before Bill Clinton is to be sworn in as president of the United States.

Mr. Gaines' departure follows Government orders for all George Bush appointees to resign on or before January 19.

His resignation will signal the end of an era in US-Bermuda relations when the Island enjoyed uncommonly close ties to the US leadership.

As the new administration takes its place, the Island faces the difficult challenge of making friends with a new Democratic President at a time when US-Bermuda interests may clash as never before.

Democratic legislation remains before Congress that could seriously undermine the costs of US companies doing business here. And a decision looms on whether the US Naval Air Station should be closed.

Mr. Gaines, who became Consul General in 1988, is confident Bermuda will weather the storm though the road may not be smooth.

He said the Island is well equipped diplomatically with Premier the Hon. Sir John Swan, who has proven talents in working the corridors of power in Washington.

And he thinks President-elect Clinton will follow in his predecessor's footsteps by appointing a close friend to Bermuda.

"One might think with the lessening of Base activities that there will be an attempt to revert the US Consul General back to a Foreign Service person,'' he said yesterday in Chelston, his official residence.

"But in an election campaign a lot of debts are built up. And this has become one of the plums of the US State Department. I don't think they'll give that up.'' Mr. Gaines dismissed the suggestion that the US-Bermuda relationship was at an historical turning point.

"Even before the Base was built, there was a close relationship between the US and Bermuda,'' he said. "We've had a consul general here since the early 1800s.'' Nevertheless, serious challenges loom -- all of them stemming from US economic difficulties and a Clinton campaign that stressed additional domestic spending, cuts in existing programmes and increased taxes.

Mr. Gaines sees the US Base, international business and tourism -- the pillars of the Bermuda economy -- under attack.

"The Base is slimming down, tourism continues to be battered by recession and there are two Bills in Congress that could really cripple offshore business by increasing the tax on all insurance transactions from one to four percent.

"These things can make it tough for Bermuda. I think Bermudians have started to realise how fragile their economy is and that they may have to pull in their belts for the first time.'' Mr. Gaines said he was especially fearful of an early flurry of Clinton legislation with a tax increase Bill attached that could not be vetoed.

"That is the worst case for Bermuda,'' he said.

Mr. Gaines is clearly impressed at the close relationship that existed between Sir John and Mr. Bush.

"Our (countries') relationship may never be as warm as it was with the very special relationship between Mr. Bush and Sir John Swan,'' he said.

"He's one of the few people to be privately entertained by the president.

That's a great tribute. Sir John had a unique relationship with the president.

"They were able to talk. I saw it first hand. I spent a lot of time with them. John had the ability to pick up the phone and call the president wherever he was. He was careful in using that access, but he went ahead and did it.'' Mr. Gaines, who is a self-described Republican Party partisan, is clearly not happy about leaving Bermuda.

"I've no reason to celebrate,'' he said. "Our life here has been good.

Chelston has been perfect. Bermuda has been perfect in every respect. No wonder so many people want to live here.

"You have beauty, good weather, the architecture is unique and lovely and the people are as friendly as any in the world. It's the cleanest place I've lived in. It's beautifully run even though you have to get off the Island to realise it sometimes.'' Mr. Gaines, 61, plans to live with his wife Sheila in Washington DC where they have a home.

But he is determined to make Bermuda a continuing part of their life. "I fully intend at the proper moment if not to make it our second home then certainly to make it a place we will visit often,'' he said.

Mr. Ebersole Gaines.