By Andreas Rinke and Holger Hansen
BERLIN, Oct 12 (Reuters) - Germany's labour minister and co-head of the centre-left Social Democrats (SPD) quit unexpectedly on Monday, adding to uncertainty around Chancellor Friedrich Merz's struggling coalition after bruising state election defeats last month.
Baerbel Bas said she was resigning from both positions to deal with grief over the recent death of her stepdaughter.
She added that "public attacks against me, unfortunately also from within the ranks of our
coalition partner" had made her situation unbearable.
Bas will be replaced as minister by Alexander Schweitzer, former state premier of the western state of Rhineland-Palatinate, and the whole of the SPD leadership will face re-election in a special party conference at the end of the year.
While the departure of one minister was not expected to disrupt the overall government, it highlighted the turmoil facing Europe's largest economy.
Merz's coalition has been under growing pressure following victories for the far-right Alternative for Germany (AfD) in eastern Germany last month.
The results, which the AfD sees as the first step towards victory in federal elections due in 2029, have shaken the government, which is languishing in opinion polls amid economic uncertainty and voter frustration over rising living costs.
Bas, whose former ministry oversees large parts of Germany's welfare system, was the target of repeated criticism from some members of Merz's conservative Christian Democrats who have accused her of standing in the way of economic reforms.
Finance Minister Lars Klingbeil, who shared the leadership of the SPD with Bas, cancelled a planned trip to India and it was unclear whether he would attend a meeting of the Group of 20 finance ministers in Bangkok this week.
STRAINED RELATIONS
Senior members from both coalition partners issued a statement last week, stressing their determination to carry on to meet the "historic test" facing Germany's democracy.
However, the tone between them remains tense and Klingbeil said Bas had been subject to "unacceptable" attacks from the CDU while mourning her stepdaughter.
Senior leaders of Merz's Christian Democrats were meeting to try to regain the initiative and agree a way forward after months of coalition wrangling over planned tax, pension and labour laws aimed at reviving Germany's sluggish economy.
They struck a conciliatory tone, saying Bas's decision deserved respect and thanking her for her commitment.
But while both sides agree on the need for reforms to shore up the pension system as the population ages and to help industry confront a surge in energy prices and increasingly intense competition from China, significant differences remain.
Merz, a pro-business fiscal conservative, has struggled to win popular support for changes that could push back the retirement age for some, increase the cost of health insurance and weaken worker protections.
Support for the government will be further tested in five more regional elections next year that will impact his ability to get major legislation through the Bundesrat, the upper house of parliament filled by Germany's 16 states.
Business groups welcomed the appointment of Schweitzer as labour minister as the chance for a "new start", said Marie-Christine Ostermann, head of an association representing family-owned companies.
"Businesses are now calling for reforms that make employment more attractive, reward performance and boost growth," she told Reuters.
(Reporting by Andreas Rinke, additional reporting by Maria Martinez, writing by Ludwig Burger and James Mackenzie, editing by Ros Russell and Andrew Cawthorne)
