The leader of Germany's opposition Christian Democrat party (CDU) has resigned over his handling of the illegal party funding scandal.

Wolfgang Schaeuble said he would not stand for re-election to the posts of leader and chairman - his other position in the CDU.

The outgoing CDU leader has come in for heavy criticism over his handling of the scandal that has engulfed the party, and brought disgrace on former chancellor Helmut Kohl. Mr Schaeuble said the scandal was "the worst crisis in the history of the CDU".

He said he was leaving the posts to allow the party to have a "new start" and restore the Christian Democrats' credibility with voters.

"The CDU's crisis must not be allowed to become a crisis for democracy. This goal overrides all others," he said.

"There must be a return to a state of affairs that will enable the Union to be perceived as a strong opposition to the (ruling) red-green coalition," he said.

Current Chancellor Gerhard Schroeder, who is leader of Germany's other main political party the Social Democrats, said Mr Schaeuble's departure was "probably a necessary step" to keep the CDU alive.

"It's important to recognise that the parties guarantee the necessary stability of the democratic system in Germany," Mr Schroeder said.

The parliamentary faction of the CDU will elect a new leader next Tuesday.

Mr Schaeuble will continue as party chairman until his successor is elected at a previously scheduled party convention in April.

Pressure from colleagues

Mr Schaeuble had come under tremendous pressure from within his own party to resign.

The head of the regional government of Thuringia in eastern Germany, Bernhard Vogel, announced that Mr Schaeuble would resign hours before the formal announcement was made.

Mr Vogel is now being touted as a possible successor to Mr Schaeuble.

The BBC Berlin correspondent, Caroline Wyatt, says Mr Schaeuble is closely associated with Mr Kohl and that the CDU is looking for an untarnished leader to restore its credibility.

Unprecedented punishment

Mr Schaeuble's announcement came after the party was told to forfeit state funding, worth more than 40 million marks ($20m) as a punishment for failing to declare campaign funds - a ruling the party says it will challenge in the courts.

The fine, unprecedented in German politics, means the CDU is being penalised for its failure to declare campaign contributions for 1998 by being made to forfeit the matching funds it would have received from the state that year.

Further fines will be levied when an investigative committee finishes its inquiry into the party's illegal secret funding under Mr Kohl.

Secret accounts

The CDU, which has admitted operating a system of secret accounts under the former chancellor, has so far made provision for less than 10 million marks in fines.

Mr Kohl's reputation as a leading European statesman and architect of German unification has been destroyed by his admission that he accepted 2 million marks in illegal donations.

In addition, the CDU in the state of Hesse has admitted keeping about 20 million marks in Swiss bank accounts, and ignoring a requirement to declare the funds.