose the most since January 2008 and the index for used cars and trucks climbed higher for the sixth-consecutive month.

Overall consumer prices were boosted by rising energy prices. Gasoline prices rose 4.4%, pushing the energy index up 2.8% in January, the ninth-consecutive month of increase.

Fuel oil and natural gas prices rose as well, while electricity prices fell. Higher prices of dairy products and fruits and vegetables boosted the food index up 0.2% in January.

Despite the overall rise in consumer prices, Vitner said inflation is unlikely to become a problem this year as housing costs fall, vehicle prices level off and airline fares drop.

"But that doesn’t mean [inflation] won’t become a problem in the future," said Vitner. "While I expect continued good news in 2010, some of the factors restraining inflation this year will likely swing the other way in 2011."  

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Syracuse, N.Y.-based Rondaxe is a drug development consulting firm that helps emerging pharmaceutical and biotechnology firms navigate through all phases of the drug development and commercialization process.

Scottsdale-based TGen Drug Development, known as TD2, is a nonprofit subsidiary of the Phoenix-based Translational Genomics Research Institute. It specializes in guiding drug companies through clinical trials and moving drug candidates through the federal review process of the U.S. Food and Drug Administration.

The two organizations will work together to bridge a gap between chemistry and translational medicine. The goal is to expedite research discoveries through the regulatory process so patients can get treatments sooner.

For more: www.td2.org.

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The University of Louisville will use its $361,887 for various programs, according to a news release issued by Kentucky Gov. Steve Beshear’s office.

The projects include the design and completion of a reactor that will produce metal oxide nanowires at commercial scale. The tiny wires are used in products such as photovoltaic cells and lithium batteries, said KSTC vice president Mahendra Jain.

U of L also plans to use its money to create a Web-assisted recovery computer program for recovering drug and alcohol addicts. The program would act as an automated accountability buddy, providing a way for addicts to check in with the program managers daily and answer questions to make sure they’re following their regimen for recovery, Jain said.

The other U of L projects are the creation of a wireless device to alert patients and caregivers to sudden increases in body temperatures in children; and development of a urine-based test to diagnose obstructive sleep apnea free business cards.

The $75,000 in funds for the University of Kentucky in Lexington will be used to create and test a new carbon fiber material that will be used to strengthen existing reinforced concrete and steel bridges and buildings, according to the release.

Kentucky State University in Frankfort will use its $119,250 to commercialize a sensor-based wireless technology to monitor loss of fluid and other changes in hard-to-monitor containers, such as whisky barrels or wine barrels, Jain said.

Since April 2002, the Kentucky Science and Engineering Foundation has invested more than $14 million to help fund 257 projects that also have received funding from the federal government.

Additional information about the foundation can be found at http://ksef.kstc.com.

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Less than an hour after Google (GOOG, Fortune 500) unveiled its new social network, Google Buzz, Yahoo (YHOO, Fortune 500) and Microsoft (MSFT, Fortune 500) took shots at their rival, both claiming that they’ve been running a similar service for years.

"Busy people don’t want another social network, what they want is the convenience of aggregation," Microsoft said in a statement. "We’ve done that. Hotmail customers have benefited from Microsoft working with Flickr, Facebook, Twitter and 75 other partners since 2008."

Yahoo tweeted a similar gibe.

"Two years after #Yahoo! launched #Buzz, Google follows suit. Check out the original: http://buzz.yahoo.com/"

Ouch.

But even as Yahoo and Microsoft came out swinging Tuesday, neither has quite been able to deliver the knock-out punch: Both have had very limited success so far in the social networking sphere.

Yahoo launched Yahoo Buzz in 2008 as part of Yahoo Updates in an attempt to filter hundreds of social networks through Yahoo Mail, Messenger and Yahoo.com. But the company signaled in December that its social networking experiment wasn’t working when it announced it would "deeply integrate" Facebook Connect into Yahoo Updates payday loan lenders.

Similarly, Microsoft’s Windows Live hasn’t exactly taken the world by storm. Microsoft is right in saying the social networks that Google Buzz would integrate with Gmail have been integrated into Hotmail for years.

Google Buzz goes even further and threatens the ground that Facebook walks on. Microsoft made a $240 million investment in Facebook, giving Microsoft a million reasons for wanting to play down Google’s new social network.

To be fair, Google has had its share of social network failure as well, with its wildly unpopular Orkut social network.

But a new Google social network that is fully integrated with Gmail, Google, Google Maps and other social networks has the blogosphere intrigued. As Google began to announce it, Google Buzz immediately became the most popular trend on Twitter.

And if Yahoo and Microsoft sound nervous, it’s with good reason. Since Google Buzz integrates with Gmail without the need for users to sign up, Google just added 176 million users (according to com Score) to its new social network on Tuesday — not a bad start. 

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“The position for most countries is to support the economies now and get the budget deficit down as the economy recovers,” U.K. Chancellor of the Exchequer Alistair Darling said in an interview in Iqaluit, Canada, where G-7 finance ministers and central bankers concluded talks on Feb. 6.

Governments face a dilemma as they try to sustain the rebound from last year’s recession at a time when rising sovereign debt burdens are being punished by investors and threaten to hobble future expansion. Adding urgency to the situation, the MSCI World Index of stocks fell to its lowest since October last week amid concern Greece and some other European nations may default on their debt.

Policy makers want to “address the twin challenges of high unemployment and rapidly worsening public finances,” said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., which runs the world’s biggest mutual fund. “The risk is that major G-7 economies will remain in the muddled middle, achieving insufficient progress in meeting either and both objectives.”

Insurance Levy

Apart from immediate economic pressures, G-7 ministers moved closer to requiring banks to pay more of the cost of future financial turmoil after government rescues of financial companies from Citigroup Inc. to Royal Bank of Scotland Group Plc saddled taxpayers with trillions of dollars in liabilities.

One initiative winning support is having banks pay an insurance levy to create reserves that could be tapped if a bank or financial system ran into trouble, a U.K. official said on condition he not be named. Sweden already has such a program.

Policy makers will await an International Monetary Fund report in April before making a decision and each country would need to adopt the plan for it to be a success, the official said. One downside of the proposal is banks may take on more risk knowing that money existed to save them in the case of failure, a German official said.

“We agreed to work together to make sure financial institutions bear the costs of their contribution to those crises,” Canadian Finance Minister Jim Flaherty said.

Officials also pledged to complete work on forcing banks to raise the quality and quantity of capital they hold. Papering over recent differences, ministers said governments still have room to pursue individual policies such as U.S. President Barack Obama’s proposal to limit the size and proprietary risk-taking of large banks.

‘Strong Reforms’

“What you saw was not a divergence of approach, but a strong commitment together to try to make sure we are putting in place the strong reforms that would permit these kinds of crises from happening again,” U.S. Treasury Secretary Timothy F. Geithner said.

With credit-default swaps on Greek debt surging to a record last week, European officials sought to bolster investor confidence in Greece’s ability to cut the EU’s largest budget deficit by endorsing the country’s austerity plan.

“The European members of the G-7 will make sure it is managed,” French Finance Minister Christine Lagarde told reporters in Iqaluit. European Central Bank President Jean- Claude Trichet said the bank is “confident” the nation will pare its deficit below the EU’s limit of 3 percent of gross domestic product in 2012 from 12.7 percent now.

‘Dress Rehearsal’

“No measure of official reassurance would be enough unless the nations in question retain credibility in financial markets, which remains to be seen,” said Geoffrey Yu, a currency strategist at UBS AG in London. “We expect foreign exchange markets to continue trading on a risk-averse tone.”

Deutsche Bank AG is warning that the increase in the cost of insuring against debt defaults by Greece and other European economies such as Spain and Portugal may be a “dress rehearsal” for the U.S. and U.K., which are now running deficits above 10 percent of GDP.

As the IMF calculates debt in the advanced Group of 20 economies will reach 118 percent of GDP in 2014, up from about 80 percent before the crisis, some G-7 nations are attracting the ire of investors and credit rating companies.

‘Horrible’ Math

Standard & Poor’s last month cut the outlook for its sovereign credit rating of Japan, whose debt burden is the biggest in the industrialized world and nearing twice the size of its economy. Moody’s Investors Service Inc. said on Feb. 2 that the U.S.’s Aaa bond rating will come under pressure unless additional measures are taken to reduce deficits. Pimco calls U.K. government bonds “a must to avoid.”

“The contagion is going to spread,” Harvard University Professor Niall Ferguson said in a Bloomberg Television interview. “The math is horrible for the United States.”

Geithner told ABC News yesterday that the U.S. will “absolutely not” lose its Aaa debt rating even after the administration predicted a $1.6 trillion budget deficit in 2010.

Still, in an acknowledgement of the looming fiscal risks, G-7 members were told in a document drawn up by Canadian officials that they should set “clear, credible and consistent” plans to strengthen their budgets.

Delay in doing so would lead markets to “begin to question our commitment to sound medium-term policy frameworks, with the result that interest rates would rise,” said the report obtained by Bloomberg News.

The G-7 officials met 195 miles south of the Arctic Circle in a former whaling and fur-trading outpost that is now the capital of Canada’s northernmost territory, Nunavut.

Bank of England Governor Mervyn King was among the delegates to try dog-sledding, while Flaherty’s personal exit- strategy backfired as he damaged the doorway of an igloo when his duck-down parka got snagged on its arch. European officials found themselves dodging press questions about whether the trip made them more supportive of seal hunting.

“It was an adventure for people, which I think took them out of their normal office mode,” said Flaherty.

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Output at factories, refineries and mines declined 1.4 percent from a year earlier, adjusted for the number of working days, after slipping a revised 5.6 percent the previous month, the Madrid-based National Statistics Institute said today in an e-mailed statement. Economists had forecast a decline of 2.3 percent, according to Bloomberg News survey.

Facing the highest unemployment rate in the euro region, Spain created one of Europe’s largest stimulus programs last year, including measures to encourage car purchases and fund public-works projects. As the global economy emerges from a recession, Madrid-based Acerinox SA, the world’s biggest stainless-steelmaker, said Jan. 19 it will increase production from this month.

The government spent 8 billion euros ($10.9 billion) to put unemployed builders back to work widening sidewalks, creating parks and constructing cycle tracks in Spanish cities in a program that created more than 400,000 jobs. In a separate stimulus package, the central government provided as much as 500 euros in incentives for car purchases that regional administrations can match, with automakers asked to offer a 1,000-euro discount on top.

Auto Production

Car production rose 50 percent from a year earlier, the statistics agency said today, while overall manufacturing declined 0.4 percent. Production of durable goods fell 6.2 percent from a year earlier, while output of non-durable goods gained 2 percent in December from a year earlier.

Spain, which has been in a recession since the second quarter of 2008, is lagging behind the recovery in Europe. The International Monetary Fund forecasts Spain will contract 0.6 percent this year, while the U.S., the U.K., and the euro area return to growth.

The statistics agency revised November production from the decline of 5.7 percent originally reported.

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