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Hints of a Bank Strategy Before a Meeting on Greece’s Crisis

July 21, 2011 by Leave a Comment

Details of the agreement were not disclosed, but the statement said it would include participation of Europe’s banking sector.

Released by the office of the French president, Nicolas Sarkozy, the statement said he and Chancellor Angela Merkel of Germany had reached an agreement they presented to Herman Van Rumpuy, president of the European Council, for consideration.

The leaders of the 17 member countries of the euro zone are to meet in Brussels to try to keep the debt crisis from spiraling out of control after a week of market turbulence in which borrowing costs spiked in Italy and Spain.

Many see the meeting as a moment of truth, particularly for Mrs. Merkel, whose caution has been blamed by some for the region’s failure to stem the crisis, and who, earlier this week, played down expectations of a breakthrough on Thursday.

“Nobody should be under any illusion: the situation is very serious,” José Manuel Barroso, president of the European Commission, the executive arm of the European Union, said earlier in the day. “It requires a response. Otherwise the negative consequences will be felt in all corners of Europe and beyond.”

The commission was arguing for a plan that would have private creditors swap Greek bonds that mature before 2019 for new 30-year bonds, thereby prompting a selective default, according to an official briefed on the negotiations who was not authorized to speak publicly.

The terms of the plan would imply a 20 percent reduction in the value of Greek bonds, the official said, a change that would raise tens of billions of euros to be directed to support the Greek bailout.

In addition, the other countries in the euro area and the International Monetary Fund would contribute 71 billion euros, or $100 billion, to the rescue plan, up to 2014.

Meanwhile, a tax on the banks equivalent to 0.025 percent of the assets of financial institutions could raise around 50 billion euros over five years and would finance a buyback of Greek bonds via the euro zone bailout fund known as the European Financial Stability Facility, the official said. That would reduce the stock of Greek debt by around 20 percentage points of gross domestic product.

Although a tax on banks has been discussed for several days, it had previously been presented as a tool for raising private sector financing without provoking a default, rather than a means of raising additional money. There are also technical problems with a bank tax that would have to be levied by each national government and would exclude countries that did not use the euro even if they had Greek liabilities.

With its willingness to contemplate selective default and ambitious targets for raising cash from the private sector, the European Commission proposal seems to be intended to appeal to Germany, which has consistently called for banks to take a substantial part of the loss.

Germany, Finland and the Netherlands are at odds with the European Central Bank and some governments over their insistence that private bondholders share the pain. Besides concerns over contagion, the central bank has said that a selective default would make it impossible to accept Greek bonds as collateral. That may require measures to ensure that liquidity still flows to Greek banks, the official said.

Officials said it was unclear whether the plan floated by the commission would be accepted by Berlin and Paris and other governments.

One element attracting consensus is the need to reduce the burden on indebted nations, not only by buying back Greek bonds but also through a reduction in the interest rates offered to Greece, Ireland and Portugal, which have also accepted international help. The maturities of these loans would also be extended.

The European Financial Stability Facility looks destined to gain a more important role, financing the buyback of bonds, and possibly the extension of credit lines or help in bank recapitalization.

“For the federal government, the participation of private investors is of immense value and is our aim,” Steffen Seibert, the German government spokesman said on Wednesday. “We are very confident that there will be a good and sensible solution,” he said in Berlin.

Economists said that a debt buyback would have other consequences.

If the program were voluntary, some investors might not participate, hoping that market prices for Greek debt would rise. So the buyback would have to be compulsory — a default, in other words — for Greece to get the debt reduction it needed, said Harald Benink, a professor of banking at Tilburg University in the Netherlands.

In addition, Greek banks would need to be bailed out because they have such large holdings of domestic debt. Portugal and Ireland might need a similar buyback deal to protect them from market attacks. The European Central Bank might need to be compensated for losses on its holdings of Greek debt.

And the European Union would have to substantially increase the size of the stability fund to show markets it is ready to protect Spain and Italy, Mr. Benink said.

“That requires a lot of political willingness and ability,” he said. “The worry is that these political leaders will have to drive at a much faster speed than their voters will allow them.”

Judy Dempsey reported from Berlin. Jack Ewing in Frankfurt and Matthew Saltmarsh in London contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=23b8a6cb89e01a7a154dc360c8a8ce93

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Talk of Greek Default Builds Before Conference

July 20, 2011 by Leave a Comment

The leaders of the 17 member countries of the euro zone are to meet Thursday in Brussels to seek a way to keep the debt crisis from spiraling out of control after a week of market turbulence in which borrowing costs spiked in Italy and Spain.

Many see the meeting as a moment of truth, particularly for the German chancellor, Angela Merkel, whose caution has been blamed by some for the region’s failure to stem the crisis, and who, earlier this week, played down expectations of a breakthrough on Thursday.

“Nobody should be under any illusion: the situation is very serious,” said José Manuel Barroso, president of the European Commission, the executive arm of the European Union. “It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond.”

As Mrs. Merkel, and the French president, Nicolas Sarkozy, met in Berlin on Wednesday, a diplomat said the “menu of options” upon which leaders will base a second Greek bailout was becoming clearer.

The commission was arguing for a plan that would have private creditors swap Greek bonds that mature before 2019 for new 30-year bonds, thereby prompting a selective default, according to an official briefed on the negotiations who was not authorized to speak publicly. The terms of the plan would imply a 20 percent reduction in the value of Greek bonds, the official said, which would raise tens of billions of euros to be directed to support the Greek bailout.

In addition, the other countries in the euro area and the International Monetary Fund would contribute €71 billion, or $101 billion, to the rescue plan, up to 2014.

Meanwhile, a tax on the banks equivalent to 0.025 percent of the assets of financial institutions could raise around €50 billion over five years and would finance a buy-back of Greek bonds via the euro zone bailout fund known as the European Financial Stability Facility, the official said. That would reduce the stock of Greek debt by around 20 percentage points of gross domestic product.

Although a tax on banks has been discussed for several days, it had previously been presented as a tool for raising private-sector financing without provoking a default, rather than a means of raising additional money. There are also technical problems with a bank tax which would have to be levied by each national government and would exclude countries that did not use the euro even if they had Greek liabilities.

With its willingness to contemplate selective default and ambitious targets for raising cash from the private sector, the European Commission proposal looks designed to appeal to Germany which has consistently called for banks to take a substantial part of the pain.

Germany, Finland and the Netherlands are at odds with the European Central Bank and some E.U. governments over their insistence that private bond holders share the pain in the new rescue effort. As well as worrying about contagion, the E.C.B has said that a selective default would make it impossible to accept Greek bonds as collateral. That may require special measures to ensure that liquidity still flows to the Greek banking system, the official said.

Officials said it was unclear whether the plan floated by the commission would be accepted by Berlin and Paris and other key governments, and it was possible that some parts could be extracted to make up a different package.

One element attracting growing consensus is the need to reduce the burden on indebted nations, not only by buying back Greek bonds but also through a reduction in the interest rates offered to Greece, Ireland and Portugal, which have also accepted international help. The maturities of these loans would also be extended.

The European Financial Stability Facility, or E.F.S.F., looks destined to gain a more important role, financing the buyback of bonds, and possibly the extension of credit lines or help in bank recapitalization.

“For the federal government, the participation of private investors is of immense value and is our aim,” Steffen Seibert, the German government spokesman said Wednesday. “We are very confident that there will be a good and sensible solution,” Mr. Seibert said in Berlin. His remarks contrasted sharply with what Mrs. Merkel said Tuesday when she bluntly remarked that the crisis could not be resolved in a “spectacular step.”

Judy Dempsey reported from Berlin. Jack Ewing in Frankfurt and Matthew Saltmarsh in London contributed reporting.

Article source: http://www.nytimes.com/2011/07/21/business/global/eu-official-warns-of-global-impact-if-europe-fails-to-act-on-debt-crisis.html?partner=rss&emc=rss

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Bond Yields Rise in Europe Despite French Assurances

June 28, 2011 by Leave a Comment

 Even German government bonds fell, and yields rose. Investors calculated that if the French proposal to roll over existing debt into new loans came to pass, somebody was going to pay for it. That would be the richer countries at the center of the euro currency zone, namely Germany and France.

 Normally, the bank plan announced by President Nicolas Sarkozy for French banks to extend the maturity of a large part of the Greek government debt they own by 30 years would have lifted bond prices in Greece and around Europe. It should have fueled optimism that Greece could escape its debt crisis and that other nations might soon find a similar way out of their own financial problems.

 But the vote in Greece on Wednesday and Thursday seemed to loom larger in investors’ minds as some doubts rose that the Greek government would pass new austerity measures. Yields on government bonds in Greece and other highly indebted nations like Ireland, Portugal and even Spain and Italy rose despite the announcement that the rollover plan was being considered.  

 Traders said investors feared that there was still some nervousness that the vote on 28 billion euros in spending cuts and tax increases could fail in Greece’s Parliament if the Socialist government cannot muster its majority. If the austerity measures failed in Parliament, it would stall a new 12 billion euros in aid due for Greece from the European Union and the International Monetary Fund, plunge Europe into a deeper crisis — and make any deal to roll over Greek debt held by French banks moot.

 In addition, traders and economists said there were still unanswered questions about the French proposal and they questioned whether it would form a template for the rollover of other countries’ debt, even whether it could in fact be agreed upon.

 “We have heard so much on this that it needs to be agreed to be taken seriously,” said Laurent Bilke , a strategist at Nomura Securities in London. “At the best it is a proposal from the French banks and the French government.”

 The plan foresees some of the banks’ debt holdings being invested in a guaranteed fund — but Mr. Bilke said it was still unclear who would guarantee the fund. In addition, he said, it was still also unclear when debt would become eligible for the rollover.

Another question hanging over the plan, analysts said, was whether the proposal would not be considered a default by rating agencies.

 Italian and Spanish bond yields recovered somewhat later in the trading session as some optimism returned that the austerity measures would pass in Greece. The yield on Italian debt, in particular, has come under pressure after Moody’s Investor Services last week placed more than a dozen Italian banks on review for downgrade because of the Italian government debt they hold.

 German government bond yields rose, traders said, on the growing realization that if the debt rollover took place it would still involve some kind of debt easing for Greece — and somebody would have to pay for that.

“Even if you are constantly pushing it out into the future, at some stage there has to be a fiscal transfer,” said Steven Major, global head of fixed income research at HSCB in London. 

Article source: http://www.nytimes.com/2011/06/28/business/global/28debt.html?partner=rss&emc=rss

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France Drops Plans for ‘Google Tax’

June 23, 2011 by Leave a Comment

PARIS — French legislators have dropped plans for a tax on online advertising that had come to be known, somewhat misleadingly, as the “Google tax.”

Philippe Marini, a lawmaker from the UMP party of President Nicolas Sarkozy, late on Wednesday withdrew legislation seeking to reimpose plans for the tax, only days after the National Assembly had rejected it.

The measure, which had been approved by the Senate, would have imposed 1 percent levy on online advertising expenditures in France. It was aimed at addressing the French government’s concern that foreign Internet companies like Google pay little or no tax on their earnings in France.

Yet support for the legislation flagged after critics pointed out that it would have had little effect on Google, because the company sells advertising aimed at French users via its subsidiary in Ireland, where tax rates are lower. Instead, French Internet companies complained that they and their advertisers would have suffered — thereby holding back the development of a homegrown French Internet economy.

After the rejection of the measure in the Senate this week, ASIC, a trade association for Web companies, including imports like Google, Microsoft and Ebay, as well as French players like Dailymotion, praised what it called a decision to “save the French digital economy.”

Often seen as suspicious of the Internet, the French government in recent months has been emphasizing the importance of digital technology to the overall economic development of France.

In May, Mr. Sarkozy convened a meeting of Internet company executives in Paris on the eve of the Group of Eight summit meeting in Deauville, France. Also this year, he established a National Digital Council, which includes industry representatives, to advise the government on technology-related issues.

The council has recommended further study on the issue of taxation, in which the borderless nature of the Internet can complicate government efforts to raise revenue at the national level. It called for the issue to be addressed at the European Union level.

The proposal for the “Google tax” had been supported by organizations representing content creators and other copyright owners, which noted that revenue from taxes on television advertising revenue is used to support film and television production in France.

Article source: http://feeds.nytimes.com/click.phdo?i=b6f846708438f1df286330e0998fe786

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Obama Seeks Aid for Egypt and Tunisia at Meeting

May 27, 2011 by Leave a Comment

These crosscutting pressures show the complexity of the Arab upheaval and the responses it is drawing from major powers. While the United States is emphasizing the need to stabilize the economy of Egypt, its major Arab ally, France and Britain are eager to intensify the NATO airstrikes on Libya’s leader, Col. Muammar el-Qaddafi.

These goals are not mutually exclusive, American and European officials said. The United States said it expected the Group of 8 countries — France and Britain, among them — to express strong support for efforts to generate jobs and revive growth in Arab countries.

“Chancellor Merkel, President Sarkozy, a number of leaders, have all stressed the importance of using these meetings to show a unified front in providing support for Egypt and Tunisia,” Benjamin J. Rhodes, Mr. Obama’s deputy national security adviser, said of Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France.

Libya and the Arab world dominated the meeting of world leaders in this fashionable seaside resort in Normandy. Mr. Sarkozy, the host, is still pushing for the United States to deploy A-10 attack aircraft and AC-130 gunships in Libya, said a French official, though he said Mr. Sarkozy was making his pitch privately.

At a news conference here, the French president reiterated his call for Colonel Qaddafi to relinquish power. “We’re not saying he should go into exile,” Mr. Sarkozy said. But he “cannot stay in power.”

Mr. Obama, who has rejected calls for more combat aircraft, is trying to keep the focus on economic stability and jobs in Egypt and Tunisia. At the same time, he is relying on European governments and international financial institutions to supply much of the capital.

Prime Minister David Cameron told Mr. Obama on Wednesday that Britain would support the effort, and it would pledge $178 million. American officials said they had gotten encouraging signs from Germany and France, even if neither has made a concrete pledge.

The International Monetary Fund, which has had a team in Egypt for the last week, is readying a package worth $4 billion to $5 billion to help it bridge a financing gap, a fund official said. Egyptian officials said their economy, damaged by unrest that halted trade and tourism, will need an infusion of $12 billion just this year to steady itself.

Last week, Mr. Obama announced $1 billion of debt relief and $1 billion in loan guarantees for Egypt. The European Union plans to increase its aid by $1.75 billion.

The United States and Europe have played down expectations of a big dollar total, saying this is not a pledging conference. That partly reflects the bitter experience of past summit meetings, where tens of billions of dollars were pledged to alleviate poverty and many countries dragged their feet in delivering on their promises.

It also reflects the fact that the most cash-rich countries — as well as the ones with the most incentive to support stable Arab countries — are their neighbors in the Persian Gulf. The Obama administration is focusing much of its efforts on persuading Saudi Arabia and other gulf countries to make pledges to Egypt and Tunisia, officials said.

The Group of 8 is also expected to take a harsh stand against Syria’s crackdown on pro-democracy protesters, officials said. That may require some arm-twisting, however, since Russia has opposed efforts to impose United Nations sanctions on the Syrian government.

Conceding those differences, Mr. Rhodes said, “We want to have a strong and unified voice that we’re speaking with our allies and all who share concerns for the rights of the Syrian people.”

The Libyan campaign was high on the agenda when Mr. Obama met for 90 minutes with Russia’s president, Dmitri A. Medvedev. But they also discussed Russia’s bid to enter the World Trade Organization and efforts to settle disagreements over the deployment of an American missile-defense system in Eastern Europe.

Russia is less bitterly opposed to missile defense than it was a year ago, an American official said. But he said the Russians remained suspicious that the most advanced version of the system — not scheduled to be deployed until 2020 — would threaten their nuclear defenses.

“They have a perception that when we get to that phase, that there may be some capability to threaten what we call strategic stability,” said Michael McFaul, senior director for Russia at the National Security Council. “We have no intention of doing that.”

Mr. Medvedev and Mr. Obama appeared stern-faced after their session, but American officials insisted it went well. Their expressions, one said, reflected only the stuffiness of the room.

Despite much anticipation, the leadership void at the I.M.F. did not figure much in hallway chatter. The French government is promoting its finance minister, Christine Lagarde, as a candidate to succeed Dominique Strauss-Kahn, who has been charged with the sexual assault of a hotel maid in New York.

The Obama administration remains noncommittal on her candidacy, saying only that it wants the most qualified person. But a French official said he was confident that Ms. Lagarde, who did not attend the meeting, had amassed enough support to win the managing director post.

Liz Alderman contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=118f4bfb0ad4abbf78fc33fc73bfefb6

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G-8 Leaders to Call for Tighter Internet Regulation

May 24, 2011 by Leave a Comment

PARIS — Leaders of the Group of 8 industrialized countries are set to issue a provocative call for stronger Internet regulation, a cause championed by the host of the meeting, President Nicolas Sarkozy of France, but fiercely opposed by some Internet companies and free-speech groups.

The G-8 leaders will urge the adoption of measures to protect children from online predators, to strengthen privacy rights and to crack down on digital copyright piracy, according to two people who have seen drafts of a communiqué the G-8 will issue at the end of a meeting this week in Deauville, France. At the same time, the document is expected to include a pledge to maintain openness and to support entrepreneurial, rather than government-led, development of the Internet.

This balancing act was reflected Tuesday in a speech by Mr. Sarkozy, who convened a special gathering of the global digerati in Paris on the eve of the G-8 meeting. Calling the rise of the Internet a “revolution,” Mr. Sarkozy compared its impact to that of two previous transforming episodes in global history: the age of exploration and the industrial revolution.

The Internet revolution “doesn’t have a flag, it doesn’t have a slogan, it belongs to everyone,” he said, citing the recent uprisings in the Arab world as examples of its positive effects.

Before an audience that included top executives of some of the world’s largest Internet companies, including Google, Facebook, Amazon and eBay, he added, however: “The universe you represent is not a parallel universe. Nobody should forget that governments are the only legitimate representatives of the will of the people in our democracies. To forget this is to risk democratic chaos and anarchy.”

The pre-Deauville meeting in Paris, called the E-G8 Forum, is providing a public window into the debates that have shaped the expected G-8 communiqué — in addition to serving as a soapbox for Mr. Sarkozy as he gears up his campaign for re-election next spring.

Mr. Sarkozy’s push to turn Internet governance into a G-8 issue, elevating it to the level of more traditional topics like trade, currencies, terrorism or climate change, has been applauded by companies in industries like music, which have been ravaged by digital piracy. But it has drawn concern from Internet companies and outright criticism from some people who see a threat to the openness that has characterized the Internet to date, at least in most Western societies.

During a panel discussion Tuesday, Yochai Benkler, faculty co-director of the Berkman Center for Internet and Society at Harvard University, told Finance Minister Christine Lagarde of France that he thought the French approach to online copyright protection was “the wrong way to go.”

“You can make the Internet safe for Lady Gaga or Justin Bieber, or you can make it safe for the next Skype or YouTube,” he said, asking her to relay that message to the G-8 leaders in Deauville.

Ms. Lagarde promised to do so, but added that she thought the rights of content owners and Internet companies could be reconciled.

Mr. Sarkozy is not alone in calling existing laws and regulations inadequate to deal with the challenges of a borderless digital world. Prime Minister David Cameron of Britain said this week that he would ask Parliament to review British privacy laws after Twitter users circumvented court orders preventing newspapers from publishing the names of public figures who are suspected of having had extramarital affairs.

But France has gone further than many other Western countries in pushing for what Mr. Sarkozy has called a “civilized Internet.” Among his initiatives are a so-called three-strikes law that threatens persistent digital pirates with the suspension of their Internet connections. Another new French law authorizes the government to filter out Web sites containing illegal content like child pornography.

The G-8 communiqué, which is still being finalized by the G-8 leaders’ sherpas, or policy emissaries, is not expected to contain specific prescriptions like these. Instead, it will include broad pledges to deal with privacy, piracy and child protection, the people with knowledge of the talks said.

In some cases, even general agreement has been difficult. On digital piracy, for example, Russia, which has been the home of some notorious file-sharing services, is said to have raised objections. And while there had been speculation before the E-G8 Forum that Mr. Sarkozy might call for the creation of a new international body to oversee the Internet, this idea was apparently rejected.

Rod Beckstrom, chief executive of the Internet Corporation for Assigned Names and Numbers, which oversees the Internet address system, gave qualified support to Mr. Sarkozy’s prescriptions, saying the mix of public- and private-sector groups that oversee the global network needed to cooperate more closely.

“To keep the Internet open and unified, the multi-stakeholder community needs to build better relationships with government,” Mr. Beckstrom said. But he added that he thought efforts to control the content of the Internet would prove futile: “I think there are a lot of global leaders trying to grasp at air.”

Eric E. Schmidt, the executive chairman of Google, said technology, rather than regulation, could take care of many of the challenges facing the Internet, including potential limits on capacity as more and more video traffic and other bandwidth-heavy content passes through telecommunications networks.

“Before we decide there is a regulatory solution, let’s ask if there’s a technological solution,” he said. “We will move faster than any of these governments, let alone all of them together.”

Article source: http://www.nytimes.com/2011/05/25/technology/25tech.html?partner=rss&emc=rss

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Merkel Clears Way for Draghi to Lead E.C.B.

May 11, 2011 by Leave a Comment

Mr. Draghi, the governor of the Bank of Italy and an American-trained economist, is well regarded by economists and foreign leaders, and his appointment should reassure them that the E.C.B. will continue to have a strong leader at a time when the euro is in crisis.

Ms. Merkel told the weekly newspaper Die Zeit, in an interview published Wednesday, that Mr. Draghi embodies German ideas about economic stability and that the government could support his candidacy. Ms. Merkel’s office confirmed that the report was accurate.

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

European heads of state are likely to formalize Mr. Draghi’s nomination at a meeting on June 24. He will replace Jean-Claude Trichet, whose term expires at the end of October.

Though top-ranking German officials have said privately that they admired Mr. Draghi, Ms. Merkel had avoided making a public statement of support for him. She may have feared that an Italian at the helm of the bank would not be acceptable to the German public.

But after other leaders like French President Nicolas Sarkozy said in recent weeks that they support Mr. Draghi, the pressure was on Ms. Merkel to take a stand.

Mr. Draghi is regarded as slightly less hard-line on inflation than Axel Weber, the former president of the German Bundesbank, who had been the front runner as next E.C.B. president until he unexpectedly withdrew earlier this year.

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 relentless 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.

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

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German Paper Finds Draghi Not So Bad After All

April 30, 2011 by Leave a Comment

FRANKFURT — Bild, a racy German daily that is easy to ridicule but hard to ignore, on Friday improved Mario Draghi’s chances of becoming the next president of the European Central Bank by dropping a campaign that depicted him as a feckless Italian who can’t be trusted with money.

“On second thought,” the newspaper said in its Friday edition, after noting how it had ridiculed Mr. Draghi in the past, “he is actually rather German, even Prussian.” The newspaper conferred honorary citizenship on Mr. Draghi, who is president of the Bank of Italy, and ran a doctored photo of him wearing a spiked helmet. “It looks good on him,” the caption said.

The newspaper’s faux naturalization of Mr. Draghi may have real political significance, as it gives Chancellor Angela Merkel more space to endorse Mr. Draghi without worrying about a public backlash stoked by the country’s most widely read newspaper.

Despite its focus on sex, scandal and football, Bild — which in apparent deference to the royal wedding did not run its usual Page 1 photo of a bare-breasted woman Friday — is taken seriously in political circles. Political leaders often grant exclusive interviews to the newspaper, which is based in Berlin but distributed nationally, when they have something to say to the German people.

Quoting unidentified sources, Bild also reported that Mrs. Merkel had decided to support Mr. Draghi as successor to Jean-Claude Trichet, whose term ends in October. The chancellor’s office denied Friday that she had made a decision. But Mr. Draghi’s candidacy looks increasingly inevitable after he won the backing of President Nicolas Sarkozy of France this week.

Bild’s clout is often overestimated, said Gero Neugebauer, a political scientist at the Free University of Berlin. “Ordinary people have absolutely no interest in who will be the next president of the E.C.B.,” Mr. Neugebauer said.

Still, Bild’s turnaround means “it’s easier for Mrs. Merkel to support this candidate,” Mr. Neugebauer said. “She won’t have any resistance from this important newspaper.”

German leaders had expected that Axel A. Weber, the Bundesbank president, would become the next E.C.B. president. But he unexpectedly took himself out of the running this year and resigned his Bundesbank post. Coincidentally, Friday was his last day in the job.

Top officials in Berlin had been careful not to criticize Mr. Draghi but seemed to still harbor hopes that they could find another German candidate. But there appeared to be no one else with the stature and experience needed to steer the euro zone through the crisis created by debt problems in Greece, Portugal and Ireland.

In revising its opinion about Mr. Draghi, Bild noted that he is a graduate of the Massachusetts Institute of Technology and has often clashed with Silvio Berlusconi, the Italian prime minister facing charges that he paid an underage girl for sex.

Bild described Mr. Draghi as strict, down to earth, determined and loyal. “As Italy’s top banker, he has since 2006 preached economic reforms, debt reduction and spending discipline,” the paper said. “Bild therefore grants him honorary citizenship.”

Article source: http://www.nytimes.com/2011/04/30/business/global/30draghi.html?partner=rss&emc=rss

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