Spyros Kladas, 44, who headed the finance ministry's special audits division, has denied any involvement in what has become known as the "sex, lies and DVD scandal".

The scandal broke in December when a senior culture ministry official attempted suicide, jumping from his apartment balcony, after being blackmailed by a lover employed as his assistant.

"The finance minister met Mr. Kladas, who submitted his resignation," the Finance Ministry said in a statement. It said Kladas had stated personal reasons.

Socialist opposition PASOK spokesman George Papaconstantinou condemned the government's handling of the scandal.

"Why did it take the prime minister so long to sack Mr. Kladas?""We demand that all facts about his activities and his role (in the scandal) come to light."

A conservative deputy, expelled from the party's parliamentary team for his role in the affair, had told prosecutors he believed Kladas had been involved in a trade off aimed at covering up the scandal.

The MP's expulsion had brought the conservative government's majority to a bare minimum, with a holding of 151 seats in the 300 seat house.

Kladas was not immediately available for comment. He served as general secretary of the Olympic Games in 2004 and sat on the board of directors of Olympic Real Estate SA.

A public prosecutor is investigating the case. So far, only the ministry employee and one of her lawyers have been charged with blackmailing her boss.