Sarkozy Backs Italian Official to Lead Central Bank

 

President Nicolas Sarkozy of France said he would support a respected Italian monetary official, Mario Draghi, to succeed Jean-Claude Trichet when he steps down later this year. Mr. Sarkozy made his unexpected announcement at a joint news conference in Rome with Prime Minister Silvio Berlusconi of Italy.

But in the political brinksmanship common with appointments at top European institutions, Mr. Sarkozy’s move may have made it harder for Chancellor Angela Merkel of Germany to endorse Mr. Draghi.

Germany’s finance ministry, led by Wolfgang Sch?uble, has recently warmed to the idea that Mr. Draghi is the best-qualified person for the job. But Mrs. Merkel faces a delicate task in preparing German voters for the prospect of an Italian’s having responsibility for keeping European inflation under control and managing the fate of the euro.

Mr. Sarkozy, though, expressed no such reservations.

“France will be very happy to support an Italian for the presidency of the E.C.B.,” he said. “I know Draghi well. We support him not because he is an Italian but because he is a man of quality.”

Mr. Sarkozy made the announcement without consulting Mrs. Merkel, according to a German official who insisted on anonymity.

The European Central Bank’s role in fighting inflation is a major preoccupation for Germany, and Mrs. Merkel retains an effective veto over the appointment, which is scheduled to be decided at a summit in June.

Mrs. Merkel had been hoping that an inflation-fighting German, or a banker from a North European country, would take the helm from Mr. Trichet, who is retiring in October. But her preferred candidate, Axel A. Weber, the former president of the German central bank, took himself out of the running earlier this year. Mr. Weber resigned from the Bundesbank in February.

Mr. Weber’s exit pushed Mr. Draghi’s candidacy to the forefront, despite widespread perceptions, particularly in Germany, that people from Mediterranean countries are not as prudent and responsible with money as those from northern nations.

Despite that stereotype, in the corridors of finance Mr. Draghi, governor of the Italian Central Bank, is widely respected as an experienced economic policy maker with sterling credentials and a knack for navigating turbulent political waters.

But Mr. Sarkozy’s announcement, by appearing to pre-empt Mrs. Merkel, could complicate the process of selecting the next central bank president.

Mr. Sarkozy’s remarks were all the more surprising because both he and Mrs. Merkel have sought to forge a closer relationship to keep the euro from unraveling amid the debt crisis.

They have also worked to overcome differences in their approaches to the central bank. Germany wants to keep the bank free from politics, while France, according to German officials, is more interested in influencing it.

It is not the first time Mr. Sarkozy has bewildered a crucial European partner by announcing policy without giving advance notice. But French officials insisted that they had been encouraged to support Mr. Draghi after Mr. Sch?uble appeared to endorse him; they expect Mrs. Merkel to ultimately support him as well.

In return, France expects Germany to back a Frenchman for the seat that Mr. Draghi would vacate on the bank board, said senior French officials who spoke anonymously because of the political sensitivity of the matter.

Mr. Draghi has a reputation as a consensus builder — an important skill when running a central bank. Mr. Weber dropped out of the running in part because he was out of step with other members of the bank’s policy-making committee.

Mr. Draghi, serious and direct, is also acutely sensitive to Germany’s preoccupation with fighting the specter of inflation, and has spent the last few months underscoring his inflation-fighting credentials. In a rare interview in February, he said monetary policy should “first and foremost be geared toward price stability.”

The central bank recently raised interest rates by a quarter percentage point, a move Mr. Draghi supported. Analysts expect the bank to lift rates perhaps twice more this year.

That policy has come under fire from some experts who warn that higher rates will choke off the faltering recovery in some countries. But Mr. Draghi’s firm position on inflation has helped endear him to Mr. Sch?uble, the German finance minister. He sees Mr. Draghi as someone who can guide a strict fiscal and monetary policy while keeping meddling politicians at bay, according to a German finance official, who spoke on condition of anonymity because he is not authorized to speak on the record.

Mr. Sch?uble also holds the view that choosing a central banker from a southern European country would send a good signal to its troubled neighbors, the official said, because it might show that the politics and economics of the 17-member euro zone are not driven by northern countries alone.

If Mr. Draghi got the job, he would have to navigate the tricky financial and political imperatives of bailouts for the most stricken European countries. He would also have to weigh how much support the central bank can and will continue to give to troubled banks in countries like Ireland and Spain.

Mr. Draghi seems to have managed to overcome reservations about his role as a managing director at Goldman Sachs from 2002 to 2005. The investment bank was the lead manager for a 2001 derivatives transaction that allowed Greece to dress up its books in a way that brought it into the euro club, but Mr. Draghi has made clear that he was not directly involved.

On another monetary policy issue, Mr. Draghi has discreetly voiced concern about the central bank’s continuing intervention in markets for European government bonds. He emphasized that intervention was justified only to make sure that the bank maintained its influence over interest rates, and not as a form of economic stimulus or stealth financing for overindebted governments.

Judy Dempsey reported from Berlin and Liz Alderman from Paris. Katrin Bennhold contributed.