Germany's two biggest political parties formally put aside decades of fierce rivalry Monday and approved final details of a deal to form a coalition government that neither side really wants but that both concluded was the only way to run the politically divided country.

The coalition will be led by Angela Merkel, 51, a Christian Democrat who is scheduled to be sworn in Nov. 22 as Germany's first female chancellor, as well as the first to have grown up behind the Iron Curtain in the former East Germany.

"Germany stands at the crossroads concerning whether we will preserve what makes this country strong: a social market economy in times of globalization, a policy of people in times of the threat from terrorism," Merkel told delegates at a party convention in Berlin.

Merkel's Christian Democrats had hoped to run the government on their own or in partnership with one of Germany's minor parties. But they barely eked out a plurality in September's elections and were forced to turn to their chief competitors, the incumbent Social Democrats, who finished a close second despite widespread voter dissatisfaction with record-high unemployment rates and years of tepid economic growth.

Delegates from both parties grumbled Monday about having to work together for the first time since 1969 in a "grand coalition," as it is called here.

They pointed out that their governing philosophies were hopelessly at odds. But in the end they decided that they didn't have much choice, other than calling for new elections -- something that lawmakers and analysts alike predicted was unlikely to clear up the gridlock.

"No one will be forced to cheer or love the grand coalition," said outgoing Chancellor Gerhard Schroeder, 61, the Social Democrat who lost his bid to extend his seven years in office and will step down next week.

In a speech to his party in Karlsruhe, Schroeder grew teary-eyed when reviewing his accomplishments in office -- highlighting his opposition to the U.S.-led invasion of Iraq -- but said compromise with the Christian Democrats was necessary for the good of the country. "We would be making a mistake if we did not seize this opportunity now," he said.

Pre-election surveys showed that many Germans preferred a grand coalition as the best way to fix the country's economic problems, with most voters trusting neither the Social Democrats nor the Christian Democrats to take charge on their own. But as the two parties spent the past several weeks negotiating a formal agreement to govern, the early optimism faded.

The grand coalition's slogan is "Together for Germany: with courage and humanity." But the feel-good words mask policies that are already drawing boos. The agreement that both sides approved Monday provides for an increase in the national sales tax from 16 to 19 percent. It also embraces an income tax increase for those earning more than $300,000 a year, from 42 to 45 percent.

The retirement age will be gradually raised over several years, from 65 to 67. Pensions will be frozen for the foreseeable future. And job protection safeguards will be loosened to make it easier for businesses to hire and fire workers.

About the only people not sharing in the pain, critics alleged, are lawmakers -- who will still be allowed to retire at age 55 with full benefits. "Grand Coalition Is Telling Everyone to Pay Up: Only the Politicians Are Sacrificing Nothing!" the Bild tabloid thundered Monday in an editorial.

Lawmakers are now preparing for what they acknowledge will often be difficult cooperation. "This is a sober marriage of convenience," Matthias Platzeck, the chairman of the Social Democrats, said at a news conference Saturday as he sat next to Merkel, his new political partner.