European Central Bank Executive Board member Juergen Stark is resigning his post in what sources say is a protest against its policy of buying bonds to help troubled euro zone debtor states.
A euro zone central bank source said Stark was at angry at being passed over when Bundesbank chief Axel Weber quit earlier this year, clearly unhappy with the ECB bond-buying program, and also felt the departure of ECB President Jean-Claude Trichet next month would mark the end of an era at the ECB.
Stark's decision to announce his departure now, rather than in a couple of months, was designed not to make it look like he was resigning because Italian Mario Draghi is succeeding Trichet from November 1, said the source.
News of Stark's shock departure highlights the size of the split at the ECB over the bond-buy plan and the extreme tension between its members, who have been at the center of the policy response to the euro zone debt crisis.
Stark is one of the most experienced policymakers at the ECB, a young institution facing the impending retirement of Trichet and uncertainty about how it will be led by Draghi, whose country is embroiled in the euro zone debt crisis.
Stark and Bundesbank head Jens Weidmann both opposed the ECB's decision last month to reactivate its bond plan following a 19-week pause. The bank decided to buy the bonds of Italy and Spain after they came closer to succumbing to the debt crisis.
The ECB has faced sharp criticism in Germany for buying bonds -- a move many here see as taking the bank into the fiscal arena and threatening its core role of fighting inflation.
The ECB confirmed Stark would be the second German policymaker to leave the bank this year after Weber quit in February, also in protest at the bond program.
This is remarkable, said Manfred Neumann, emeritus economics professor at Bonn University and former thesis adviser to Weidmann.
Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president. It is a position that all the Germans have. This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB.
The ECB said Stark had resigned for personal reasons but two other sources told Reuters it was related to the bond-buying that has rescued Italy and Spain from crisis over the past month.
The euro, European and U.S. stock markets fell in response. Bond yield spreads, though, for Europe's struggling periphery were only slightly higher.
German Deputy Finance Minister Joerg Asmussen will replace Stark on the ECB's six-member Executive Board, a source familiar with the plan said.
Asmussen will be more pragmatic, Bert Ruerup, former head of the 'wisemen' council of economic advisers to the German government told Reuters. I don't think that he will fight as openly. This may calm down when the EFSF gets the power to buy bonds.
Asmussen has been a key figure in Germany's policy response to the euro zone debt crisis.
The ECB's policy orientation will not be altered by Stark's departure, Austrian ECB policymaker Ewald Nowotny said. German Finance Minister Wolfgang Schaeuble said he expected a German candidate to succeed Stark and that the successor would pursue the same policies of stability as Stark.
News of Stark's departure came just a day after Trichet delivered an impassioned defense of the ECB's record and its handling of the euro zone debt crisis.
Trichet's emotional response to a question about calls from some in Germany for a return to the Deutschmark suggested tempers were running high at the bank.
German politicians immediately leapt on news of Stark's resignation to press for a change of direction at the ECB.
His departure is a dramatic alarm signal which shows the ECB must correct its course, said Kurt Lauk, president of the economic council of Chancellor Angela Merkel's Christian Democrats.
It is also a clear signal that the ECB must be freed from the role of aid provider that was foisted on it due to bad decisions by politicians, he added.
The ECB has been concerned that by buying the sovereign bonds of Italy -- the euro zone's third largest economy -- it is encouraging Rome to slacken efforts to shore up its finances, and has been irritated by flip-flopping over austerity measures.
However, Trichet said after the bank's policy meeting on Thursday that the latest decisions by the Italian government meant it was delivering on what it had promised.
Stark, 63, has been a member of the ECB's six-member Executive Board -- whose members form the Governing Council along with the 17 euro zone national bank chiefs -- since June 2006.
He holds the board's influential economics portfolio, a role that allows him to present a template of the ECB's monetary policy statement that forms a basis for the Governing Council's final view.
The ECB said Stark's successor would be appointed before the end of the year. Stark's term on the board was due to run until May 31, 2014.
In addition to Trichet and Stark, Lorenzo Bini Smaghi, another heavyweight ECB board member, is expected to leave the bank this year. Their departures leave the ECB without some of its most experienced policymakers while the euro zone crisis shows no sign of abating.
(Additional reporting by Marc Jones, Sakari Suoninen, Daniel Flynn and Noah Barkin; Writing by Paul Carrel; Editing by Ruth Pitchford/Mike Peacock)