The Social Democrats are putting the agreement secured Wednesday to a ballot of their more than 460,000 members. Many of them are skeptical about extending the four-year "grand coalition" of Germany's biggest parties after a disastrous election result in September.
The Social Democrats are widely viewed to have secured a good deal in the coalition negotiations - capturing the powerful finance ministry, along with the foreign and labor ministries and three others that it already held.
But Schulz's own plans were becoming a major distraction. The former European Parliament president said Wednesday that he planned to become Germany's next foreign minister - a risky move given that, after the election, he had explicitly ruled out entering Merkel's next Cabinet. He also said Andrea Nahles, the party's parliamentary leader, would take over as the Social Democrats' chairwoman.
In a statement Friday, Schulz said members' approval of Germany's new coalition government was endangered by the discussion about his future so "I will not enter the government and fervently hope that this ends the personnel debates inside the Social Democratic Party."
"We are all in politics for the good of the people of our country," Schulz added. "That also means that my personal ambitions must come behind the interests of the party."
The foreign ministry is currently held by Sigmar Gabriel, who handed the Social Democrats' leadership to Schulz a year ago and has become one of Germany's most popular politicians.
Schulz's decision came after Gabriel complained to the Funke newspaper group about "disrespectful" behavior in the party. Gabriel said Germans appear to think he has been successful "and it's clear I regret that the new Social Democrat leadership didn't care about this public appreciation of my work."
There was no immediate word on who might become foreign minister instead of Schulz, who also didn't detail any plans for his own future.
Schulz was Merkel's defeated challenger in September. After leading his party to its worst post-World War II election result, he vowed to take the Social Democrats into opposition. He reversed course, however, after Merkel's coalition talks with two smaller parties collapsed in November.
The head of the Social Democrats' youth wing, who is campaigning against the new coalition, said party members should give up fighting about who does what job and concentrate on debating whether the party enters the government.
Asked if he was relieved, Kevin Kuehnert replied: "I will be relieved when the ballot is done in three weeks and we have achieved a rejection of the 'grand coalition.'"
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