Chancellor Gerhard Schroeder, who has led Germany since 1998, said for the first time on Wednesday he would not play a role in the next government, in an emotional farewell including broadsides at the United States and Britain. "I will not be a part of the next government -- definitely not be part of it," a tearful looking Schroeder told a rapt audience of union members in his home city of Hanover. He quickly composed himself, hitting his stride in a passionate defense of a strong German state and lashing out at "Anglo-Saxon" economic policies favoured in Britain and the United States, which he said had "no chance" in Europe.
In an apparent reference to Hurricane Katrina, Schroeder castigated Washington for liberal, hands-off policies that left it exposed in times of crisis. The Bush administration was widely criticised for its response to the devastating storm.
"I do not want to name any catastrophes where you can see what happens if organised state action is absent. I could name countries, but the position I still hold forbids it, but everyone knows I mean America," he said to loud applause.
Schroeder was speaking two days after his Social Democrats (SPD) said he was ready to step down to allow conservative leader Angela Merkel to front a power-sharing government of their two parties.
Her conservatives narrowly beat Schroeder's SPD in a September 18 general election, but failed to win enough seats to build a majority with their preferred coalition partners.
Schroeder, who has been urged by some members of his party to stay on as vice-chancellor in a new government, hinted on Tuesday evening he would not stay on but had not ruled it out publicly before.
CLASHES OVER IRAQ
Schroeder clashed with Britain and Washington in the run-up to the 2003 Iraq invasion and has been at odds with British Prime Minister Tony Blair over the direction of European economic policy.
Blair has urged European Union countries to cut back state influence on the economy, running into fierce opposition from both Schroeder and his ally, French President Jacques Chirac.
Schroeder stressed the importance of the Franco-German link in his speech, saying it was crucial for the defense of Europe's social model.
Merkel, who advocated far-reaching reforms of the German labor market and tax system during the election campaign, has vowed to take a more even-handed approach with France and is seen to be closer to Blair.
But as she will rule in a coalition with Schroeder's party, her plans are expected to be watered down.
The SPD has won many of the important cabinet positions in the next government, including the foreign and finance ministries. The party plans to decide who will fill those posts on Thursday, SPD sources told Reuters.
Peer Steinbrueck, former state premier of North Rhine-Westphalia, is a "clear favorite" to take the key role of Finance Minister, sources said.
The SPD and the conservatives are due to start formal coalition talks from next Monday. Schroeder will participate in those negotiations, which are due to conclude by November 12.
His withdrawal, while not unexpected, is nevertheless a blow to the SPD, which is likely to struggle to fill the void their most charismatic figure leaves behind him.
Schroeder has not given any signs of what he could do next, although companies could be keen to make use of his connections and deal-making skills, which he used as chancellor to secure lucrative deals for German industry.