The German leader's support could be crucial in landing him the job, a testament to Spain's changed fortunes two-and-a-half years since the nation was fighting off the threat of an all-out financial and economic bailout.
Now, the eurozone's fourth-largest economy is being touted by some as an example of fiscal restraint and economic reform, despite suffering an unemployment rate of more than 24 percent.
Merkel praised De Guindos' handling of the Spanish crisis as she supported his candidacy in the run-up to a European Union summit on Saturday in Brussels, where top jobs in the 28-nation bloc for the next five years will be decided.
"We will support Luis de Guindos' candidacy," she told a news conference at the end of at two-day visit to the northwestern Spanish city of Santiago de Compostela, birthplace of Prime Minister Mariano Rajoy.
"Luis de Guindos was an excellent economy minister in Spain in difficult times," Merkel said during a joint appearance with Rajoy, according to a Spanish translation of her remarks.
Germany's Finance Minister, Wolfgang Shaeuble, had worked closely with De Guindos to create a new eurozone "banking union" giving the European Central Bank direct supervision of the bloc's largest banks, she said.
Spain had campaigned for a banking union after being saddled with the bill for a rescue of its bad loan-ridden banking sector in 2012.
The impending collapse of the Bankia group and the broader banking system forced Madrid to take a €41-billion ($56 billion) rescue loan from the eurozone but the loan also pushed up Spain's accumulated sovereign debt.
De Guindos can claim to have overseen an improvement in Spain's economy, which emerged in mid-2013 from a double-dip recession sparked by a 2008 property crash, and is now enjoying a gradual pickup in activity.
Merkel arrived in Spain on Sunday and walked along a six-kilometre (four-mile) stretch of the pilgrimage road to Santiago de Compostela with Rajoy in a highly symbolic show of unity with Spain and its arduous, austerity-driven path to economic recovery.