NEW YORK (AFP) – Dominique Strauss-Kahn resigned Thursday as head of the International Monetary Fund (IMF), saying he did so with great regret but must focus entirely on clearing his name of sexual assault charges.

The move came after escalating pressure on the IMF to chart a course through the leadership crisis and promised to kick off a succession battle between emerging economies and Western nations that have long dominated the world body.

"I want to protect this institution which I have served with honor and devotion, and especially -- especially -- I want to devote all my strength, all my time, and all my energy to proving my innocence," Strauss-Kahn said.

"I deny with the greatest possible firmness all of the allegations that have been made against me."

His short statement paid tribute to his American-born wife, journalist Anne Sinclair, who he said he loved more than anything, and spoke of his "infinite sadness" at being compelled to leave a job to which he had also been devoted.

Strauss-Kahn, a leading French politician, is currently in jail awaiting a grand jury decision on whether to indict him on charges of sexual assault and the attempted rape of a 32-year-old Manhattan hotel chambermaid.

His lawyers were expected to tout his wife's American credentials before a judge later Thursday in a fresh bid to free him from the tough Rikers Island jail, where he spent his third night in isolation and on suicide watch.

The new bail application argues that he should not be considered a flight risk because he has strong US ties through property and family.

The application mentions a $4 million home in Washington, DC, a daughter in New York, and says Sinclair is "currently working on a book about American political life."

In addition to the $1 million Strauss-Kahn's lawyers said he can post for bail, they said he is willing to be confined to a Manhattan apartment 24 hours a day -- with electronic monitoring -- until the case is resolved.

"These additional bail conditions eliminate any concern that Mr Strauss-Kahn would or could leave this court's jurisdiction," attorney Shawn Naunton wrote.

The chambermaid, who has accused one of the world's most powerful men of trying to rape her on Saturday, on Wednesday went before the grand jury that must decide if there is enough evidence to go to trial.

The single mother of a 15-year-old daughter alleges that Strauss-Kahn groped and mauled her in his room in the posh Sofitel hotel in Times Square and forcibly tried to have oral sex with her.

Her lawyer, Jeff Shapiro, refused to comment on the closed-door grand jury proceedings but hit back at claims his client was part of an elaborate set-up intended to bring down the man once seen as a leading presidential hopeful.

Shapiro has shot down the idea that his client, an immigrant from Guinea in West Africa, had consented to a sexual encounter and suggested forensic evidence would back her up.

Strauss-Kahn was refused bail on Monday by a judge and is desperate to leave Rikers Island jail, where he has been made to wear slip-on shoes with no laces and a special grey jumpsuit.

His top lawyer Benjamin Brafman has said the evidence "will not be consistent with a forcible encounter," and New York media reports quoted a source close to the defense as saying "there may well have been consent."

The scandal has thrown the French political scene into disarray, as Strauss-Kahn had been seen as a strong contender to defeat President Nicolas Sarkozy in next year's elections.

Strauss-Kahn's resignation comes at a critical time for the IMF, which is engaged in delicate negotiations to help overcome the eurozone debt crisis.

Germany said Thursday it respected Dominique Strauss-Kahn's decision to quit, with Chancellor Angela Merkel calling for a successor to be named soon.

French Finance Minister Christine Lagarde is the front-runner to succeed him and become the first female head of the IMF, but emerging economic powers have called for an end to Europe's virtual monopoly on the world lender's top post.

Lagarde on Thursday said Europe should unite behind a single candidate.

"Any candidacy, whoever's it may be, should come from the Europeans, who unite, all together," she told reporters in Paris, without directly addressing the question of her own possible candidacy.

European Commission chief Jose Manuel Barroso called for a "strong" European candidate to succeed Strauss-Kahn.

China said Thursday that "newly emerging markets and developing countries should be represented in the top leadership," echoing similar calls from South Africa and Brazil.

Officially, the IMF's executive board votes to fill the top post, with votes weighted based on member countries' and regions' subscription quotas, but traditionally it has been negotiated based on a pact that gives the United States a hold on the World Bank's top job and Europe the IMF position.