The former German Defence Minister, Volker Ruehe, has bowed out of the race for leadership of the Christian Democratic party (CDU).

Mr Ruehe announced his decision in a newspaper interview, scheduled to be published on Sunday, after a defeat under his leadership in last week's regional elections in the northern state of Schleswig-Holstein.

Opinion polls have also indicated that he is trailing behind the party's general secretary, Angela Merkel, who has not yet announced her candidacy.

Funding scandal

Last week's elections were the first major test of public opinion in Germany since the scandal involving the former Chancellor, Helmut Kohl, over the financing of the CDU.

But the margin of defeat was not as great as many people had feared and the ballot was seen as a reading of the popularity of the conservative CDU after the scandal involving off-the book donations, secret accounts and falsified opinion polls.

Before the scandal, opinion polls had suggested that the CDU would win the election easily.

Mr Ruehe's chances of leading the CDU may even have received a boost after avoiding the predicted political meltdown, according to political analysts.

Correspondents now say Mr Ruehe's decision is a setback for the party's traditionalist wing. They fear Ms Merkel is too liberal to represent the whole of German conservatism.

For many people in the party, Mr Ruehe was seen as the candidate of continuity in a party keen to put months of scandal behind it.

Setback

The other main candidate besides Ms Merkel is governor of the eastern state of Saxony.

In his interview with Bild am Sonntag, Mr Ruehe speaks out for the 70-year-old Mr Biedenkopf.

"With Kurt Biedenkopf, the concept of the future will be more strongly connected than with some who are younger," he says.

CDU leaders are scheduled to decide on a recommendation for party head on 20 March, ahead of a party convention in April which will make a final choice.

The party was dealt another setback on Friday, when an electoral review board ruled that it financed its 1999 parliamentary election campaign in the western state of Hesse with illegal funds.

A re-examination of the poll - which the CDU won - has been ordered.