Mario Draghi - the sole nominee to replace Jean-Claude Trichet as president of the European Central Bank - has told a confirmation hearing in the European Parliament that giving medium-term loans to support liquidity in the Irish banking sector would conflict with the ECB's main mission of fighting inflation.

Mr Draghi, the current governor of the Bank of Italy and a former Goldman Sachs executive, said the ECB understands that it would be very useful to Ireland and to confidence in the Irish banking sector if funding were switched from its current rolling short-term support to a medium-term facility.

But he said that giving liquidity to a country over the medium-term, regardless of price developments, would conflict with the ECB's central mission of maintaining price stability - in other words fighting inflation.

In response to a question from Dublin MEP Gay Mitchell of Fine Gael, Mr Draghi said: 'We do understand that this would give give confidence to Ireland but we have to be free to use monetary policy to control prices. And if we do it for one country why not for all? And if do it for all we don't run a monetary policy anymore.' Mr Draghi said the ECB had to weigh 'different trade-offs'.

MEP Gay Mitchell described Mr Draghi's comments on the possibility of a medium-term lending facility as 'the best reply I've heard so far'. Mr Mitchell said: 'He is open to the idea, and has clearly given some consideration to it.'

The MEP added that Ireland was the best chance of a success in the euro zone and the Government had to continue to promote the idea of medium-term rather than the current 14-day facility.

The European Parliament's Economic and Monetary Affairs Committee is due to vote on its recommendation on Mr Draghi's candidacy tomorrow. A vote of the full parliament takes place next week, just ahead of the next EU summit, which will appoint a successor to Mr Trichet.

Mr Draghi also chairs the Financial Stability Board, a G20 committee of central bankers working on new rules and regulations governing global finance.