Angela Merkel on Monday confirmed her last term as German chancellor, and said she will not seek re-election as chairwoman of the Christian Democratic Union (CDU) in December.
"Firstly, at the next CDU party congress in December in Hamburg, I will not put myself forward again as candidate for the CDU chair," she told reporters, after suffering setbacks for the CDU in a regional vote on Sunday.
"Secondly, this fourth term is my last as German chancellor. At the federal election in 2021, I will not stand again as chancellor candidate, nor as a candidate for the Bundestag, and... I won't seek any further political offices," she added.
Merkel, 64, has been CDU chairwoman since 2000, and giving up the role would start a race within the party to succeed her as chancellor.
The euro fell to session lows on the news.
German Chancellor Angela Merkel speaks to media ahead of a European Union (EU) leaders Brexit summit in Brussels, Belgium, October 17, 2018. /VCG Photo
Monday's developments came a day after the CDU and its junior federal coalition partner the Social Democrats (SPD) suffered heavy losses in an election in the state of Hesse, just two weeks after a similar drubbing in Bavaria.
Both polls have been seen as damning verdicts on the right-left "grand coalition" in Berlin which has lurched from crisis to crisis, often over the hot-button issue of migration.
Standing down from the party chair would allow a new CDU chairman or woman to build a profile before the next national election, due in 2021.
Merkel's weakness at home may limit her capacity to lead in the European Union at a time when the bloc is dealing with Brexit, a budget crisis in Italy and the prospect of populist parties making gains at European parliament elections next May.
(With inputs from agencies)