BERLIN : Germany embarked on an historic course on Monday as conservative leader Angela Merkel won the battle to become the country's first woman chancellor and Gerhard Schroeder bowed out after seven years in power.
Schroeder only agreed to step down after ensuring a handsome deal for his Social Democrats (SPD), who will control the majority of the ministeries in a coalition government with Merkel's Christian Democrat alliance.
But Schroeder will play no role in the new left-right government, SPD sources said.
The end of three weeks of political deadlock in Europe's biggest economy was welcomed by the European Union and Germany's neighbours.
The German press hailed the remarkable rise to power of the 51-year-old Merkel who grew up in the communist former East Germany, but warned that the government she will preside over could be fraught with divisions.
"It is a turning point, a truly historic moment because of Merkel's background," the Berlin-based Der Tagesspiegel daily said in an advance report from its Tuesday edition.
Merkel vowed that her new government would tackle urgent reforms to revive the stuttering economy, which is saddled by unemployment at currently more than 11 percent.
She said the agreement would pave the way for formal coalition negotiations starting next week, and her Christian Union alliance would take six ministries, with the SPD getting eight cabinet posts.
"We have achieved something big, we have the basis for coalition talks," she told a press conference.
"We agree that we have no alternative to the reform process. We have set our aim to create a coalition that stands for new policies."
Creating jobs would be a priority for the new administration, she added.
Pressed by reporters how she felt, Merkel broke into a smile. "I feel good, but a lot of work lies ahead of us."
News of Germany's first "grand coalition" since the 1960s saw the euro rise against the dollar.
British Prime Minister Tony Blair sent his congratulations.
"The prime minister congratulates Angela Merkel on her elevation and hopes to be speaking to her later this afternoon," his official spokesman said.
French President Jacques Chirac invited Merkel to Paris "as soon as possible" and a spokeswoman for European Commission head Jose Manuel Barroso said he "was happy that the period of waiting is over".
Washington said it looked forward to working with her. "We welcome Angela Merkel being designated chancellor," State Department spokesman Tom Casey told AFP.
Merkel said she hoped to improve relations with the United States which plunged to freezing point when Schroeder refused to provide any military support for the US-led invasion of Iraq in March 2003.
The coalition deal was hammered out after intense negotiations following a September 18 general election which gave Merkel's party only a four-seat advantage over the SPD.
According to sources close to the SPD, the Social Democrats will take the key ministries of foreign affairs, finance, labour and justice, as well as health, aid and cooperation, transport and environment.
Merkel's conservatives would have economy, interior, defence, agriculture, education and family ministries.
Edmund Stoiber, the state premier of Germany's most wealthy region Bavaria, confirmed he would take over the economy portfolio.
Peter Struck, currently the defence minister, may switch to become foreign minister, according to some reports.
But it remains unclear how the division of responsibilities will affect her ability to govern.
Merkel's elevation caps a remarkable rise for the daughter of a Protestant pastor who moved to East Germany in the 1950s.
She will be the first woman at the head of a major European country since Edith Cresson's brief stint as French premier in the early 1990s.
Schroeder, 61, swept to power in 1998 in a coalition with the Greens after 16 years of conservative reign under Helmut Kohl.
Despite his charisma, he lost the trust of voters after failing to bring down unemployment.
Seven years on, with his government struggling to push through sweeping but deeply unpopular structural reforms to revive the economy, his party won just 34.2 percent of the vote in an election he had called a year early in a bid to secure a fresh mandate for his controversial reforms.
Analysts say a stable government may be able to push through at least some of the reforms needed to get the eurozone's biggest economy back on its feet. - AFP /dt
