Juergen Stark quits ECB board

The top German official at the European Central Bank has quit in disagreement with the bank's policy of buying eurozone government bonds to combat the currency bloc's debt crisis.

Juergen Stark, the central bank's chief economist and an executive board member is to leave before the end of the year once a replacement had been found.

The shock development caused a plunge in financial markets, leaving the FTSE 100 down 108 points and the euro immediately lower.

Stark's departure, almost three years before his term is due to expire in May 2014, would deepen a gulf between the ECB, which manages the currency of the 17-nation European currency area, and German guardians of central bank orthodoxy.

His exit dramatises a rift inside the central bank over the handling of the deepening debt crisis and could undermine German public support for the euro.

Former Bundesbank President Axel Weber, who had been the frontrunner to succeed ECB President Jean-Claude Trichet when he retires at the end of next month, resigned and withdrew from the race in February in protest at the same policy.

"Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president," said Manfred Neumann, emeritus economics professor at Bonn University and former thesis adviser to Bundesbank chief Jens Weidmann.

"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."

Trichet has made an emotional defence of the bank's performance against German criticism at a news conference, angrily telling a German questioner that the ECB's record of inflation fighting in Germany over the last 12 years had been better than the Bundesbank's.