European stocks were called to open lower on Monday ahead of the first meeting of the year between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Berlin.
The FTSE is called 17 to 25 points lower, the DAX in Frankfurt is expected to be down by 31 to 38 points and the CAC 40 is called lower by 22 to 26 points.
Positive employment data from the US on Friday failed to detract from persistent concerns over the debt crisis in the euro zone. While employment grew in the US in the last month of 2011, euro zone retail sales and economic sentiment stalled, indicating that recession may be imminent in the common currency area.
The euro fell against the dollar and the yen in overnight Asian trade and shares also stalled.
EU member Hungary was downgraded on Friday to 'junk' status while German magazine Der Spiegel reported that the IMF was losing confidence in the ability of the Greek government to come to terms with its debt.
Merkel and Sarkozy will meet in Berlin at 10:00am London time to begin their latest round of discussions which could cover the plight of the euro, how to implement the fiscal pact agreed last month and the possibility of a financial transaction tax. The French and German leaders are due to give a press conference at 12:30pm.
A French senior official said on Sunday that the French government could propose a financial transaction tax for parliamentary approval within the next month, possibly without the support of other EU partners. The announcement by State Secretary Benoist Apparu is likely to antagonize the British government which remains firmly opposed to a so-called 'Tobin Tax' and fears it could damage the UK's vast financial services sector.
British Prime Minister David Cameron told the BBCon Sunday that he would veto any European Union plans to introduce a tax on financial services to protect the City of London financial district.
The FT reported on Sunday that Cameron had not ruled out further donations to the IMF beyond the £10 billion ($15.4 billion) approved by the British parliament last year. The newspaper reported that government insiders had hinted that more donations could be on the cards if other nations decided to donate more to the IMF.
A survey by the Confederation of British Industry (CBI) and auditors PricewaterhouseCoopers released on Monday showed that the UK finance sector could cut jobs at a faster pace than anticipated in the first quarter of 2012. The report cites fresh concerns over the sovereign debt crisis in the euro zone and a fall in confidence at the end of 2011 as reasons for the job losses.
Italian Prime Minister Mario Monti announced plans to promote competition across industry sectors in an effort to boost Italy's flagging economy, in a TV interview on Sunday.
Monti said the gradual liberalization "involves reducing protection and the different ways industry sectors try to create advantages for those who are inside the fortress to the detriment of those who are outside," in an interview with state-owned Rai television. Monti will meet with Merkel and Sarkozy on Wednesday to discuss measures to drive down Italy's deficit.
In London, Deputy Prime Minister Nick Clegg will host a meeting of European liberal ministers and commissioners where they are expected to discuss Clegg's unease over Cameron's use of a veto at last year's summit of European leaders.
The Leveson Inquiry into the practices of the British press following the phone hacking scandal at the now defunct News of the World will resume in London on Monday following a Christmas break and Lloyd's Banking Group Chief Executive Antonio Horta-Osorio will return to work on after a temporary leave of absence.
Economic releases to watch on Monday include German foreign trade data out at 7:00 am London time, followed by France at 7:45 am.
British entertainment retail chain HMV will release its group trading results along with food retailer Morrisons .
Rolls Royce announced a 30 percent jump in annual sales on Monday, while Air France-KLM December traffic figures are due on Monday.