• The German economic recovery will be moderate with predominately downside risks.
• GDP growth will be 1.5% in 2010 and 1.9% in 2011, the IMF forecasts.
• Budget cutting should begin as soon as the economy firms, which the IMF sees in 2011.
• There is little time to address the remaining risks in the German financial sector, the IMF reports. The health of the sector has improved, though.
• Export growth will be limited by US consumer restraint and muted euro area growth.
• The German deficit to GDP ratio will rise to 5.5% in 2010

Greece is applying loads of tough love which is sure to raise hackles.

Public pension payments above EUR 2,000/mo are being frozen while those below that level will be given a 1.5% raise. Public sector salary supplement s will be cut 10%.

EUR/USD is firm, now at 1.3757.

Rating agency Fitch says the collapse of economic and monetary union in Europe is an extremely low risk. An EU bailout of weaker members is a possibility but it does not rely on it for its ratings assessment.

EUR/USD is firming once again, now at 1.3755. Central bank sales were rumored earlier at 1.3770, traders report.

Inventories fell 0.8% in December, a downer for GDP. The market expected a 0.5% rise.

Also crossing the wires is the IDB/TIPP economic optimism index. It fell to 46.8 in Feb from 48.8 in Jan

Risk aversion may be hiked by news that S&P has changed its outlook on Citigroup from stable to negative.

The S&P is up 1.2% at the open, following European bourses higher. EUR/USD bounced from a dip into the 1.3730s and is now at 1.3753.

Most of the “risk assets” are solidly higher on the day with Gold up to $1075 after falling as low as $1044 last Friday. Oil is up $0.82 at 72.70 after a brief probe below $70 last week.

Risk may not be “on” but risk aversion is easing…

They have their tentacles into everything, don’t they? Here’s the story.

It should not be Taboo to to mention the a role for the IMF in the Greek situation, Swedish FinMin Borg says.

The EU’s Almunia calls the Greek macroeconomic projections “optimistic”. That’s not good, as it suggests they will not be achievable. Greece should stand ready to adopt additional measures, Almunia says.

EUR/USD is easier, trading now at 1.3735. Stops are seen in the 1.3680 area now.

Pro-government militias tried to attack the Italian Embassy in Tehran today, the Italian foreign minister says.

Given the US experience in 1979/1981, this is not to be taken lightly. Iran has been increasingly bellicose toward the west in recent days.

EU Commission president Barroso is on the wires saying this is not the first time Trichet has come to an EU summit. Barroso says he will discuss the economic situation with Trichet.

EUR/USD has eased back below 1.3750 mid reports of further central bank sales into strength. The BIS was spotted at 1.3770, traders report. We’d expect bids to be solid toward the 1.3715 level on dips.

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