Germany's central bank last night said its president Ernst Welteke, who is embroiled in a sleaze row over a €8,000 (£5,300) hotel bill, would take a temporary leave of absence.
The Bundesbank said after an all-day board meeting there were "not sufficient grounds" to sack the 61-year-old veteran banker, who will be replaced by his deputy Jürgen Stark.
Mr Welteke became the subject of a Bundesbank review after Der Spiegel magazine reported on Monday that Dresdner Bank, a commercial bank regulated by the Bundesbank, paid a bill of almost €8,000 for a four-day stay Mr Welteke took with his family at a top Berlin hotel two years ago.
After the row broke Mr Welteke said he would pay for half the hotel stay but insisted part of it had been on business and the Bundesbank settled the rest of the bill. He was attending an event launching euro notes and coins.
Mr Welteke has come under growing pressure to quit and he indicated before yesterday's meeting that he was prepared to resign. He initially refused to apologise, blaming media "misunderstanding", but by Tuesday had issued an apology for creating the impression he had not lived up to the Bundesbank's high ethical standards.
Although the central bank is independent, the German government appeared to add its pressure on Mr Welteke to go, urging the Bundesbank to defend its "particularly high reputation", adding that a replacement could be found "very quickly". Thomas Steg, a government spokesman, said yesterday: "It would be in the interest of the Bundesbank, which is a very special institution and enjoys a particularly high reputation ... that one reaches a quick decision."
He said there were no specific plans for a permanent replacement but offered praise for two rumoured candidates: Caio Koch-Weser, the Deputy Finance Minister, and Ingrid Matthäus-Meier, a board member of KfW Bankengruppe.
The Frankfurt state prosecutor's office is investigating Mr Welteke, who has an annual income of €350,000, on suspicion that he might have broken rules for public servants.
The Bundesbank is fiercely independent, and has beena fierce critic of government fiscal laxity, and details of Mr Welteke's hotel bill have contrasted starkly with the tight economic conditions faced by ordinary Germans.
Last night the Bundesbank confirmed Mr Welteke would take a temporary leave of absence. "There [are] not sufficient grounds for the board to ask for the Bundesbank president to be expelled from office," it said in a prepared statement after the eight-hour meeting.
Mr Stark will step into Mr Welteke's role on the policy-setting Governing Council of the European Central Bank.
David Goldman, an economist at Bank of America, said: "That Welteke is an ECB council member who reportedly expressed opposition to any rate cut at last week's meeting adds further spice to the story and a further impetus to our call for a rate cut next month."
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