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UPDATE 2-EU parliament vetoes Mersch, wants woman for ECB

* European Parliament rejects Mersch by 325 votes to 300

* EU lawmakers frustrated by lack of women ECB candidates

* Decision ups stakes in showdown with EU member states

* Mersch still likely to be confirmed, but snub registered

(Adds comment, reaction from ECB, analysts, lawmakers)

STRASBOURG, France, Oct 25 (Reuters) - The European Parliament rejected Luxembourg banker Yves Mersch's nomination to the board of the European Central Bank on Thursday because of his gender, raising the stakes in a showdown with EU governments over power and women's rights.

In a plenary vote in Strasbourg, members rejected Mersch's candidacy by 325 votes to 300, saying insufficient effort had been made to find suitable women candidates for the post. Forty-nine lawmakers abstained.

It is the toughest stance the European Parliament has taken on such a sensitive issue of economic management, underlining its determination to have a great say in decision-making at a time of crisis for the single currency and the region.

EU leaders have the power to steamroller Mersch's appointment through over the lawmakers' objections. There was no immediate comment on how they would respond.

Sharon Bowles, head of the economic affairs committee and a driving force behind the rejection, was especially critical of Herman Van Rompuy, president of the European Council, for not putting forward any women candidates.

The European Council represents member states and Van Rompuy has said efforts were made to secure women applicants, but it is up to member states to put forward qualified candidates.

``Van Rompuy has not taken the opportunity to offer more than lip service to what is a very serious matter,'' said Bowles, herself a candidate to be the Bank of England's next governor.

``He has promised nothing, not even a road map, for appointing women to the ECB board in the future. European institutions should be leading by example, not dragging their feet,'' she said in a statement.

The ECB's 23-member governing council is made up of the six executive board members and the 17 national central bank chiefs of euro zone states, all of whom are men at this time. If Mersch is appointed, the next board vacancy would not be until 2018, adding to the pressure for a female policymaker now.

The European Parliament is frequently outspoken on issues of gender equality and human rights, and in this case generated a groundswell of support for its position.

The vote came in a week when the European Commission put off a proposal that would have obliged companies to allot 40 percent of their board seats to women by 2020, highlighting how gender issues are rising up the EU's agenda.

The ECB's last female policymaker, Austria's Gertrude Tumpel-Gugerell, left at the end of her term in 2011.

GESTURE POLITICS?

For their part, EU member states and the ECB are frustrated by parliament's obstruction of Mersch, seeing it more as an act of gesture politics than a matter of principle, and worried that it could leave the ECB short-handed at a time of crisis.

Mersch was nominated to replace Spaniard Jose Manuel Gonzalez Paramo on the ECB's top decision-making body, the six-member executive board, at the end of May this year. Nearly six months on, the position is still empty.

Mersch's appointment is particularly important for Germany, which is keen to ensure that a hawkish voice, albeit a non-German one, is maintained on the executive board.

While parliament has succeeded in making its voice heard, Mersch's appointment is still likely to go ahead, even if it is now more politically sensitive for the European Council to override the legislature.

Asked to comment on Thursday's vote, a spokesman for the ECB referred to President Mario Draghi's statement on Oct. 9, when he told the European Parliament that ``especially in times of crisis, the executive board should be completed and (Mersch's) nomination should go through''.

SEND THE RIGHT MESSAGE

Sylvie Goulard, a French liberal parliamentarian who is outspoken on gender issues, said parliament was right to reject Mersch's candidacy if the EU wanted to have any legitimacy with other countries where women's rights are at risk.

``How can you go to Tunisia to tell them to respect the rights of women and then have an all-male ECB?'' she said, emphasising that the EU treaties underpin gender equality.

Mersch's supporters in parliament said it was wrong to put the stability of the euro zone at risk by holding up the appointment of a senior central banker to a critical post.

``The European Union needs stability in these times of crisis and the European Central Bank has a crucial role to play,'' said Joseph Daul, chairman of the conservative group in parliament.

``We voted in favour as we are fully convinced that Mr Mersch is of recognised standing and has the professional qualifications and experience in monetary and banking matters needed to exercise the functions'' of an ECB board member.

Mersch is an inflation-fighting hardliner whose policy views are close to those of the Bundesbank, the German central bank, which has lacked a close ally on the executive board since German Juergen Stark quit last year. ID:nL5E8GEG51

Analysts said Mersch's hawkishness was not necessarily what the ECB requires right now.

``In an economy more threatened by deflation and depression than inflation, one hopes that Mersch will bring more to the job than hard money rhetoric,'' said Bill Adams, Senior International Economist at the PNC Financial Services Group.

(Reporting By Claire Davenport; editing by Luke Baker and Paul Taylor)

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