Chancellor Angela Merkel's conservatives and Germany's main center-left party are still haggling over a deal to form a new coalition government after negotiations that lasted through the night.
But before she can be sworn in, a final hurdle looms: the hard-fought pact between her CDU/CSU bloc and the Social Democratic Party must still be approved by the SPD's skeptical rank-and-file.
And in Berlin they demanded that Germany return to the European Union leadership position.
Julian Reichelt, editor-in-chief of the influential Bild daily, called it "the first SPD government led by a CDU chancellor".
'I hereby declare my decision not to join the federal government and at the same time I sincerely hope that this will end the personnel debates within the SPD, ' Mr Schulz said.
The SPD has managed to secure the finance, foreign and labour ministries as part of the deal, "a significant feat for the leader, Martin Schulz", who is set to land the job of foreign minister, says The Guardian.
An SPD member since she was 18, Nahles is credited with helping to swing her divided party behind agreeing to take up the coalition talks with a passionate speech at a special party conference in January.
The deal Wednesday morning between the CDU and coalition partners, the Christian Social Union (CSU) and the Social Democrats (SPD) ensures that Merkel, who has already served for more than 12 years, will get another term in office.
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The SPD lost 40 seats as its...
Given the fate of its sister parties in Europe, the SPD should have been aware of the dangers of putting personal ambitions over party politics.
Those opposed to any deal with Mrs Merkel include a new group within the SPD calling itself NoGroKo (no grand coalition).
Schulz was Merkel's defeated challenger in September.
Martin Schulz, leader of the German Social Democrats (SPD), said Friday he won't be the next foreign minister. He was then accused of flip-flopping, when he announced on Wednesday that he would cede the party chairmanship to succeed Sigmar Gabriel as foreign minister.
The result of the SPD vote is expected to be announced on 4 March, with CDU delegates also getting a chance to vote on the coalition deal at a party congress on 24 February.
"I think the coalition agreement that we've assembled can be exactly this: the basis of a good and stable government that our country needs and that many in the world expect from us", Merkel told reporters.
Merkel has relied on exactly this coalition for two of her three four-year terms.