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French official: confident Draghi will be ECB head

By Gabriele Steinhauser

Associated Press

Published: Friday, June 24 2011 2:45 a.m. MDT

From left, Belgium's Prime Minister Yves Leterme, Latvian Prime Minister Valdis Dombrovskis, Greek Prime Minister George Papandreou, Spain's Prime Minister Jose Luis Rodriguez Zapatero, European Commission President Jose Manuel Barroso, French President Nicolas Sarkozy, Portugal's Prime Minister Pedro Passos Coelho, Slovenia's Prime Minister Borut Pahor and German Chancellor Angela Merkel walk together after a group photo at an EU summit in Brussels on Thursday, June 23, 2011. Greece's financial meltdown is set to overshadow yet another summit of European Union leaders, who on Thursday will discuss new ways to get the country back on its feet and protect the euro's stability.

Michel Spingler, Associated Press

BRUSSELS — A senior French official said he is confident EU leaders will appoint Mario Draghi as the new president of the European Central Bank at their summit Friday — a move that would give investors some certainty over who will lead the institution in its pivotal role against Europe's crippling debt crisis.

The timing of Draghi's appointment had come under doubt as fellow Italian executive board member Lorenzo Bini Smaghi has so far refused to leave his post. But delaying the appointment until their next summit in September would have underlined divisions among EU leaders, who have already struggled to find a common line on debt-stricken Greece and the best way of containing the financial crisis that has also pushed Ireland and Portugal into needing massive bailouts.

The worry in Paris has been that France would not have a representative on the ECB's executive board once current ECB chief Jean-Claude Trichet departs on Oct. 31. The French had previously implied they would only support Draghi if a Frenchman or woman takes Bini Smaghi's spot.

The French official didn't say how the differences would be ironed out. He spoke on condition of anonymity because the decision wasn't final.

A second European official also said Draghi's appointment would likely come Friday.

The ECB has played a central role during the debt crisis that has afflicted the 17-country eurozone over the past 18 months or so. For example, Trichet overrode criticism from some of the more hawkish officials at the bank when he backed a multibillion euro bond-buying program intended to ease the pressure on the more indebted countries.

The ECB has also provided massive amounts of liquidity to European banks since the start of financial crisis.

More recently, the ECB has found itself in the difficult position of raising interest rates to keep a lid on above-target inflation levels even though the weaker eurozone economies remain weak.

The decision on Draghi is expected a day after EU leaders gave their clearest sign yet that Greece will get a second bailout in the coming weeks, on top of last year's €110 billion.

"We agreed that there will be a new program for Greece," said German Chancellor Angela Merkel.

The stronger language on aid for Greece was also made possible after debt inspectors from the EU and the International Monetary Fund reached a final deal Thursday with the government in Athens on €28 billion worth of new austerity measures.

The measures have to be passed by the Greek Parliament next week for the bailout funds to be released. If lawmakers fail to back the package, then Greece will likely be staring at a default on its debts.

Even if it gets a second bailout, many economists think that Greece will have to restructure its debts in some shape or form in the coming years, especially if the economy shrinks further.

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Angela Charlton contributed to this story.

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