Merkel picks aide for Bundesbank, opening up ECB race

BERLIN (Reuters) - Chancellor Angela Merkel named her top aide Jens Weidmann on Wednesday as German central bank chief to succeed Axel Weber, making it less likely she will insist on a German running the European Central Bank.

Weidmann, who at 42 will be the youngest president in the Bundesbank's 54-year history, has spent five years as Merkel's economic adviser, helping her lead Germany through the financial crisis, recession and euro zone debt crunch.

At a news conference at her chancellery in central Berlin, Merkel played down concerns expressed by some opposition parties that she was making an overtly political appointment by putting her close adviser at the top of the Bundesbank, the independent post-war guardian of stability in Germany.

"Everyone acquainted with Jens Weidmann knows he is highly competent on the issues, has a brilliant intellect and an independent mind," she said.

"We are all convinced that he will be an outstanding president of the Bundesbank and will represent Germany and use his voice in the European Central Bank to promote a stability culture," Merkel said. "He will defend Germany's own interests."

As Bundesbank chief, Weidmann will sit on the ECB's governing council. Weidmann's new deputy will be Sabine Lautenschlaeger from the German banking regulator Bafin.

Weidmann's nomination to succeed the effective but sometimes abrasive inflation-hawk Weber, who steps down on April 30, was expected but may throw open the contest to succeed Jean-Claude Trichet as ECB president to candidates from other countries.

Had Merkel tapped Juergen Stark, another monetary policy hawk, and taken him off the ECB's executive board, it would have been a clear sign that Berlin wanted a German to replace Trichet, whose term as ECB president ends in October.

"I really think this means they have given up the idea of having a German candidate for the ECB presidency," said Carsten Brzeski, an economist at ING.

Although ECB Governing Council members are in theory equal, the Bundesbank president carries particular authority thanks to the German central bank's inflation-fighting legacy and by virtue of Germany being the euro zone's dominant economy.

Finance Minister Wolfgang Schaeuble, announcing Weidmann's nomination with Merkel and foreign minister Guido Westerwelle, said the priority was to prepare euro zone crisis measures for a series of summits in March before deciding the ECB succession.

"For now we will focus on the substantive decisions linked to the medium-term stabilization of the euro and once those are taken we will decide on the personnel issues," he said.

But the finance minister of Luxembourg, Luc Frieden, told an Italian paper a successor to Trichet had to be found quickly to avoid causing instability, presumably in financial markets.

"Trichet leaves in October. A delay risks generating instability," said Frieden.

NEVER INSISTED ON GERMAN

The choice of Weidmann rather than veteran central banker Stark means the latter should remain on the executive board of the Frankfurt-based the ECB. [ID:nLDE71A11H]

The top German candidate for Trichet's post is Klaus Regling, who runs the European Financial Stability Facility (EFSF), the rescue fund put in place to support troubled euro zone countries.

As an ECB outsider with no central banking experience, Regling is seen by some as a long shot. He told reporters last week that he already had "a great job."

Germany had been expected to press for a home-grown president for the ECB, which was run by Dutchman Wim Duisenberg before Trichet. But Berlin has signaled since Weber's surprise resignation that it did not rule out a non-German candidate.

However Westerwelle, who has tried hard to paint his struggling Free Democrats as defenders of German interests within the euro zoen, said Germany must "exert influence."

"We have not given up our ambitions in Europe, at the European Central Bank," the foreign minister said. "We want to ensure the stability culture that has been part of Germany for decades is continued in Europe."

Italy wants its central bank chief Mario Draghi, head of the Financial Stability Board, to become the next ECB president but his previous work for U.S. investment bank Goldman Sachs could be a problem for some.

Luxembourg's Yves Mersch, on the ECB governing council, was close to ruled out as a contender by his country's finance minister, Frieden, who said he could not see Luxembourg having that post as well as the chair of the Eurogroup of euro zone finance ministers, held by Jean-Claude Juncker.

At the Bundesbank, Weidmann is expected to bring a softer profile and greater political experience gained from Berlin, in contrast to the sometimes brusque 53-year-old Weber.

But he should also mean continuity in terms of the central bank's focus on fighting inflation.

"I wouldn't expect major changes in the general direction of economic policy," said Julius Baer analyst David Kohl.

Stephan Rieke, an economist at BHF Bank, said Weidmann could ultimately emerge as a future contender for the ECB presidency if Germany does not seek the post this time.

"He's still very young and could be a candidate for the ECB presidency later on," he said.

(Additional reporting by Annika Breidthardt, Noah Barkin, Thorsten Severin, Gernot Heller, Erik Kirschbaum, Scot Stevenson, Paul Carrel in Frankfurt and Nigel Tutt in Milan; writing by Stephen Brown, editing by Mike Peacock)