Christian Democratic Union chief Angela Merkel said on Monday she would be the next chancellor of Germany at the head of a coalition government.

"The Union will occupy the chancellery," Merkel said, in a reference to her Christian Democratic Union after striking a power-sharing deal with the Social Democrats of outgoing chancellor Gerhard Schröder.

In her first press conference as German Chancellor-designate, Merkel said a grand coalition with Social Democrats would have to work on policies that help create new jobs in a "coalition of new possibilities. We want to do something for this country." Merkel also said that the CDU's leadership had unanimously voted for coalition negotiations with the SPD.

Merkel said the agreement would pave the way for formal coalition talks and would see her party take six ministries with the Social Democrats getting eight cabinet posts.

"We have achieved something big, we have the basis for coalition talks," she said, adding that the new government would push ahead with reforms to revive the ailing German economy.

"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," she told the press conference. "We want to work together for the people of this country."

She added that the will of the voters was to have a grand coalition and that the coming government would do its best to respct that will.

When asked about the direction of Germany's relations with the United States under her leadership, she said that transatlantic relations are an important issue and of interest for Germany. "That doesn't mean we have to agree on every issue, but there needs to be a good, trustful relationship."

Chancellor-to-be in "good mood" but focused

Despite attempts by several foreign journalists to get her to say how she feels after being picked as Germany's next chancellor, Merkel had difficulties expressing her emotions. "How do you feel, come on," a Danish reporter asked her, but Merkel only replied: "I'm doing well, I'm in a good mood," adding that she is in a state of "tense concentration" ahead of coalition talks.

She also refused to say when she had finally realized that she could become the next chancellor during talks with SPD leaders.

SPD leader Franz Müntefering said in his press conference that his party accepted coalition negotiations with two votes against it and seven abstentions. Referring to the new cabinet, he said that the SPD would have less might than in the last government.

SPD accepted Merkel "with respect"

He also said that the SPD had accepted the decision for Angela Merkel as chancellor "with respect," adding that outgoing Chancellor Gerhard Schröder will participate in coalition talks.

Müntefering said that SPD members will probably vote on a coalition agreement with the CDU/CSU during a party convention in the southwestern town of Karlsruhe that is already scheduled for Nov. 14-16.

Merkel will lead a coalition government of her Christian Democrats and his Social Democrats, an alliance last seen in the 1960s, tasked with reviving the country's battered economy.

In separate meetings Monday, the SPD and CDU leaderships approved the deal for a left-right administration, although formal negotiations to hammer out a government program are not expected to start until next week.

The government's primary task will be to breathe new life into the economy, crippled by sluggish growth and chronically high unemployment currently running at more than 11 percent.

Germany's two biggest parties will share cabinet seats fairly equally, but it remains unclear how the division of responsibilities will affect Merkel's ability to run what is likely to be a fractious government.

No place for Schröder in new "grand coalition"

Edmund Stoiber, leader of the CDU's Bavarian sister party Christian Social Union (CSU), was reported to have told his leadership that Schröder would not have any post in the new government. Schröder's party has not commented on his future.

Schröder is expected to officially relinquish his seven-year grip on power on Monday to open the way for Merkel to become the first female leader of Europe's biggest economy.

The deal was hammered out amid intense negotiations in a three-week battle for supremacy after inconclusive September 18 general elections failed clearly to separate Schröder's SPD from her Christian Democrats.

According to reports citing sources close to the SPD, it will take the key ministries of foreign affairs, finance, labor and justice, as well as health, aid and cooperation, transport and environment.

Merkel's Christian Union alliance would also have eight cabinet posts -- Merkel as chancellor, a minister of state at the chancellery, and the economy, interior, defense, agriculture, education and family ministries.

Cabinet carousel begins in earnest

Stoiber, whose Bavaria is Germany's richest state, is tipped to take over the economy ministry with enlarged responsibility on European policy.

Peter Struck, currently the defense minister, will switch to become foreign minister, replacing Joschka Fischer of the Greens.

When pressed further on her cabinet appointments Merkel said she has no idea when she will announce who will take positions in her cabinet. "Once I'm done thinking," she said.

Merkel's rise to chancellor caps a remarkable rise for the daughter of a Protestant pastor who moved to communist 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.

Media chancellor, reforms chancellor, ex-chancellor

She will replace Gerhard Schröder who swept to power in 1998 in a coalition with the Greens on the back of a demand for change after 16 years of conservative rule under Helmut Kohl. But despite his charisma, he lost the confidence of voters after failing to bring down unemployment or to dispel a sense of malaise stifling the national mood.

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.

With neither the CDU, which finished four seats ahead of the SPD, nor the Social Democrats able to form a government with their preferred partners, both leaders claimed they had a mandate to run the country.

Schröder notably refused to step aside, a tactic seen by some observers as an audacious attempt to cling to power and by others as a political poker game to ensure the best deal for his party in a coalition government.

Industry and markets upbeat at result

German industry has urged the politicians to reach a compromise and get on with urgently needed economic reforms. Analysts say a stable government might be able to push through at least some of the key reforms needed to get the euro zone's biggest economy back on its feet.