BERLIN, Nov 13 (Reuters) German Vice Chancellor Franz Muentefering is resigning to spend time with his sick wife and will be replaced by Foreign Minister Frank-Walter Steinmeier in a move that could raise tensions in Berlin's ''grand coalition''.
Muentefering, who caused a stir in 2005 by labelling foreign investors ''locusts'', has been the senior Social Democrat (SPD) and a stabilising influence in Chancellor Angela Merkel's right-left government for the past two years.
He is also stepping down as labour minister, to be replaced in that post by the SPD's parliamentary whip Olaf Scholz, with both moves effective next week.
''Overall this change represents a loss for the coalition because Muentefering was one of its main pillars,'' said Dietmar Herz, a political scientist at Erfurt University.
Muentefering played a key role in the negotiations that set up Merkel's awkard ruling partnership -- Germany's first ''grand coalition'' of Christian Democrats (CDU) and SPD since the 1960s -- following her narrow election victory over Gerhard Schroeder two years ago.
The 67-year-old, cigarillo-smoking veteran of German politics has worked well with Merkel and therefore his departure represents something of a setback for the chancellor, who offered her ''respect'' today for his work in her government.
Muentefering's move also sets the stage for a more confrontational SPD within her government in the run-up to four key state elections next year and a federal vote in 2009.
Steinmeier, who will keep his foreign ministry portfolio, has grown increasingly critical of Merkel in recent months, accusing her of hurting ties with China and Russia by focusing on human rights.
Recent opinion polls show the SPD trailing Merkel's conservatives by as much as 14 percentage points -- a deficit they are struggling desperately to narrow.
WIFE HAS CANCER It has been widely reported in the German press that Muentefering's wife Ankepetra is suffering from cancer. He missed a key coalition meeting last week because of her worsening condition.
''The reason for my departure is purely family-related ...
not for political reasons,'' he told a news conference. ''My wife thinks it's good. The chancellor does not.'' 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 that post less than two years later after clashing with leftists in his party.
He has had a relatively low profile in Merkel's government and had been accused by some in his party of being too accommodating with the conservative chancellor.
He clashed with party leader Kurt Beck last month, openly criticising his proposal to unwind key aspects of Schroeder's labour market reforms. Muentefering lost that battle and this may have contributed to his decision to step aside early.
Muentefering is best known abroad for his 2005 attack on foreign investors. In the heat of a state election campaign, he likened them to ''Heuschrecken'', or locusts, saying they chewed up companies for profit before spitting them out and moving on.
The comments alarmed the corporate world, but analysts in Germany saw them mainly as a device to bring back SPD voters disillusioned by the party's shift to the right under Schroeder.
While Muentefering's departure would appear to strengthen Beck, it also puts the white-haired, bespectacled Steinmeier -- Beck's only serious rival in the race to challenge Merkel in 2009 -- in the coveted position of vice chancellor.
Should Beck falter or fail to bring up the SPD's poll ratings over the coming year, Steinmeier will be waiting in the wings.
Reuters SBC VP0018