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American Public Opposes Action in Syria and North Korea

April 30, 2013 by Leave a Comment

While the public does not support direct military action in those two countries right now, a broad 70 percent majority favor the use of remotely piloted aircraft, or drones, to carry out bombing attacks against suspected terrorists in foreign countries.

Interest in the Syrian conflict has waned, with 39 percent of those surveyed saying they are following the violence closely, a 15-percentage-point drop since a CBS News poll conducted in March, before the Boston Marathon bombings.

Sixty-two percent of the public say the United States has no responsibility to do something about the fighting in Syria between government forces and antigovernment groups, while just one-quarter disagree. Likewise, 56 percent say North Korea is a threat that can be contained for now without military action, just 15 percent say the situation requires immediate American action and 21 percent say the North is not a threat at all.

Louis Brown, 50, a poll respondent from Springfield Township, Ohio, described Syria and North Korea in a follow-up interview as “political hotbeds.” In his view, “we don’t need additional loss of American lives right now.”

Instead, Mr. Brown said he thought that now was the time to “concentrate on our own backyard,” and he cited the economy as the most important problem facing the country. Mr. Brown said Congress and President Obama should “address the economic situation in the country and stop infighting.”

Many Americans agree with Mr. Brown as the economy and jobs continue to top the list of the most important problems facing the country while foreign policy issues barely register. Four in 10 Americans cite the economy and jobs as the most important problems facing the country, while only 1 percent named foreign policy.

Another poll respondent, Pat Bates, 63, of Parkville, Mo., said she would “hate to see us trot into yet another country and try to fix things when we’re not quite sure what we’re doing.” She went on to say that “we’ve certainly got enough to keep us busy here without sending our young people over somewhere again.”

The nationwide telephone survey was conducted on both land lines and cellphones with 965 adults and has a margin of sampling error of plus or minus three percentage points. More results will be released at 6:30 p.m. Tuesday on nytimes.com.

Article source: http://www.nytimes.com/2013/05/01/world/american-public-opposes-action-in-syria-and-north-korea.html?partner=rss&emc=rss

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Fundamentally: Investors Rediscover Risk-Taking Abroad

February 23, 2013 by Leave a Comment

RISK-TAKING may be staging a comeback overseas.

While equities around the world soared last year, the stock market rebound abroad was decidedly different from the one that sent the Standard Poor’s 500-stock index up 16 percent in 2012.

In the United States, the most economically sensitive stocks, like shares of banks and other financial businesses, posted the biggest gains as investors grew confident that an economic recovery was at hand. Overseas, by contrast, it was the defensive-oriented shares like health care and consumer staples stocks that performed the best for most of the year.

What’s more, investors favored stocks in the developed world over riskier but faster-growing emerging markets equities.

This is not all that surprising. “The economic situation abroad in the last 12 to 18 months has either been worse or has slowed more dramatically than in the U.S., creating an even bigger ‘risk off’ mind-set in those markets,” said James W. Paulsen, chief investment strategist at Wells Capital Management.

Yet Mr. Paulsen believes that investors’ appetite for risk-taking overseas is likely to improve. In fact, that process may have already begun.

Among the early signs are that economically cyclical sectors, like financial stocks in the MSCI EAFE index of foreign equities, have been outperforming defensive areas like health care and consumer staples since December.

Part of this can be attributed to the growing clarity about the state of the global economy, money managers say. It is not so much that the economy is booming, but that some of the greatest potential dangers seem to have receded.

Most prominently, concerns about a euro zone breakup have abated since Mario Draghi, president of the European Central Bank, declared that the bank would do “whatever it takes” to save the euro. Ever since that announcement, in late July, European equities have been in rally mode.

“In the international markets, you saw the removal of major tail risks last year, particularly in Europe,” said Jason A. White, a portfolio specialist at T. Rowe Price.

Meanwhile, fears over China’s slowdown seemed to subside at the end of last year on signs that the world’s second largest economy was finally beginning to re-accelerate. In November, government data showed that industrial output and retail sales in China grew much faster than expected, bolstering the bullish case for Chinese and emerging-market stocks. Since then, the Shanghai Stock Exchange Composite Index has soared nearly 20 percent.

The improving global economy, though, isn’t the only reason risk-taking may be re-emerging.

Money managers note that fear over Europe’s debt crisis has been driving investors into defensive-oriented stocks overseas for several years. This is particularly true for shares of consumer companies that manufacture staples like food and household products that continue to be in demand regardless of the health of the economy.

“In an environment where returns for the equity markets were quite poor, you saw very decent returns in those staples,” said Harry Hartford, president of Causeway Capital Management. As a result, though, “consumer staples outside the U.S. looks pretty fully priced,” he said.

Take Diageo. Shares of the British spirits maker, which has sales in about 180 countries, have climbed more than 26 percent a year for the last three years. That means Diageo shares now trade at a price/earnings ratio of more than 18, based on forecast profits. By comparison, the average P/E for MSCI EAFE stocks is less than 14.

Unilever, the packaged food and household goods company, is another example. In 2008, amid the global financial crisis, the stock was trading at around 11 times earnings. Today, Unilever’s P/E ratio stands at 17 times earnings.

“A lot of the defensive industries had big runs, so valuations got extended,” said W. George Greig, head of international investing for the asset manager William Blair Company. As a consequence, he said, “some investors are starting to say that the defensive stocks aren’t as defensive as they thought.”

NOT all money managers are convinced that the worst of the economic storm is behind us. “We know that after a financial crisis, it takes a long time to recover,” said Simon Hallett, chief investment officer for the asset manager Harding Loevner. “We think a conservative approach is still appropriate — there are still an awful lot of things that can go wrong.”

Mr. Greig said investors were not seeking economically sensitive stocks out of a newfound sense of euphoria. “This is not a venturesome ‘risk on’ mind-set,” he said. Rather, investors are reluctantly seeking out cyclically oriented stocks because their valuations are so low that they now look compelling, and there may be better values in areas that had been considered riskier.

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

Article source: http://www.nytimes.com/2013/02/24/your-money/investors-rediscover-risk-taking-abroad.html?partner=rss&emc=rss

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ArcelorMittal to Close Parts of Belgium Plant

January 24, 2013 by Leave a Comment

The Liège business is heavily dependent on the automotive sector, a severe handicap in the current environment. Auto sales in the European Union fell 8.2 percent in 2012, according to the European Automobile Manufacturers’ Association, and sales are expected to decline again this year.

The company said it would close six production lines at Liège that make finished steel products for the auto industry. It is also closing a coke plant, where fuel for blast furnaces is produced.

ArcelorMittal said there was “insufficient demand to support the running of these flexible facilities and no improvement is seen over the medium term.” European steel demand, it said, is 29 percent below the levels of before the global financial crisis.

“We deeply regret that the economic situation has further deteriorated to the extent that the proposal of further closures at Liège has become necessary,” Bernard Dehut, chief executive of ArcelorMittal Liège, said in a statement.

The announcement marks the latest shrinkage of production capacity at the Liège facility. ArcelorMittal said in October 2011 that it would close a liquid-phase steel production facility at the site.

The company said it would continue operating five other lines, employing about 800 people, because they “are strategic due to their dedicated high-quality products, specialized processes and technological innovation.”

The MWB-SETCa union called for the plant to be nationalized, saying in a statement that the company had broken its agreements with workers and was preparing “even worse announcements.”

ArcelorMittal, based in Luxembourg, was formed through the merger of Mittal Steel with Arcelor in 2006. Lakshmi N. Mittal, the Indian-born billionaire who serves as chairman and chief executive, borrowed heavily to pull off the merger and subsequent deals, but that has worked against him since the financial crisis hit steel demand in key markets.

The company’s debt is rated below investment grade by both Moody’s Investors Service and Standard Poor’s. On Jan. 10, ArcelorMittal announced the sale of stock and convertible subordinated notes — essentially bonds that turn into stock at a later date — to raise about $4 billion as part of its goal of reducing debt to $17 billion by June 30.

Mr. Mittal ran afoul of the French government in the autumn during a dispute over the company’s plans to close to blast furnaces at a plant in Florange, in eastern France.

The French industry minister, Arnaud Montebourg, accused Mr. Mittal of failing to honor his promises and threatened to nationalize the facility. The government retracted the threat after the company agreed to certain concessions.

As for the 1,300 employees whose jobs are being eliminated at Liège, ArcelorMittal said it was “committed to finding a socially acceptable solution for all those affected,” with measures including “the possibility of reallocation to other sites within the group.”

Article source: http://www.nytimes.com/2013/01/25/business/global/arcelormittal-to-close-parts-of-belgium-plant.html?partner=rss&emc=rss

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European Economy Remains Fragile, Data Shows

January 4, 2013 by Leave a Comment

In its monthly report on lending, the central bank said Thursday that loans to companies, not including banks, in the 17-nation currency zone fell at an annual rate of 1.8 percent in November, the same rate of decline as in October.

That is a sign that measures by the bank have not yet succeeded in restoring the flow of credit to troubled countries like Spain. Credit is a prerequisite for economic growth, and the central bank closely watches data on lending in deciding the level of the official interest rate.

During the last year the central bank has gone to ever greater lengths to encourage lending. It has cut the benchmark interest rate to a record low of 0.75 percent and allowed banks effectively to borrow as much money as they want at that rate.

The central bank has also promised to buy the bonds of countries like Spain to hold down their borrowing costs, a policy intended to help businesses and consumers in the countries hardest hit by recession.

The interest rate that a government pays often acts as a floor on the market rates paid by the country’s companies and consumers.

But the central bank’s efforts have been thwarted by continued reluctance by banks, many of which are already burdened by bad loans and are trying to reduce risk. In some countries there may also be a lack of demand for loans, because corporate managers are not confident enough to resume investing in their businesses.

“Today’s euro zone bank lending figures are a timely reminder that the economic situation in the 17-country region remains very fragile,” Martin van Vliet, an analyst at ING Bank, wrote in a note to clients on Thursday.

Lending to euro zone households continued to register only weak growth, rising at an annual rate of 0.4 percent in November, the same rate as in October, the central bank said.

The latest data could reinforce expectations that the bank will cut the benchmark rate early this year, perhaps as soon as the monthly monetary policy meeting next Thursday.

But a rate cut would most likely face opposition from some members of the central bank’s governing council, including Jens Weidmann, president of the Bundesbank, the German central bank.

Mr. Weidmann and others might argue that lower rates would increase the risk of inflation, without doing much to encourage lending in the countries that need it most.

In interviews and other public statements, Mr. Weidmann has continued to warn about inflation even though most economists see little risk.

Inflation in the euro area fell to an annual rate of 2.2 percent in November from 2.5 percent in October, according to the most recent official figures. The central bank aims to keep inflation at about 2 percent.

The report on monetary conditions did contain some good news. Mr. van Vliet pointed out that bank deposits in Spain and Greece rose in November, a sign that people were no longer withdrawing money from those two countries.

“This confirms that fears of a (partial) euro zone breakup are gradually receding,” Mr. van Vliet wrote.

And while the German economy has slowed in recent months, unemployment numbers released Thursday suggested that it remained resilient. The unemployment rate rose to 6.7 percent from 6.5 percent, the German Federal Employment Agency said. Adjusting for seasonal fluctuations, however, the unemployment rate was unchanged at 6.9 percent. About 2.9 million people in Germany are jobless.

The stable German labor market, despite poor weather that would normally suppress hiring, is a sign that “most firms do not expect the currently weak economic environment to persist for much longer,” Thomas Harjes, an analyst at Barclays, wrote in a note.

According to the methodology used by the International Labor Organization, which uses a narrower definition of joblessness, Germany’s unemployment rate was only 5.3 percent.

A report by the Bank of England Thursday indicated that the British central bank is having better luck restoring credit to the economy than the European Central Bank. Lending to both businesses and consumers rose significantly, the Bank of England said in its quarterly credit conditions survey.

Britain is not a member of the euro zone, and the Bank of England undoubtedly faces a less complex task than the European Central Bank, which must try to fashion a monetary policy for 17 countries.

The Bank of England attributed the improvement to its Funding for Lending Scheme, which rewards banks that increase the amount of credit they provide. Banks that lend more can borrow more from the central bank at lower rates than banks that decrease lending.

“The Funding for Lending Scheme was widely cited as contributing towards the increase in secured and corporate credit availability,” the Bank of England said in a statement.

Article source: http://www.nytimes.com/2013/01/04/business/global/bank-lending-in-euro-zone-slumped-in-november-data-show.html?partner=rss&emc=rss

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Euro Watch: Bonds in Spain and Italy Shaken by Italian Politics

December 10, 2012 by Leave a Comment

Shares of Italian banks, which are big holders of the government’s bonds, were among the hardest hit.

The action came in the first day of trading after Prime Minister Mario Monti said over the weekend that he would soon step down after his predecessor, Silvio Berlusconi, withdrew his party’s support from Mr. Monti and said he would again seek election as prime minister.

Mr. Berlusconi, a four-time prime minister, left office a year ago as markets pushed Italy to the brink of financial collapse. Mr. Monti, an economist who was appointed as his temporary successor, has restored Italy’s credibility with investors, who have given the country a break on its borrowing costs. But those gains have come at the cost of painful austerity measures that have worsened the country’s economic situation and given Mr. Berlusconi an opening to attack.

The Milan benchmark index, MIB, fell more than 2 percent on Monday. Italian banks, which remain sensitive to declines in the country’s bond prices, were among the big losers. Intesa Sanpaolo, the most active stock, fell 5.2 percent, as did UniCredit.

Mr. Monti, who joined other leaders in Oslo on Monday to receive the Nobel Peace Prize awarded to the European Union, said at a news conference that the market reactions “need not be dramatized.”

“I am confident,” he said, that the Italian elections would result in a government “that will be responsible and oriented toward the E.U. and this will be in line with efforts the Italian government has made so far.”

The decline in bond prices sent their yields, or interest rates, higher — an indicator of the Italian government’s borrowing costs. The spread between interest rates on Italian 10-year sovereign bonds and equivalent German securities, the European benchmark for safety, grew to 3.5 percentage points on Monday. That was up from 3.25 percentage points late Friday, suggesting that investors were growing more wary of holding Italian debt.

The yield on Italian 10-year bonds, which breached 7 percent this year, ended trading on Monday at 4.8 percent, up 29 basis points. A basis point is one-hundredth of a percent.

Bonds of Spain, which is the other big economy of concern in the euro zone, also came under renewed pressure on Monday after Mr. Monti’s announcement.

The spread between Spanish 10-year bonds and equivalent German bonds widened to 4.27 percentage points from 4.16 points on Friday. The yield on the benchmark Spanish 10-year rose 10 basis points, to 5.5 percent; it reached 7.1 percent in July amid concerns that Spain would be forced into a full bailout after having to negotiate a 100 billion euro, or $129 billion, rescue package for its banks in June.

Luis de Guindos, the Spanish economy minister, warned that Italy’s political turmoil would affect his country.

“When doubts emerge over the stability of a neighboring country like Italy, which is also seen as vulnerable, there’s an immediate contagion for us,” he said Monday morning on Spanish national radio.

Asked whether Spain would itself seek further European rescue funding, he instead said, “The help that Spain needs is that the doubts over the future of the euro be removed.”

Speaking before the Nobel ceremony on Monday, the European Commission president, José Manuel Barroso, said Italy must “continue on the road of structural reforms.” The elections, Mr. Barroso said on Sky News, “must not be used to postpone reforms.”

A dismal economic report on Monday served as a reminder that despite Mr. Monti’s success with investors, the real economy continues to suffer. Italian industrial production fell a seasonally adjusted 1.1 percent in October from September, and by 6.2 percent from a year earlier, Istat, the national statistics agency, reported.

Some analysts said they thought that Mr. Berlusconi’s re-emergence as a political leader was as responsible for unnerving investors as Mr. Monti’s unexpected decision to resign. Nicholas Spiro, managing director of Spiro Sovereign Strategy, a research firm, wrote on Monday in a note that Mr. Berlusconi remained “the boogeyman of investors,” who “epitomizes the dysfunctional nature of Italian politics.”

Angela Merkel, the German chancellor, was to meet on Monday with Mr. Monti on the sidelines of the Nobel ceremony, said Georg Streiter, a spokesman for the chancellor.

Ms. Merkel pushed to have Mr. Monti succeed Mr. Berlusconi. But she ended up facing Mr. Monti’s own economic reform ideas, which focused more on growth and job creation than on the austere fiscal discipline championed by Ms. Merkel.

As a rule, the German government does not comment on its partners’ domestic politics, but Foreign Minister Guido Westerwelle warned that an attempt to scale back Italy’s reform push could result in further destabilization in the euro zone.

“Italy cannot remain stagnant on two-thirds of its reform process,” Mr. Westerwelle said through a spokesman. “This would throw not only Italy but the rest of Europe into turbulence.”

Elisabetta Povoledo reported from Rome and David Jolly from Paris. Raphael Minder contributed reporting from Madrid and Melissa Eddy from Berlin.

Article source: http://www.nytimes.com/2012/12/11/business/global/11iht-eurozone11.html?partner=rss&emc=rss

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Ford Contract With Union is Ratified

October 19, 2011 by Leave a Comment

Local 600 in Dearborn, Mich., the largest local for the union, disclosed the development Tuesday on its Facebook page, citing national union officials. U.A.W. Local 862 in Louisville, Ky., said its members at two plants voted 53.3 percent in favor of the four-year agreement. The Louisville plants build pickups and sport-utility vehicles and employ 5,397 workers. Ford’s 40,600 American hourly workers were to conclude voting Tuesday.

Michele Martin, a spokesman for the union, did not immediately answer a voice message and an e-mail seeking comment.

U.A.W. members at Ford shifted from voting 53 percent against the contract last Friday to 63.2 percent in favor as of Tuesday morning. Ford is offering 12,000 new jobs, $6.2 billion in factory upgrades and bonus and profit-sharing payments per worker this year that total as much as $10,000. A lack of a wage increase was responsible for much of the initial opposition.

“People are saying there is room for improvement, but they’ll vote in favor of this contract because it means jobs,” said Jerome Williams, president of U.A.W. Local 2000, which represents 1,880 workers voting today at Ford’s Ohio van plant. “A few people are saying we gave up monetary concessions and other things that they’d like to see come back, and rightfully so. But the economic situation isn’t the best right now.”

The U.A.W. negotiated contracts for 113,000 workers for the first time since General Motors and Chrysler went bankrupt in 2009. G.M. workers endorsed a new deal last month and workers at Chrysler begin voting this week. Only workers at Ford, which avoided Chapter 11, could strike in these contract talks because G.M. and Chrysler employees agreed not to walk out as part of their government-backed rescues.

Ford has promised investments totaling $1.26 billion at the two Kentucky assembly plants. .

Article source: http://feeds.nytimes.com/click.phdo?i=79a357f2bfd1c40303f09e9628b92e6a

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Back-to-School SHopping Aids Many Retailers

September 1, 2011 by Leave a Comment

Sales at stores open at least a year rose 4.4 percent on average from August 2010, according to a Thomson Reuters tally of 23 retailers. That was 0.2 percentage points below what analysts had expected, but still a good result.

“It bodes well for the balance of the year — the consumer has shaken off the craziness of Wall Street and the negativity coming out of Washington, and they’re buying,” said Madison Riley, managing director at Kurt Salmon, a retail consulting firm.

The companies with the biggest increases represented pretty much every retailing sector. BJ’s Wholesale and Costco, both warehouse stores, posted same-store sales increases of 11.5 percent and 11 percent. Limited, a consistently good performer because of its Victoria’s Secret division, was also up 11 percent. The teenage-oriented store chain The Buckle was up 8.3 percent, while Nordstrom rose 6.7 percent.

All five were also the biggest upside surprises, beating analyst estimates by the biggest margins among the stores reporting.

On the downside, Kohl’s and J.C. Penney, which have been promoting back-to-school shopping heavily, continued to have sales trouble. Both retailers posted same-store sales declines of 1.9 percent; analysts had expected increases of 1.6 percent and 0.8 percent, respectively.

Earlier in the summer, analysts were predicting that back-to-school shoppers would postpone purchases to September as they waited for deals. But at most retailers, that did not seem to be the case.

“Part of the dynamic we see here is consumers had held off on a fair amount of spending in the last 18 months due to the economic situation. It’s pent-up demand, and it’s an important part of the retail year,” Mr. Riley said. “I don’t think they’ve put it off, I think they’ve gone ahead.”

MasterCard Advisors’ SpendingPulse, which tracks spending at the retail level, said sales in back-to-school categories increased 3 percent in both July and August. “This is the best back-to-school season we’ve seen in terms of growth since 2006,” said Michael McNamara, vice president of research and analysis for SpendingPulse.

While luxury spending is usually correlated with the stock market over the long term, that is not always the case over the short term, as August showed.

In addition to Nordstrom’s gain, Saks Fifth Avenue’s same-store sales rose 6.1 percent. SpendingPulse did not release a percent increase for luxury spending this month because of changes in how it reports data, but “the luxury trend throughout the summer has been one of the leading areas, and it continues to be through August,“ Mr. McNamara said.

Still, analysts said that some lower-end stores have raised prices because of cotton and other materials increasing in cost, but are having trouble getting shoppers to pay more.

“Thus far in the season, promotions appear to be deeper than last year, and inventory levels across the sector are growing faster than sales, which bodes poorly for successful price increases,” Adrienne Tennant, an analyst at Janney Capital Markets who covers apparel stores, wrote in a note to clients earlier this week.

Hurricane Irene, which caused stores to close and shoppers to stay at home along the East Coast last weekend, seemed to have a light impact on sales. The retailers that quantified the impact of Irene on same-store sales said it had hurt sales by 0.6 percent (J.C. Penney) to 1.5 percent (Macy’s and Saks).

The more significant impact of Irene will be felt next month, Paul Lejuez, an analyst with Nomura Securities, said in a note to clients, because the beginning of this week, including Sunday, when many of the stores were closed, will be counted as part of the next period’s results.

At Costco, several warehouses closed briefly over the hurricane weekend, but “we saw a lift in sales prior to the weekend as members anticipated the storm,” a Costco spokesman said in a prerecorded message. Over all, the net effect of Irene was slightly negative, Costco said.

Costco also said Thursday that its longtime chief executive and one of its founders, Jim Sinegal, will resign on Jan. 1. He will be replaced by Craig Jelinek, who is Costco’s president and chief operating officer. Mr. Sinegal will continue as a board member.

Article source: http://feeds.nytimes.com/click.phdo?i=c0c57da809e8677580ec5cf1667e7459

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Merkel Signals Support for Italian to Lead E.C.B.

May 11, 2011 by Leave a Comment

Mr. Draghi, an American-trained economist who is the governor of the Bank of Italy, finally won the crucial support of the German chancellor, Angela Merkel, after convincing her of his commitment to fiscal soundness.

Mrs. Merkel told the weekly newspaper Die Zeit, in an interview published Wednesday, that Mr. Draghi embodied German ideas about economic stability and that the government could support his candidacy to success Jean-Claude Trichet of France as head of the central bank.

Mrs. Merkel’s office confirmed the chancellor’s comments.

Her government found no plausible German candidate to propose after Axel Weber, former president of the Bundesbank, took himself out of the running, leaving the field to Mr. Draghi.

“He is very much in line with our ideas about stability and economic solidity,” Mrs. Merkel said of Mr. Draghi.

While markets will see her endorsement of Mr. Draghi as evidence that the European Union can overcome its internal politics to appoint the best-qualified candidate to a top position, her comments on Greece and its troubles will provide no relief for investors.

Speaking to reporters in Berlin, Mrs. Merkel indicated that there would be no decision on new help for Greece before June, at the earliest, after officials have compiled an assessment of the country’s economic situation.

“Greece is in focus,” she said. “Any kind of statement about what the situation there is and what we are going to do is something I can only do when I have the results of the mission on the table. I think it’s most important to go about this on a step-by-step basis.”

In that mission, officials from the European Commission, International Monetary Fund and European Central Bank will assess the reasons why the debt crisis in Greece has continued and will decide whether the government has honored its pledges to improve tax collection and to start a program to privatize €50 billion, or $71 billion, in state assets.

The officials will also examine whether the assumptions underlying the €110 billion E.U.-I.M.F. bailout of Greece last year were flawed. If they conclude that the country’s huge debt burden is strangling growth prospects, that would give euro zone countries little choice but to extend the term of the loans, reduce the interest rate, or start a process of voluntarily rescheduling some Greek government debt.

Ireland’s campaign to cut the interest rate charged on its bailout loans appears deadlocked, with France and Germany still determined to extract a concession from Dublin in return. At a summit meeting earlier this year, the new Irish prime minister, Enda Kenny, refused to agree to work toward creating a common corporate tax base for Europe, fearing that would ultimately threaten his country’s low 12.5 percent rate.

German lawmakers were to meet Wednesday to debate the country’s contribution to the euro zone’s third bailout, that of Portugal. Mrs. Merkel argued there had been “quite substantial progress” since 2010, when the debt crisis emerged.

“Obviously what we are doing is to lay the ground for the future,” she said “There is not as yet a satisfactory response as to how we deal with the sins committed in the past, but I think that the fact that we have looked those sins squarely in the face and tried to address them was already progress.”

German analysts are increasingly convinced that some form of debt restructuring or default in Greece is inevitable. Ferdinand Fichtner, senior research fellow at the German Institute for Economic Research in Berlin, argued that the sooner that takes place, the cheaper it would be for taxpayers.

“I think a haircut or partial default will be necessary, “ he said, “and my sense is that this is almost a consensus among German economists.”

“The problem over the last year is that private investors are being replaced by the European Central Bank and state-owned banks, and that will continue,” argued Dr. Fichtner. “If policy does not react quickly it will be more expensive for taxpayers. If we agree on a haircut later taxpayers will take a higher haircut,” he added.

Debt restructuring should take place before Mr. Trichet steps down at the E.C.B. to help preserve the credibility of the incoming chief, he added.

If anointed as expected in June, Mr. Draghi will begin his term with a reputation of being slightly less hard-line on inflation than Mr. Weber.

But Mr. Draghi, 63, who earned a doctorate in economics at the Massachusetts Institute of Technology, is certain to maintain the E.C.B.’s focus on price stability. He also enjoys an international reputation, in part because of his work as chairman of a panel that has been asked by the Group of 20 nations to find ways to avoid future financial crises.

Like Mr. Trichet, Mr. Draghi has the gravitas, stature and political savvy needed to interact on equal terms with European leaders. The crisis caused by debt problems in Greece, Portugal and Ireland has put extreme pressure on E.C.B. policy makers, who have often taken the lead in managing the crisis because of the difficulty that European Union leaders have in agreeing on fast action.

Jack Ewing reported from Frankfurt.

Article source: http://feeds.nytimes.com/click.phdo?i=d9408cde9a11bf5a03807a5c07a42954

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