The inquiry revolves around Mr German's use of a corporate credit card while he was head of the European unit of the committee, according to WJEC chair Jeff Jones (Lab). His decision to step down has left the Assembly's Liberal Democrats severely weakened.
Mr Jones (Lab) said: 'The European unit has now been closed down. The Assembly is now limping along because first minister Rhodri Morgan has tied himself to the Liberal Democrats.' A spokesman for the first minister said he remains committed to the coalition with the Liberal Democrats.
In a letter to Mr Morgan, Mr German says: 'The continuing drip-drip effect of unsubstantiated leaks, allegations and speculation regarding my former employment at WJEC is having an adverse impact on the work of the Assembly and the successful continuation of the partnership government.'
Minister for culture and sport Jenny Randerson is to take over as acting deputy
Mr Morgan replied: 'I accept the public has been persuaded the status of the police investigation has moved on. It is better for the health of the partnership government and the Assembly that you take this step.'