Two key members of President Bush's economic team, Treasury Secretary Paul O'Neill and White House adviser Larry Lindsey, curtly announced their resignations yesterday, creating uncertainty about Mr Bush's future economic policy. From Conor O'Clery, North America Editor, in New York

With the resignation four weeks ago of Mr Harvey Pitt, head of the Securities and Exchange Commission, the team that Mr Bush put in place after taking office two years ago to guide the world's biggest economy has now fallen apart.

Though announced as resignations, the White House made clear the departures of Mr O'Neill and Mr Lindsey had been requested by the president. Their ousting came as unemployment climbed to an eight-year high of 6 per cent, and Wall Street headed for its first losing week since October.

Analysts said, however, that public relations blunders and differences over taxation policy led to the need for new economic leadership. "It has been a privilege to serve the nation during these challenging times," Mr O'Neill said in a brief letter to the president. "I thank you for that opportunity."

Mr Bush did not personally pay tribute to the two officials, leaving it to his spokesman Ari Fleischer to read a formal statement for him. "My economic team has worked with me to craft an economic agenda and help lead the nation out of recession and back into a period of growth," Mr Bush said. "I appreciate Paul O'Neill and Larry Lindsey's important contributions to making this happen."

No one mourned their departure on Capitol Hill. Senate Republican Leader Trent Lott said the resignations of Mr O'Neill and Mr Lindsey were "an opportunity for the administration to think about the best people to bring in as they try to develop an economic growth package."

Senate Democratic leader Tom Daschle said, "Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed. However, the fundamental problem is that this administration has no comprehensive plan to get the economy back on track."

Bush advisers have been increasingly concerned that mishandling of the economy could damage his re-election prospects in 2004.

The economic team was the "weakest link" in the White House team, said Mr Thomas Mann of the Brookings Institute. The episode did not serve vice-president Dick Cheney well, he said as Mr Cheney had been behind the appointment of industrialist Mr O'Neill in the first place.

The long-heralded departure of the 67-year-old Treasury Secretary probably became inevitable when Republicans won control of both houses of Congress, meaning Mr Bush could get new nominees through Senate sub-committees.

The new economic team will have to push Mr Bush's stimulus package next year which could make permanent the 10-year $1.35 trillion (€1.34 trillion) programme of tax cuts. The shake-up has prompted speculation that Mr Alan Greenspan might also resign soon but the chairman of the Federal Reserve cannot be removed by the president.

The top name on the list to succeed Mr O'Neill is Commerce Secretary Don Evans, who is regarded by the White House as a strong candidate to promote a very ambitious domestic agenda. Other names mentioned are Joseph Grano jnr, head of UBS Paine Webber in New York, investment counsellor Charles Schwab, retired House Ways and Means Committee Chairman Bill Archer, Senator Phil Gramm, and House Majority Leader Dick Armey.

Mr Bush met privately last month with budget expert John Cogan, an adviser in the 2000 presidential campaign, in a possible search for new faces and Mr Cheney has sounded out former Federal Reserve official Wayne Angell on possible names. Glenn Hubbard, chairman of the White House Council of Economic Advisers, is tipped to move up to Lindsey's job.

Market reaction to the resignations was muted and the dollar weakened from $1.0005 to $1.0087 per euro. Mr O'Neill, a former chief executive of the Alcoa aluminium giant, was criticised for prematurely predicting the end of the recession. When Wall Street reopened after the September 11th terrorist attacks, he forecast that the Dow Jones Industrial Average could be approaching all-time highs within 12-18 months. When the market went into freefall that month he declared: "The people who sold will be sorry that they did it." Mr O'Neill became the first Treasury chief to preside over a contraction of the economy since Nicholas Brady in the early 1990s. During his time in office the federal budget also recorded its first deficit since 1997.