Martin Schulz, the leader of the Social Democratic Party of Germany (SPD), had previously decided he would accept the post of foreign minister in the country's new cabinet, counter to still earlier claims that he wouldn't do so, after the coalition talks with Merkel's CDU/CSU alliance succeeded.
"At the same time, I sincerely hope that this will end the personnel debates within the SPD.my own personal ambitions must be placed behind the interests of the party", Schulz said.
Schulz, who was rumoured to be heading for the foreign ministry after agreeing a coalition deal with the CDU on Wednesday, said in a statement that he feared the upcoming SPD membership vote, which is required to approve a renewed "grand coalition", could be "endangered by the discussion surrounding my person".
Martin Schulz was told by his SPD party members that they would not back the deal to form a government if he took the job.
Sigmar Gabriel, a popular foreign minister in the previous government and until recently seen as a close friend of Schulz, bitterly attacked his party leader in an interview on Thursday, hinting at broken promises.
Many Social Democrats don't want to revive the "grand" coalition of Germany's two biggest parties, which underpinned two of Merkel's three terms.
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September's general election was a disaster for the party, however. His withdrawal was a response to an outcry in the Social Democrats' base, with many saying Schulz, who led the party to its worst election result since World War II a year ago, had broken his promise never to enter a Merkel government.
The deadlock prompted speculation the 63-year-old German leader could be forced to step down, but after long negotiations over key issues such as foreign policies, immigration and the environment, Ms Merkel will remain Chancellor for her fourth term.
His announcement leaves the former European Parliament president empty-handed after a disastrous year that saw him lead the SPD to its worst-ever score since WW2 in September elections, with just 20.5 percent of the vote.
"What's left is regret at how little respect there is in the Social Democratic Party in our dealings with one another, and how little someone's word counts for", Gabriel told the Funke newspaper group. Gabriel himself surrendered the party chairmanship to Schulz in January 2017.
Tensions are also reported between him and Sigmar Gabriel, an SPD colleague who is now foreign minister.
The draft, published on Wednesday on the homepage of Chancellor Angela Merkel's conservative CDU party, did not indicate a schedule for ending glyphosate use.