German Chancellor Angela Merkel signaled her backing for MarioDraghi as the next president of the European Central Bank, leavingthe Bank of Italy governor unopposed by Europe's politicalleaders.

“I know Mario Draghi,” Merkel told Die Zeit newspaper in aninterview published today. “He's a very interesting and experiencedperson. He's very close to our ideas of the stability culture andsolid economic policy. Germany could support his candidacy for theoffice of the ECB president.”

Merkel's remarks, her first to mention a candidate for the ECBpost by name, were confirmed by the Chancellery and by her chiefspokesman, Steffen Seibert.

Germany is the last of the four biggest euro-region countries toendorse Draghi after French President Nicolas Sarkozy told ItalianPrime Minister Silvio Berlusconi on April 26 that he would back anItalian. Spanish Finance Minister Elena Salgado called Draghi an“excellent candidate” the next day.

The euro failed to react as the news broke today. It was up 0.25percent to $1.4392 as of 12:26 p.m. in Berlin.

Euro area finance ministers tentatively plan to make the ECBnomination when they meet in Brussels on May 16. Germany haspreviously signaled that European leaders will make a decision onan ECB candidate at a June summit.

Weber Pulls Out Draghi became the frontrunnerin February when Germany's contender, then-Bundesbank PresidentAxel Weber, pulled out of the race to succeed Jean-Claude Trichetat the ECB. Jens Weidmann, formerly Merkel's chief economicadviser, took over at the helm of the Bundesbank this month.

Draghi's candidacy is a done deal in Merkel's coalition, agovernment official said in Berlin on condition of anonymitybecause of the sensitivity of the matter. The government's mainconcern is having a candidate in place who will represent Germaninterests and Draghi fits the bill, the official said.

The eight-year term of the ECB's current president ends inOctober, creating an opening at the top of the world's second- mostpowerful central bank after the U.S. Federal Reserve. While Germanyalone cannot dictate who wins the post, its status as Europe'slargest economy and biggest guarantor of aid to peripheral eurocountries make it the dominant voice in the appointment.

Debt Crisis Draghi will inherit an ECB verydifferent to the one that Trichet took over in November 2003. AsECB president, Draghi will have to eventually steer the centralbank out of a sovereign debt crisis that that forced it to take theunprecedented steps of buying government bonds, a move some councilmembers said jeopardizes its independence.

The ECB is also trying to convince politicians that Greece can'tbe allowed to restructure their debts, a move that Executive Boardmember Lorenzo Bini Smaghi says could see part of the Greek bankingsystem collapse.

At the same time, Draghi will also have to convince investorsand voters that he can fulfill the ECB's primary mandate and getinflation under control. Germany's biggest- selling Bild newspaperearlier this year raised questions about whether an Italian couldbe trusted to get a grip on prices given the country's inflationaryhistory. The newspaper last month backed Draghi's campaign, sayingthat Merkel wanted to support “the most German of the remainingcandidates.”

Inflation accelerated to 2.7 percent in April, the fastest pacein 2 1/2 years and the ECB raised interest rates in that month forthe first time in three years.

MIT-Trained Draghi, a Massachusetts Instituteof Technology-trained economist, has worked at the World Bank andGoldman Sachs Group Inc. He is also chairman of the FinancialStability Board, which was established by the Group of 20 nationsin 2009 to oversee development of standards to strengthen globalregulation.

In a sign Draghi understood the need to meet German skepticismhead on, he appealed to the German inflation-fighting mindset,saying on April 13 that monetary policy is still “accommodative”even after the ECB raised its benchmark rate on April 7.

In February, he told newspaper Frankfurter Allgemeine Zeitungthat Germany is an example for other nations, calling for toughersanctions for budget-rule breaches and vowing to ensure pricestability.

Bloomberg