BERLIN - Bayern Munich have underlined their desire for European dominance and hunger for the continent's top prize by appointing Pep Guardiola as their coach for the next season.

Bayern announced on Wednesday they had signed Guardiola, who took a year off after winning 14 titles with Barcelona including two Champions League crowns, as their coach from next season with a contract to 2016.

Bayern Munich's Mario Gomez (L-R), David Alaba, Franck Ribery and Thomas Mueller celebrate a goal against FC Augsburg during their German first division Bundesliga soccer match in Augsburg, Dec 8, 2012. [Photo/Agencies]

The driven Bavarians, twice losing finalists in Europe's premier competition in the past three seasons, are eager to re-establish their continental dominance and close the gap with other football powerhouses in Spain and England.

Long the biggest force in Germany with a record number of league titles and German Cups to their name, Bayern have been starved European success with their last Champions League win coming 12 long years ago.

There is no better suited coach than the 41-year-old Guardiola whose trophy haul in four years at Barca was astonishing.

Bayern have notched their first win over their European rivals by beating all other big-spending clubs to secure his services. Chelsea, Manchester City and Paris St Germain were among the teams reportedly interested in Guardiola.

After investing heavily in their squad the past few years, Bayern, among the richest clubs in Europe, have assembled a string of quality players who can beat anyone their day.

But their bitter Champions League final defeat in front of a home crowd in Munich against Chelsea last May looks to have instilled an increased sense of determination to win a fifth top European title.

While other teams would have gone into a prolonged period of hibernation, licking their wounds after such a gutting defeat, Bayern went on the offensive, paying 40 million euros ($53 million) to lure gifted Spanish midfielder Javier Martinez to Munich among others.

File picture shows Barcelona's coach Pep Guardiola being tossed in the air by his players after his last match at Camp Nou stadium in Barcelona, May 5, 2012. [Photo/Agencies]

Guardiola's signing is essentially the next step - and arguably the most important one - in their masterplan for European dominance. With current coach Jupp Heynckes retiring at the end of the season, the time was right for the Bavarians to strike.

"The signing of Guardiola shows the value of Bayern who want to be on par with the likes of Real Madrid or Manchester United," said Bayern honorary president Franz Beckenbauer.

"(Sports director) Matthias Sammer and Pep Guardiola. You will not find a better duo anywhere," said Beckenbauer who led the team to three consecutive European crowns in the 1970s.

What remains to be seen is whether Guardiola can produce instant results from a team full of big names and big egos.