Stocks slid further around the world on Friday on fears Europe's debt crisis and tougher financial regulation will hurt a global economic recovery, as Germany prepared to vote on a massive standby package to stabilize the euro.

European shares fell 1 percent in early trade after Asian stock markets slid again. Japan's Nikkei average closed 2.5 percent down for a loss of 6.5 percent on the week, mostly driven by worries about the euro zone.

The German parliament was poised to approve the lion's share of a $1 trillion safety net for troubled euro zone nations and an EU task force of policymakers in Brussels will look to toughen regulations within the bloc blighted by a debt crisis.

The lower house was to vote on the 750 billion euro rescue package that is unpopular with voters at around 1000 GMT after rejecting opposition motions to delay or shelve the decision.

Europe's biggest economy may have to fork out up to 148 billion euros in guarantees, on top of an equally divisive 22.4 billion euro contribution to a package for debt-ridden Greece.

Chancellor Angela Merkel's center-right coalition has the necessary votes to get the bill passed, but it wants as much cross-party backing as possible to ease public opposition to bailing out weaker euro zone states.

In an effort to rally broader public support, her government stunned markets this week by unilaterally banning speculative trades in some financial instruments. The move sent stocks and the euro plunging and drew sharp criticism from EU partners, including close ally France, which were not consulted.

However, Merkel failed to satisfy the opposition Social Democrats, who were threatening to abstain from Friday's vote unless the government backed a motion to push for an international financial transaction tax.

The vote follows pledges by the leaders of Germany and France on Thursday to set aside differences and work together to solve the European debt crisis and support the euro.

Later on Friday, European finance ministers were to discuss tightening the bloc's tattered budget discipline rules and improving economic policy coordination in the 16-nation euro zone at a working group meeting in Brussels.

Berlin wants harsher sanctions on deficit sinners and an unprecedented insolvency procedure for states crippled by debt. No immediate decisions were expected.

The talks were sensitive because some euro zone countries oppose a European Commission proposal to scrutinize member's budget plans before they are submitted to their own parliaments, seen as a threat to national sovereignty.

Today's meeting is to co-ordinate economic policies. Obviously the decision taken in Germany .... was not an example of co-ordination, Spanish Economy Minister Elena Salgado said pointedly in a radio interview.

WALL STREET OVERHAUL

The United States also took a big step closer to the most comprehensive overhaul of Wall Street rules since the 1930s after a financial reform bill cleared a final Senate vote.

The tougher rules are aimed at preventing a recurrence of the 2007-2009 crisis which plunged the global economy into a recession that it is still struggling to shake off.

The bill has to be merged with one from the House of Representatives, but analysts said they expected President Barack Obama to sign the law as soon as next month.

France and Germany, co-founders of the euro, clashed over Berlin's ban on naked short-selling of sovereign euro zone bonds and some financial shares.

Their public patching up on Thursday helped, along with short-covering, push the euro on Friday up as high as $1.26 from a four-year low of $1.2143 on Wednesday. The European currency was trading at $1.25 at 0800 GMT (4 a.m. ET).

French Budget Minister Francois Baroin said the euro was not in danger because Paris and Berlin were determined to save the single currency at all costs.

Luxembourg Prime Minister Jean-Claude Juncker, chairman of the Eurogroup of euro area finance ministers, and Ewald Nowotny, a member of the European Central Bank's governing council, both dismissed worries about the euro's level despite a 12 percent slide against the dollar this year.

A German spokesman said Merkel and French President Nicolas Sarkozy had agreed to cooperate on euro-zone growth strategies and coordinate their positions on world financial rules at a G20 summit next month.

Sarkozy, who will visit Berlin on June 7, denied any policy differences with Merkel when pressed by reporters after talks with new British Prime Minister David Cameron.

The head of the International Monetary Fund, Dominique Strauss-Kahn, highlighted global concerns about the euro zone crisis by telling French television that Paris and Berlin should not focus too quickly on slashing their budget deficits, otherwise it could dampen growth.

With the United States increasingly involved in trying to contain the euro zone crisis, Treasury Secretary Timothy Geithner will visit Europe next week, on his way back from a trip to China, and will meet the head of the European Central Bank and Germany's finance minister.

China has also said the crisis is adding to uncertainty.

The euro for now is a secondary story. The danger is that people are doubting the sustainability of the global recovery, said Boris Schlossberg, director of research at GFT Forex in New York.

(Writing by Paul Taylor and Miral Fahmy; Editing by Mike Peacock)

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