Chancellor Angela Merkel picked her aide Jens Weidmann as German central bank chief to succeed Axel Weber, officials said on Wednesday, making it less likely she will insist on a German running the European Central Bank.
Weidmann, who is 42, has spent five years as Merkel's top economic adviser, helping her lead Germany through the financial crisis, recession and euro zone debt crisis.
As Bundesbank chief he gets a seat on the ECB's governing council.
A spokesman for Chancellor Angela Merkel's junior coalition partners, the Free Democrats, confirmed Weidmann's appointment and that his new vice-president would be Sabine Lautenschlaeger, from the German banking regulator Bafin.
Merkel and Finance Minister Wolfgang Schaeuble were due to give a joint statement on the Bundesbank succession at 1215 GMT.
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.
Fellow-German Juergen Stark, another hawk, is already on the ECB's executive board.
If there was a German candidate for the ECB presidency like (euro zone bailout chief Klaus) Regling, it would have implied that Stark would have to step down and go to the Bundesbank and this road is closed now, said ING economist Carsten Brzeski.
With Stark and Weidmann, Germany will have two people in the council to inject the Bundesbank spirit. That should be sufficient, said Stephan Rieke, an economist at BHF Bank.
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.
Germany has said its priority is sorting out the Bundesbank post and proposing a package of euro zone crisis measures for a series of summits in March before deciding the ECB succession.
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.
There is a need to decide as soon as possible. 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]
I think really means they have given up the idea of having a German candidate for the ECB presidency, Brzeski said.
As an ECB outsider Regling's chances are slim. He told reporters last week that he already had a great job.
While Germany had widely been expected to take over the ECB this time, following a French and previously a Dutch presidency, Berlin has signaled since Weber's surprise resignation that it did not rule out a non-German candidate.
Finance Minister Wolfgang Schaeuble said last week Berlin had never insisted on a German for the job.
Italy is proposing its central bank chief Mario Draghi, head of the Financial Stability Board, though an earlier incarnation as a Goldman Sachs banker 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 Eurogroup 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.
Rieke said Weidmann could now get the experience to be a future contender for ECB president. He's still very young and could be a candidate for the ECB presidency later on, he said.
The Bundesbank was established in 1957 and its success in controlling inflation meant its decisions had an impact across Europe and beyond. It also made the Deutschmark a respected and strong currency until it was replaced by the euro in 2002.
(Additional reporting by 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)