His resignation came after weeks of renewed allegations. Mr Engholm, leader of the opposition Social Democrats (SPD), said that he was resigning, because his 'political credibility' had been called into question.
He talked of the 'difficult times' that lie ahead for the SPD, but argued that the accusations against him had partly been motivated by attempts to 'bring the SPD into disrepute, in order to prevent the necessary change of government in Bonn'.
It is still unclear who will succeed Mr Engholm as challenger to Helmut Kohl in elections at the end of next year. Johannes Rau, 62, Prime Minister of North Rhine-Westphalia, is to take over temporarily. But Mr Rau, one of the most respected senior figures within the party, yesterday made it clear that he did not see himself as a long-term candidate for the post because he had 'a different life plan'.
Mr Engholm's resignation comes at a disastrous time for the Social Democrats. The ruling Christian Democrats have shown themselves to be weak, but the opposition has been so divided that it has been unable to make serious headway against the government.
The official talk yesterday was all about how Mr Engholm's colleagues had tried to persuade him to stay. The reality seems to be that most of them felt Mr Engholm needed to be ditched while there was still time to find a new leader and to knock the party into shape in time for next year's election.
Mr Engholm's resignation is directly connected with the dirty tricks campaign waged against him more than five years ago by his then Christian Democrat rival, Uwe Barschel, in the north German region of Schleswig-Holstein. The story became public just before polling day in September 1987. Mr Barschel first denied the allegations, giving his 'word of honour'; but then he resigned and faced the threat of jail.
He was later found dead, having apparently committed suicide in a hotel bathroom in Geneva. In fresh elections, held a few months later, Mr Engholm became Prime Minister of Schleswig-Holstein, a position he has held since.
Mr Engholm had insisted that he only heard from his aides about the dirty tricks campaign at the last moment. The suspicion has always lingered, however, that he was aware of what was happening, at an earlier stage. Revelations in the latest issue of Der Spiegel forced Mr Engholm's hand, by making it clear that he had, indeed, known about the dirty tricks earlier than he had previously admitted.
Mr Engholm's motives for concealment have been explained in various ways: the SPD feared the original allegations might backfire because it could not prove them; it knew the story would be eventually be made public and destroy Barschel politically; yesterday the Frankfurter Allgemeine Zeitung even raised the question of whether Mr Engholm had not been a 'controlling accomplice', in this tangled and deadly game.
As Mr Engholm himself now admits, he miscalculated badly. Paradoxically, both in 1987 and in 1993, it has been one magazine which has dominated the story. Der Spiegel first exposed the Barschel affair, on the eve of the election in September 1987; at the time, the magazine was accused by the Christian Democrats of working on behalf of Mr Engholm. Now, it is Der Spiegel which has forced Mr Engholm out of office, too.