BERLIN—It’s not the end of Angela Merkel’s remarkable political career. But it is surely the beginning of the end.
Germany’s center-left Social Democratic Party voted on Sunday to join a grand coalition with Ms. Merkel’s conservatives, clearing the way for her to become chancellor for a fourth time.
But close aides to Ms. Merkel say this term, which would make her post-war Europe’s longest-serving leader, will be her last.
By the end of this term she will have served 16 years at the head of the German government, a rarity in Europe’s tumultuous political landscape, where the shelf life of democratically elected leaders is getting shorter and shorter.
In her remaining years, the people close to her say, the chancellor, less encumbered by domestic power struggles, will be able to focus on overhauls at home and engage with French President Emmanuel Macron on his reform agenda for the European Union and its common currency, the euro.
Ms. Merkel, who has preached austerity for Germany’s neighbors over much of her time in power, has accepted that Berlin must increase its contributions to the EU budget to fill the gap created by Britain’s departure.
To Mr. Macron, she will likely offer closer integration in the fields of defense and taxation, and some limited improvement in eurozone governance, such as the creation of a European Monetary Fund to help fight future financial crises on the continent.
“It’s good news for Europe,” Mr. Macron’s office said on Sunday of the Social Democrats’ decision to endorse the coalition. “France and Germany will work together on new initiatives…to bring the European project forward.”
But analysts said German politics would face further turbulence.
Ms. Merkel’s new coalition will leave the rightwing populist Alternative for Germany as the parliamentary opposition. The anti-migration party, which won nearly 13% of the vote in September, is now polling at 15% and rising.
“The danger now is that the whole German political class will pretend that everything has gone back to normal. It hasn’t,” said Yascha Mounk, a Harvard University politics lecturer. “The populists are rising rapidly. Moderate parties are in danger of losing their majorities.”
Germany’s leading political magazine Der Spiegel, argued in an editorial that the “perpetual coalition of necessity” was meant to serve as a bulwark against the right yet only confirmed AfD’s claims to be the only alternative to the mainstream.
“The legacy of Ms. Merkel’s politics is AfD’s entry into the parliament,” Christian Lindner, leader of the pro-business Free Democrats, told journalists in Berlin. “Her legacy is unleashing centrifugal powers and cultural alienation in her own country.”
Ms. Merkel’s pending departure also sets up a contest between her Christian Democratic Party’s conservative and liberal wings over its future direction.
She has appointed her preferred heir, Annegret Kramp-Karrenbauer, formerly prime minister of the small German state of Saarland, as secretary-general of the CDU, a post that catapulted Ms. Merkel herself into the top job.
Ms. Kramp-Karrenbauer, 55 years old, who goes by the moniker AKK, is seen as conservative yet supportive of the liberal course plotted by Ms. Merkel that placed the CDU firmly in the political center.
On the other side of the arena, Ms. Merkel placed Jens Spahn, a darling of the conservative caucus and her most outspoken critic. Mr. Spahn, 37, designated healthcare minister, is a rarity in German politics. Openly gay and married to a leading journalist, he is a charismatic speaker who rarely misses an opportunity to attack Ms. Merkel’s liberal migration policies, which have led more than one million people to seek asylum in the country since 2015.
“The main candidates now have the platform to present themselves, and the party will be able to make a decision when the time comes,” a person familiar with Ms. Merkel’s thinking said.