He has led Germany for the past seven years but Gerhard Schroeder has confirmed he will play no part in the next government.
After hinting at his move earlier this week, he said an emotional goodbye in front of an audience of union members in his home city of Hannover.
“I will not be part of the next government,” he said. “But your reception has made one thing clear to me – I would like to stay among you. I know where I came from and that’s why I know where I belong.”
Schroeder will, however, take part in formal coalition talks between his SPD and the conservatives.
It looks as though the SPD chairman Franz Muentefering will be the next vice chancellor and take the employment post.
Peer Steinbrueck, the former SPD state premier of North Rhine-Westphalia, is apparently the favourite to take the key role of finance minister.
The SPD plans to name the ministers who will take its eight cabinet posts later today.
But although Angela Merkel will lead the new administration, it appears she will have only limited powers as chancellor of a coalition of the country’s main left and right wing parties.
Leaders on both sides acknowledged her role would be different to that of the head of a united government.
Although a chancellor’s right to set the government’s course is written in the constitution, the SPD chairman has said it would be “unrealistic” for her to use it.