Berlin ? Conservative Angela Merkel struck a power-sharing deal Monday that will make her the first woman and politician from the ex-communist east to serve as Germany’s chancellor, forging a coalition with ousted leader Gerhard Schroeder’s party to reform the faltering economy.

The country’s two biggest political forces were forced into talks on forming a joint government after a Sept. 18 election gave Merkel a victory – but with a margin so slim Schroeder’s party demanded equal treatment in a “grand coalition.” To resolve the impasse, the Social Democrats gave up Germany’s leadership, but the party secured the bulk of the ministries, including the prestigious Foreign Ministry.

“I feel good,” she told reporters with a broad smile. “But I have a lot of work ahead of me.”

Both sides agreed to start formal negotiations on a new government Monday. Merkel said both sides aim to complete them by Nov. 12, after which they will need endorsement by party conventions.

There was no word Monday on whether Schroeder, Germany’s leader for the last seven years, might play any role in a new government. Franz Muentefering, the chairman of his party, said he would take part in the coalition talks but that there had been no other decisions.