Conservative leader Angela Merkel will become Germany's first woman chancellor under a deal that sees Gerhard Schroeder step aside but gives his Social Democrats top posts in a new government, sources said today.
Three weeks after voters gave Ms Merkel's conservatives an unexpectedly narrow win over Mr Schroeder's SPD in a federal election, sources from both parties said an agreement had been struck that would set the stage for a power-sharing cabinet and break Germany's political deadlock.
Angela Merkel
According to a senior SPD source, the SPD is poised to get the foreign, finance, justice and labour ministries in a new government led by the 51-year old Ms Merkel, a pastor's daughter who grew up in the former communist east.
That would give Mr Schroeder's party a key role in shaping budget and labour market policy, as well as influence over foreign policy.
Ms Merkel's Christian Democrats (CDU) and their Christian Social Union (CSU) allies would get the economy, interior and defence portfolios.
Current Economy Minister Wolfgang Clement said CSU chief and Bavarian state premier Edmund Stoiber would replace him in the post, leaving Ms Merkel's CDU with very few major ministries.
"In exchange for getting the chancellery, the conservatives will have to make compromises in personnel," said Andreas Rees, an economist at HVB Group in Munich.
"It is unlikely that reform-minded politicians will have a lot to say in the new government."