Chancellor-designate Angela Merkel (search) faced a deepening political mire after a leading conservative ally tapped to be economy minister announced Tuesday he was quitting her coalition Cabinet before it even takes office.

Merkel insisted she was "bound and determined" to build a stable government, speaking to reporters less than an hour after conservative Edmund Stoiber (search) dropped out of her broad left-right alliance.

The turmoil was sparked Monday when Merkel's intended deputy chancellor, Franz Muentefering (search), announced he was quitting as leader of the left-leaning Social Democratic Party (search). He said he didn't know whether he would take his intended job as Merkel's vice chancellor.

His resignation prompted Stoiber to say Tuesday that given the changed situation he would remain in his current post of Bavarian governor rather than join the Cabinet.

"In this altered situation, I have reached the decision that as the head of the party, I can better support the interests of the Christian Social Union (search) in Munich," Stoiber told reporters in the Bavarian capital.

Christian Social Union lawmaker Michael Glos (search) was appointed to take Stoiber's place.

Merkel said she and her party respected Stoiber's decision and welcomed Glos as the future economy minister.

She also sought to reassure Germans that both her Christian Democrats and their sister party, Stoiber's Christian Social Democrats, were committed to working toward building a stable governing alliance with the Social Democrats.

"This evening I would like to tell the citizens of this country ... I am bound and determined to make the creation of this grand coalition possible," she said.

"It goes without saying that difficult discussions remain ahead of us, but we will conduct them with optimism, determination and a bit of joy that voters have chosen us for this job," Merkel said.

Merkel's conservatives and the Social Democrats tentatively agreed to form an alliance after an inconclusive September election handed neither side a clear majority. The two sides hope to have an agreement in time for parliament to elect Merkel as Germany's first female chancellor Nov. 22.

A group of key Social Democratic leaders on Tuesday united behind Matthias Platzeck (search), governor of Brandenburg state, to replace Muentefering. The party leadership was expected to formalize the nomination Wednesday.

Failure to strike a deal on a coalition Cabinet could lead to a weak minority government being appointed by President Horst Koehler (search), or even new elections early next year.

Analysts said, however, that given the lack of any convincing alternative alliance, the two sides would still strive to form a coalition government.

Lothar Probst, a political scientist at the University of Bremen, argued that voters' growing weariness over the maneuvering would increase pressure "to pull this thing off anyway."