Mehdorn said he was offering to go because the "destructive debates" over his future were damaging the company.

"I have made an offer to terminate my contract with the supervisory board chairman," Mehdorn said Monday, March 30, at a press conference to announce Deutsche Bahn's annual financial results. "I assume that a successor will be appointed before the summer holidays" begin in July.

Mehdorn, who has run the state-owned firm since 1999, has been under increasing pressure ever since it was revealed earlier this year that Deutsche Bahn accessed confidential staff data as far back as 1998.

Mehdorn admitted in February that, as part of an anti-corruption campaign, Deutsche Bahn spied on 173,000 of its 220,000 employees in 2002 and 2003. Official documents have since shown Deutsche Bahn screened its entire workforce again in 2005 for corruption.

In total, the records show that almost all railway employees would have been checked three times, and around 800 top managers would have been scrutinized twice.

The German government said it had "taken note" of Mehdorn's offer to quit and praised his role in turning Deutsche Bahn into a "world-leading transport and logistics company."

"The financial success of recent years and the securing of 220,000 jobs are clearly linked to the high level of Mehdorn's personal engagement and corporate know-how," the government said in a statement.

As recently as Friday it was reported that Deutsche Bahn had also monitored the e-mails of staff to check whether they had contacted journalists or parliamentarians in a bid to find employees critical of the company's policies.

Over the weekend, the company was forced to admit that it deleted a 2007 e-mail calling for strike action that was sent by train drivers union GDL to thousands of employees.

In an interview with the German Sunday newspaper Welt am Sonntag, German Chancellor Angela Merkel's spokesman Ulrich Wilhelm denied a report that the chancellor was keen to keep Mehdorn in his post until an independent report on the snooping scandal was completed in May, adding that the issue could not be allowed to drag on for weeks.

This, and a statement from an unnamed source who told Reuters that Berlin was "putting out feelers" for a potential successor, suggested that Mehdorn was living on borrowed time.

German politicians call time on Mehdorn's reign

A chorus of German politicians joining together to criticize the Bahn chief added to the sense that Mehdorn's refusal to resign would become a mute point in the coming days.

"I do not believe that Hartmut Mehdorn can remain on as the boss of Deutsche Bahn," said Transport Minister Wolfgang Tiefensee , a member of the the Social Democrats (SPD). "My impression is that parliament and the federal government does not take him seriously and is beginning to understand the criticism."

"The man must go," said Berlin's Mayor Klaus Wowereit, while his Social Democrat colleague and vice president of the party's Bundestag group Klaas Huebner told the Frankfurter Rundschau newspaper, "Any politician who found themselves in the same position could no longer stay in their post."

Merkel "must finally terminate (Mehdorn's) untenable position with the Bahn," said Dietmar Bartsch from the Left Party while Greens party leader Claudia Roth said "Bahn boss Mehdorn cannot stay a day longer."

Others, however, were still loath to pass judgment until the full case against Mehdorn is heard. Finance Minister Peer Steinbrueck (SPD) told German TV that he would "wait to see all the evidence before forming an opinion, let alone issuing a condemnation."

Economics Minister Karl-Theodor zu Guttenberg said it wasn't up to politicians to determine Mehdorn's immediate fate.

"It is reasonable to wait for the investigation and then to let those who have to decide make the decision," said the minister, who is a member of the Christian Social Union, the Bavarian sister party to Merkel's Christian Democratic Union. "That is the job of the supervisory board."

Mehdorn clings on to past glories

Mehdorn's fall from grace has been spectacular for a man credited with turning Deutsche Bahn into a profitable global transport leader over the past decade.

But he has been dogged by the revelations that his company spied on employees and has recently come under heavy criticism for his perceived arrogance in the affair, resisting calls to step down and maintaining that the company did not break the law.

"Under my leadership, (Deutsche) Bahn is in good shape despite the serious economic and financial crisis," Mehdorn told the Sunday edition of Germany's Bild newspaper, when asked why he had not resigned. "Our results are good and we are not laying off any workers in the crisis."

Until now, Mehdorn has enjoyed the support of the chancellor, who has stood by him in past confrontations and has sided with him on occasional battles with Germany's powerful transport unions.

Mehdorn's decision to offer his resignation now relieves Merkel of a burden which may have threatened her campaign in parliamentary elections scheduled for September.