One of the leaders in Germany's proposed coalition government said Monday he was stepping down as party chairman, raising questions about the future of the deal struck to give the country its first female leader.

After announcing he would give up his position as head of the Social Democrats, Franz Muentefering (search) said it was uncertain whether he would serve as vice chancellor in the new Cabinet under Chancellor-designate Angela Merkel (search).

Yet he vowed to continue solidifying the Social Democrats' position in the coalition government with Merkel's conservative Christian Democrats, referring to it as the "crowning achievement" of his tenure as party chairman.

"I believe that even when one thing or another has happened, the desire to continue with this coalition remains unchanged," Muentefering told reporters.

Merkel also insisted that both major parties remained committed to the deal reached in October to form a "grand coalition" after neither party won a majority in parliamentary elections.

"From both sides there is the desire to build a grand coalition," she said.

Yet Christian Social Union leader Edmund Stoiber (search), tapped to be the country's next economics and technology minister, appeared less confident, suggesting his participation in Merkel's government was no longer guaranteed. Stroiber's party, the Christian Democrats' Bavarian-only sister party, has a small role in the coalition.

"Mr. Muentefering as the party chairman has been a cornerstone of this grand coalition," Stoiber told reporters. "This cornerstone has now changed and that does have an impact on things for us."

The crisis in the Social Democrats took politicians by surprise, coming hours before the two sides were to meet in hopes of sealing an agreement on how to tackle the country's huge budget shortfall.

Muentefering's decision to give up the chairman position came after his preferred candidate for the party's post of secretary-general was passed over for another candidate by the party's executive board.

Outgoing Chancellor Gerhard Schroeder (search), the former head of the Social Democrats, blamed the move on the "ambition" of individuals within the party, but said the development could not be allowed to derail the new government.

"I am very sorry about this," Schroeder said. "But it can not be allowed to have any consequences, any negative consequences on the building of a stable government."

Even as questions surrounded the future coalition, Merkel, Muentefering and a handful of others met in a further round of talks to seek a compromise on how to close the $42 billion budget gap by the end of 2007.

That is supposed to bring Germany back within European Union spending limits designed to protect the stability of the euro and head off possible sanctions from Brussels.

The parties also face difficult decisions on how to shore up the country's creaking pension and health systems and reform its tightly regulated job market.

Talks were expected to continue for the next couple weeks before Merkel is elected chancellor by parliament on Nov. 22.