BERLIN, Nov 13 (Reuters) German Vice Chancellor Franz Muentefering, the top Social Democrat in Angela Merkel's government who once labelled foreign investors ''locusts'', is resigning for family reasons, a government spokesman said.
In addition to his vice chancellor post, Muentefering also serves as labour minister, and his departure sets the stage for a minor reshuffle of Chancellor Merkel's cabinet.
The Berliner Zeitung newspaper reported that Foreign Minister Frank-Walter Steinmeier would take Muentefering's place as vice chancellor, the number two position in Berlin's ''grand coalition'' after Merkel.
Olaf Scholz, a leading member of the SPD in parliament, is pegged to become labour minister, a party official told Reuters.
Muentefering's departure represents a setback for Merkel, who had worked well with the cigar-smoking political veteran, and sets the stage for more confrontation between the ruling parties in Berlin.
At the same time, it strengthens the hand of SPD Chairman Kurt Beck who had clashed openly with Muentefering in recent months over labour market policy.
''Up until now, Muentefering was the one who guaranteed that the coalition held together,'' said Gerd Langguth, a political scientist at Bonn University.
Muentefering's wife Ankepetra has been seriously ill with cancer and he missed a key coalition meeting last week because of her condition. He will hold a news conference in Berlin at 4:30 pm (2100 IST).
''Franz Muentefering will resign his positions as labour minister and vice chancellor due purely to family reasons,'' said Stefan Giffeler, a Labour Ministry spokesman.
The 67-year-old Muentefering was a close ally of former Chancellor Gerhard Schroeder, from whom he took over the leadership of the SPD in early 2004.
He gave up the SPD leadership less than two years later after clashing with leftists in the party over a key appointment.
Muentefering has had a relatively low profile in Merkel's government and been accused by some in his party of being too accommodative with the conservative chancellor.
He clashed with Beck last month, openly criticising his proposal to unwind key aspects of Schroeder's labour market reforms.
Muentefering fired a debate in 2005 over the role of business in Germany by likening some financial investors to ''locusts''.
His comments made headlines abroad and alarmed the corporate world, but German analysts saw the comments mainly as a device to bring back disaffected SPD voters.
REUTERS SKB HS1725