Oct. 10 (Bloomberg) -- German Christian Democratic Union chairwoman Angela Merkel will become the country's first woman chancellor, wresting the top government post away from Social Democratic incumbent Gerhard Schroeder three weeks after a national election, a CDU official said.

Merkel, 51, and Schroeder, 61, will meet for a third time in less than a week at 11 a.m. today in Berlin to reach formal agreement on the issue. The CDU official spoke on condition of anonymity before an official announcement expected this afternoon. Agreement ends three weeks of political deadlock and clears the way for a ``grand coalition'' between the two main parties, the first since 1969.

Merkel spoke of the ``huge tasks ahead of us'' after meeting with Schroeder in Berlin on Oct. 6 to discuss the new government team. She promised the government coalition will provide ``new opportunities for our country.''

During the campaign for the Sept. 18 election, Merkel promised to lower taxes and cut labor costs. The planned coalition with the SPD, which has said it will protect workers' rights and opposes further tax cuts, may make it difficult for her to fulfill those promises.

The euro rose, trading at $1.2148 at 8:31 a.m. in London, from $1.2129 late in New York on Oct. 7, according to electronic currency dealing system EBS. The DAX Index climbed 37.91, or 0.8 percent, to 5045.68 as of 10:12 a.m. in Frankfurt, rising for the first session in four.

Cabinet Seats

The CDU and its Bavarian sister party, the Christian Social Union, will divide up the 16 cabinet posts with the SPD. The CDU official said his party will have charge of the Economy Ministry.

The SPD will get the Foreign, the Finance, Justice and Labor Ministries as well as the Health, Transport, Environment and Development Ministries, while the CDU will appoint the president of parliament, the German news agency DPA reported today.

``The difference between the parties percentage-wise isn't that big, so one must form a grand coalition that reflects it,'' Peter Mueller, the CDU's prime minister of Saarland state, said before a meeting of the CDU's steering committee today. ``We need a structure at the cabinet table so that neither side can outvote the other one in a decision.''

The election last month failed to produce a decisive majority, making the grand coalition necessary. The ballot gave the CDU and CSU 35.2 percent of the vote, or 226 of the 614 seats in the lower house of parliament, while Schroeder's SPD won 34.2 percent, or 222 seats.

Near-Record Unemployment

Merkel, a product of communist East Germany, has promised to spur growth in Europe's largest economy, which is coping with unemployment near a post-World War II record. The SPD has repeatedly dismissed as socially unjust the CDU's plans to cut taxes for high-wage earners while scrapping tax breaks for commuters and night-shift workers.

Both sides said they had found common ground in resolving their differences during their rounds of talks since Sept. 18. They will start full-scale coalition negotiations this week once there is agreement on who will fill the top posts.

``A solution is not easy at all,'' Deutsche Bank AG Chief Economist Norbert Walter said today in an interview. ``Several people will be forced to make concessions. The actual work will have to start afterward, explaining to voters why reforms are needed in Germany after all.''

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

Last Updated: October 10, 2005 04:53 EDT