KEHL AM RHEIN, Germany, Oct. 10 (UPI) -- German Conservative leader Angela Merkel announced Monday that an agreement was reached with political rivals to form a "grand coalition" making her Germany's first female chancellor.
The deal ended a three-week political stalemate between Merkel's Christian Democrats/Christian Socialists and outgoing Chancellor Gerhard Schroeder's Social Democrats, which threatened to throw the country into a downright crisis. The two major parliamentary factions brokered the deal over the weekend.
"We are today heading into a key period in German politics," Merkel said Monday at a news conference in Berlin. "We want to work together for the people of this country, and that's why I am consciously speaking of the grand coalition as a coalition of new possibilities."
Asked how she felt after finally realizing her claim for the chancellorship, Merkel said she felt "fine," but that there was "much, much work ahead" to form a stable government that could solve Germany's most pressing problems, such as reducing the huge federal deficit and sparking growth in the world's third-largest economy.
Since the inconclusive Sept. 18 elections, both parties have led a bitter fight for the chancellorships. With no clear victory for either Merkel's conservatives or Schroeder's SPD last month, both leaders called for a mandate to form a government.
The results, which for the conservatives were much worse than expected, strengthened the position of the SPD, which in recent weeks said Schroeder should be given a third shot at forming a government. The CDU/CSU faction, however, won the most votes and claims four more seats in the new Bundestag, the lower house of parliament.
Schroeder proved to be a tough bargainer for his party, as the SPD on Monday emerged with eight cabinet posts, two more than the conservatives.
"Schroeder gave up a claim he didn't have," political analyst Hugo Mueller-Vogg told German news channel N24. "It's a grand political move by Schroeder."
SPD head Franz Muentefering on Monday agreed, saying his party emerged "pretty positive" and "with renewed self-confidence" out of the leadership summit.
"We want a stable government, one that is designed for four years," Muentefering said. "We need reforms and social justice. This coalition should try to evoke the potential of such an alliance. This coalition must do everything to secure the competitiveness of our economy."
Schroeder, the key man behind the new deal, did not appear before the press on Monday. Reporters darted Muentefering with questions about the political future of the 61-year-old chancellor, but the party head ducked them by answering evasively.
"We haven't talked about Gerhard Schroeder's or my political future yet," he said, adding that there were nevertheless "voices in the party" that would like to see Schroeder continue.
Merkel said formal coalition talks to forge a left-right government will commence on Oct. 17 and end on Nov. 12, at the earliest. It is expected that discussions on how stringent economic and social reforms will be hotly debated. Critics of the grand coalition argue that the party will be unable to revive Germany's struggling economy, which suffers from 4.77 million unemployment and zero growth, due to watered down reforms.
The conservatives in their campaign vowed to create jobs by a stringent cost-cutting reform plan, which included raising Germany's value-added tax to lower non-wage labor costs.
"We agree that we have no alternative to the reform process," Merkel said Monday of the talks with the SPD.
Pushing those reforms will be tough, however as key government departments will be managed by Schroeder's SPD party. Government positions were handed to Schroeder's party in exchange for Merkel's leadership claim.
The SPD will name the ministers to head the powerful foreign affairs, finance and labor departments, as well as the development, justice, health, transportation and environment positions.
The conservatives, as the Bundestag's strongest faction, are able to name the chancellor, the parliamentary president and ministers to head the interior, defense, agriculture, education and family briefs.
Outgoing Economy Minister Wolfgang Clement told reporters Edmund Stoiber, Merkel's ally in Bavaria, would replace him in the post.
The SPD has emerged as a strong partner in a potential grand coalition, Gero Neugebauer, political expert at Berlin's Free University, told United Press International.
"The conservatives paid the SPD a high price," he said. "I don't think the party ever really tried to pursue the chancellor post for Schroeder, but tried to maneuver itself in a good position for power."
Schroeder initiated early elections by deliberately losing a confidence vote, arguing he needed a new mandate to push through his controversial economic and social reforms, called "Agenda 2010."
Merkel on Monday, as the new chancellor-designate got her first taste of the office when she was asked about the development of ties with the United States. Merkel is expected to revive the trans-Atlantic friendship, which might be tough as a Social Democrat foreign minister.
"I think good trans-Atlantic relations are in the interest of Germany," she said. "That doesn't mean we have to agree on every issue, but there needs to be a good, trustful relationship."