The European Central Bank in Frankfurt confirmed in a Friday afternoon statement that its chief economist and executive board member Jürgen Stark had resigned due to personal reasons.
The German economist's resignation shook the European markets hours before the end of the week's trading; with Germany's DAX shedding almost two percent of its value in a matter of minutes after the rumors were confirmed. The Euro, meanwhile, slid to its lowest level against the US dollar since February.
According to preliminary information from Reuters, Stark resigned because he opposed the ECB relatively new and growing practice of purchasing sovereign bonds of Euro zone member states - a policy born out of a desire to protect at-risk economies from increased borrowing costs and insolvency.
In February this year, the chief of Germany's Bundesbank, Axel Weber, left the ECB in protest at the bond-buying program.
Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president, said Manfred Neumann, emeritus professor at Bonn University and former thesis advisor to current Bundesbank President Jens Weidmann.
It is a position that all 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, he told Reuters.
Weidmann and Stark were among a group of the ECB 23-member governing council who opposed last month's decision to reinstate Euro zone bond-buying after a 19-week pause. The decision was believed to aim to stabilize borrowing costs for presumed insolvency candidates like Italy and Spain, although the ECB does not publicly announce which countries' debts it is purchasing.
Until Greece started to run into financial ruin in 2010, the ECB was not permitted to buy sovereign debt from Euro zone members, with such a move deemed to be a conflict of interest.
The Frankfurt-based European lender was already slated for major change, with President Jean-Claude Trichet set to retire at the end of October - to be replaced by Mario Draghi of Italy.
Critics of the plan have also said that purchasing bonds of at-risk economies could cause national governments to slacken off in their austerity drives, complacently thinking that the ECB will protect them from collapse.
Last month, German President Christian Wulff voiced his objection to the policy, saying it could only be tolerated temporarily. Wulff also described the move as politically and legally questionable, adding that the ECB had vastly exceeded its mandate.
Stark, 63, had been on the ECB six-member executive board since 2006, presiding over the crucial economics portfolio.
German Deputy Finance Minister Jörg Asmussen is rumored to be the top candidate to replace Stark, but the ECB said on Friday only that it intended to name a successor before the end of the year.