German President Christian Wulff has announced his resignation, after prosecutors called for his immunity to be lifted, BBC News reported.

An ally of Chancellor Angela Merkel, Mr Wulff is embroiled in a scandal over a home loan that he accepted when he was premier of Lower Saxony.

Mrs Merkel cancelled a visit to Italy on Friday, February 17 to deal with the crisis, and she will give a statement shortly.

German media say the crisis is unprecedented in post-war Germany.

According to BBC News, the affair will be no more than a headache for Chancellor Merkel, whose approval rating is high among the German people. However, it comes at a time when she does not need any new headaches, as Germany wrestles with the eurozone debt crisis. And Mrs Merkel had fought to get Mr Wulff, an ally in her centre-right Christian Democrat party (CDU), appointed as president. He has been in the job for less than two years.

He will be replaced as president by Horst Seehofer of the Christian Social Union (CSU), the Bavarian sister party of the CDU.

"The developments of the past few days and weeks have shown that (the German people's) trust and thus my effectiveness have been seriously damaged," Mr Wulff said in a brief statement.

"For this reason it is no longer possible for me to exercise the office of president at home and abroad as required."

Chancellor Merkel, who selected him for the largely ceremonial post of head of state, was scheduled to speak at 10:30 GMT.