Earlier quoted context omitted.
Google's users don't see the paywall, so why would Google care?
Because google claims to care about the wider web not just its search product. This breaks the web.
"Not breaking the web" has a couple sides:
1. Users have to be able to find and read interesting content.
2. Content publishers have to be able to make enough money so that they continue to find it economical to produce content.
"First click free" was the compromise solution for this. Google's incentives actually run both ways - if they couldn't use paywalls, most content sites would probably use AdSense or DoubleClick, both Google products. But it's unlikely that a site like The Economist or The New York Times could continue to produce quality articles off AdSense revenue alone.