The president of the German Bundesbank, Mr Ernst Welteke, has bowed to extraordinary political pressure and resigned two weeks after he admitted allowing a private bank pay for a family holiday in a luxury Berlin hotel.
Mr Welteke's departure ends an unprecedented battle of wills between the federal government in Berlin and the Bundesbank board in Frankfurt, fuelled by allegations of a government campaign to smear the central bank chief as punishment for his critical comments about Berlin fiscal policy.
"The disregard for the constitutionally guaranteed independence continues," said Mr Welteke in a bitter resignation letter, full of parting shots to the government. "My integrity and that of the Bundesbank are being continually damaged by distorted statements."
The Bundesbank board said in a statement yesterday that it had accepted Mr Welteke's resignation as "an appropriate step in view of the reputation of the institution and the perception of its duties".
Mr Welteke telephoned Chancellor Gerhard Schröder in Berlin to inform him of his decision, after two weeks of thinly veiled calls for Mr Welteke to resign. By law, the government appoints the Bundesbank president but cannot fire him.
The government says a successor is lined up and is expected to be announced on Wednesday. Possible candidates for the job include the current acting president, Dr Jürgen Stark, and Mr Caio Koch-Weser, deputy secretary at the finance ministry.
A government spokesman rejected as "fantasy" opposition claims that finance ministry officials leaked receipts to discredit Mr Welteke, a vocal critic of Berlin's repeated breaches of euro-zone rules.
Two weeks ago, Der Spiegel magazine published a report that Mr Welteke let Dresdner Bank pay a hotel bill for €7,661 for a four-day trip that combined an event to launch the euro, in which he participated, and a holiday in Berlin for himself and his family in January 2002. Mr Welteke stayed with his wife for four nights in the €1,717-a-night "Pariser Platz" Suite of the Adlon Hotel, adjacent to the Brandenburg Gate.
Mr Welteke, who earns €350,000 per annum as Bundesbank chief and is charged with supervising the private banking sector, said he saw nothing wrong in letting Dresdner pay the bill. He rapidly changed his tone as the pressure grew, announcing he had paid half of the bill back to Dresdner out of his own pocket and had let the Bundesbank pay the rest in business expenses.
Despite growing public and political pressure, the board defended its independence and let Mr Welteke take a leave of absence instead while state prosecutors in Frankfurt investigated whether his behaviour constituted what is known as "taking benefit" under German law.
"The political pressure on Mr Welteke had become so great that no one would have been able to withstand it," said a leading Bundesbank official yesterday.
