Annegret Kramp-Karrenbauer, the leader of Germany's Christian Democratic Union (CDU) and the one-time favorite to succeed Angela Merkel, confirmed Monday that she will not run for chancellor.
Reports of Kramp-Karrenbauer's departure came earlier in the day, but she later gave a press conference confirming the news.
Known colloquially as "AKK," the CDU leader said she will remain as defense minister until the end of the legislative period and chair of the CDU until another candidate is found. A leadership contest is expected to take place in summer.
She said that the question of who will run for chancellor was "weakening" the CDU and said her departure would have no impact on the stability of the governing coalition made up of the CDU, its Bavarian sister party the Christian Social Union (CSU), and Social Democratic Party (SPD).
The announcement throws the CDU's political future, and that of Europe's largest economy, into doubt once Merkel steps down from the chancellorship in 2021.
Kramp-Karrenbauer had taken over the party leadership in December 2018 and was widely seen as a successor to Merkel, who has led Germany since 2005.
The move comes at a difficult time for the awkward and troubled CDU/CSU-SPD coalition, however, and the CDU has seen its popularity decline in several regional elections in recent months.
There was uproar last week when the CDU party in the small state of Thuringia joined forces with the far-right, anti-immigration Alternative for Germany (AfD) party to elect a new state premier. The politician was from the Free Democratic Party (FDP) but he has since stepped down from the role following the furor caused by the vote.
However, the move sent shockwaves to Berlin as mainstream parties had vowed not to work with the AfD before now. The decision by the local branch of the CDU to help a candidate into office, alongside the AfD, was seen as a defiant message against the party's leadership — and a reason for the departure of Kramp-Karrenbauer.
Christian Schulz, director of European economics at Citi, said Monday that Kramp-Karrenbauer announced her intention to step down in a CDU board meeting on Monday "and cited divisions over cooperation with the far-left and far-right parties after the shock event in Thuringia" with Merkel reportedly favoring cooperation with the Left Party in Thuringia, which Kramp-Karrenbauer ruled out.
Now, analysts are looking at a possible successor to both the CDU and German leadership, with Friedrich Merz, Armin Laschet and Jens Spahn seen as front-runners for the leadership.
The next leader will be closely-watched in Europe too, as Germany has been seen as the region's growth driver, although its economy almost entered a recession in 2019.
Carsten Nickel, deputy director of research at Teneo Intelligence, told CNBC Monday that the announcement casts further uncertainty over the future direction of the CDU.
"The big underlying question hasn't been resolved and that is, does the CDU want to look back towards a more traditional right or does it want to stick to that more centrist course that it has been on under Merkel?" he told CNBC's "Street Signs."
He said the structural problem in the CDU between centrists and traditionalists — both within the party and its voters – was the biggest challenge facing the party.
"My concern, looking back, one year ago was that whoever you end up with (leading the CDU) — the more traditionalist leader or, on paper, the more liberal leader like her, will preside over a party that is structurally divided."
The next general election in Germany takes place in 2021 and there has been speculation that if the CDU-CSU/SPD coalition falls apart, a snap election could take place earlier. Germany will be looking to minimize the political disruption from the Kramp-Karrenbauer departure, however, one expert said.
"The coalition already looks really shaky," Robin Bew, managing director of the Economist Intelligence Unit, told CNBC Monday.
"How this plays into that is really unclear to me. Germany assumes the EU presidency in the second half of this year so there's a strong thought, and our team thinks, that they're desperate to avoid having to bring the election forward to clash with that. So our view is that the election might be brought forward in 2021, but only to the beginning of the year," he told CNBC's "Squawk Box Europe."
"But given the state of the coalition at the moment and the risks that we end up with a minority government sometime in the next six months, I think this does really start to shake German politics."
—CNBC's Annette Weisbach contributed reporting to this story.