Political Fallout Banking Crisis Topples Governor of Saxony
The governor of the eastern German state of Saxony, Georg Milbradt, has resigned. He had been weakened by criticism surrounding the costly rescue of state bank SachsenLB. Revelations that he borrowed money from the bank in the 1990s dealt his image a killer blow.
Georg Milbradt announced his resignation on Monday.
Milbradt, 63, said he was stepping down from the end of May as state premier and as leader in Saxony of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU). Saxony is ruled by a grand coalition of the CDU and center-left Social Democrats.
"In the fall of last year the stock market crisis shook the entire world,'' Milbradt said in a statement. "I have taken the decision to leave office because I wanted to have an orderly and harmonious handover and to prevent further damage both to myself and to others. Now is the right time.''
Milbradt had come under pressure from opposition lawmakers over his administration's record in supervising the state bank, which was bought by Landesbank Baden-Württemberg after subprime investments caused its near-collapse in August.
He came under added pressure from his Social Democrat coalition partners over personal loans he took from SachsenLB in the 1990s to invest in a unit of the bank.
His position became untenable when leading members of his own party started distancing themselves from him. His image had become too damaged for him to lead the party into the next state election, scheduled for late 2009.
Milbradt proposed that he be succeeded by Saxony Finance Minister Stanislaw Tillich, 63. A party conference on May 24 is expected to elect him leader of the Saxony CDU and he would then be elected governor of Saxony in a parliamentary vote at the end of May.
In his statement on Monday Milbradt defended his actions to rescue SachsenLB which got into trouble because of its investments in the US mortgage market. It had been his duty as governor to prevent damage to the state of Saxony.
"Very quick and determined action was needed," said Milbradt. "Today it would no longer be possible to save the jobs in Leipzig and merge the bank with Landesbank Baden-Württemberg."
He made no comment on his personal dealings with SachsenLB. Last week the Saxony government confirmed that Milbradt and his wife had borrowed a total of around 172,000 ($272,000) between 1996 and 1999 to help purchase around 360,000 in investment fund products from a subsidiary of the bank.
Milbradt's opinion poll ratings have been falling and a recent poll showed a majority of people in Saxony wanted him to resign. He has been governor of Saxony since April 2002.
A former interior minister of Saxony, conservative Heinz Eggert, said Milbradt had been right to resign to avoid "political death in instalments."