Awwal 07, 1432, Feb 10, 2011, SPA - Axel Weber's shock withdrawal from the ECB leadership contest has increased pressure on Chancellor Angela Merkel to impose tough German fiscal rules on euro zone partners to satisfy her coalition and voters at home, Reuters reported. Weber's decision to step down, reported by Reuters on Wednesday, was widely seen in Berlin as a blow to Merkel and her drive to see a German replace Jean-Claude Trichet when his term as president of the European Central Bank ends in October. German media said she had lost a vital ally in what some depict as the battle to save the euro. Opposition politicians accused her of throwing away a chance to put a home-grown candidate at the helm of the central bank which sets monetary policy for the 17-nation euro zone. People close to Merkel have said for weeks that her main priority has been to ensure the new "comprehensive package" euro leaders have promised to unveil next month has Berlin's policy fingerprints all over it. Having lost a major bargaining chip in Weber, she has even less wiggle room to compromise with EU partners at two crucial summits -- on March 11 and March 24-25 -- which will shape the future of Europe's 12-year old single currency zone. "I think that Germany will now try much harder to push through its points," said Daniela Schwarzer, an analyst at the German Institute for International and Security Affairs. As she has been forced to do for months, Merkel must balance the demands of domestic constituents, who expect her to drive a hard bargain in Brussels, and the needs of European partners, who are willing to accept some but not all of Berlin's demands. Lurking in the background are increasingly nervous financial markets, whose confidence that EU leaders will forge a strong agreement to stem contagion to countries like Portugal and Spain seems to be fading. Portuguese bond yields shot up to their highest level since the creation of the euro on Thursday and the single currency fell back against the dollar as renewed doubts about the promised package emerged. -- SPA
