Francoise Ducros has stepped aside as the prime minister's communications director a week after she was heard remarking that U.S. President George Bush was a "moron."

Ducros, who had served in the Prime Minister's Office since 1999, told Jean Chretien the ongoing controversy was making it "impossible for me to do my job."

During a NATO meeting in Prague last week, Ducros was overheard calling Bush a "moron" to a Canadian reporter. According to journalists in the room, she was referring to Bush's intense focus on the issue of Iraq at the meeting of NATO.

Ducros first offered her resignation to Chretien shortly after the incident but the prime minister declined to accept it.

"I am sorry, she was very good, very competent and served me and the government extremely well. I wish her good luck," Chretien told reporters. "She thought this was a handicap to do her job. She wanted to do it, so I let her do it."

CTV's Mike Duffy says that a number of Liberals loyal to the prime minister had advised Chretien in the last couple of days to remove Ducros.

Duffy said Chretien was advised that while Ducros was a loyal staffer, for the sake of the prime minister's legacy and for the sake of harmony with the U.S., she must step aside.

"The prime minister's advisers knew this thing had to be stopped," Duffy reports. "They urged him to make the change. He was reluctant to do that, we are told. But senior advisers came back to him and told him, 'Look, for the good of your prime ministership, you have to let her go.'"

"The feeling immediately after the remark in Prague was 'Well, we'll ride this out and after the weekend, everything will be fine,'" Duffy says. "Yesterday, it became clear everything wasn't fine. It continued to dominate the media in the U.S."

CNN's talk show Crossfire dedicated a large segment on Monday night to the incident, and Chretien advisers watching that program realized the issue was not going to die away, Duffy says. They were also concerned that the incident would overshadow Chretien's words at a key fundraising dinner Tuesday night.

The remark even made its way into state-run Iraqi newspapers. One paper said the remark was proof that Bush is the "most hated person in the world."

Senior communications adviser and former CTV reporter Jim Munson will replace Ducros on an interim basis. Ducros, who is a career civil servant and trained as a lawyer, will return to the temporary assignment pool for senior executives.

Alliance critic Jason Kenney reacted to the resignation Tuesday with anger, saying Chretien should have accepted Ducros' resignation when she first offered it last week. He says the damage to U.S.-Canada relations is done.

Kenney says Chretien must now make clear to the Bush administration that Ducros' views are not those of the Canadian government. And he says an apology to President Bush should be the first order of business.

Alliance leader Stephen Harper pressed the issue in the House of Commons Tuesday, asking Chretien in question period whether he planned to issue a personal apology to President Bush for "the insult heard around the world."

Chretien responded that Ducros made it clear to him that the remark was made during a private conversation with a reporter and that she later went on to defend the U.S. president to the reporter. He said no formal apology will be issued.