German political deadlock broken

Chancellor Angela Merkel shakes hands with Martin Schulz, leader of the Social Democrat Party at a news conference following 24 hours of talks to end nearly four months of political deadlock. (EPA-EFE Photo)

BERLIN: Chancellor Angela Merkel's conservatives and the centre-left Social Democrats took a big step on Friday toward forming a new German government, sealing a preliminary agreement in which they vowed to strengthen the EU and keep a lid on the number of migrants entering the country.

The 28-page deal was reached in a marathon negotiating session that lasted 24 hours at the end of nearly a week of talks. It was enough for leaders of Merkel's two-party Union bloc and the Social Democrats to recommend moving on to formal coalition negotiations.

But Social Democrat (SPD) leader Martin Schulz will have to work hard to persuade a party congress on Jan 21 to endorse that move.

The agreement set out compromise positions on a wide range of issues, including taxes, education and health care.

"I think we have achieved outstanding results," Schulz told reporters.

He said it was a good indicator of support that his 13-member negotiating team had decided unanimously to recommend going ahead with talks. Still, a ballot of his party's entire membership is required to bless the coalition agreement.

After the week of negotiations and the overnight session, a visibly tired Merkel told reporters that she, too, was now "optimistic that things will move forward" to forming a new coalition of the same parties that have run Germany for the past four years.

"We are working seriously ... on creating the conditions to be able to live well in Germany in 10 or 15 years," she said.

"We dealt with questions of investment for the future," she added, pointing to education, digitisation, energy and construction as major issues.

If things go well, a new government could be formed by April 1, said Horst Seehofer, the leader of the Christian Social Union -- the Bavaria-only sister party to Merkel's Christian Democratic Union.

"If we succeed, these could be four very, very good years -- I am already speaking of these years because I believe we will succeed," he said.

Had the talks failed, Merkel's only options would have been to form a minority government or hold new elections. Despite the challenges ahead, the news buoyed markets and sent the euro to a three-year high of $1.2138.

Following a dismal result in Germany's Sept 24 election, the Social Democrats initially vowed not to enter another government with Merkel's conservatives, but they reconsidered their position after the long-time chancellor's attempts to form a coalition with two smaller parties collapsed. There still remains much resistance to it within the party's membership, however.

Friday's agreement opened with an acknowledgement that the September election showed "many people were dissatisfied".

The three coalition parties' support dropped by a cumulative total of nearly 14 percentage points in the election. It said the parties are committed to "strengthening social cohesion in our country and overcoming the divisions that have arisen."

It contains a long section on Europe -- an issue particularly dear to Schulz, a former European Parliament president. The parties pledged that Germany will play an active role in the debate on the EU's future and strengthening European integration.

They pledged to fight tax dumping and evasion in Europe, pushing for "fair taxation of big companies" including the internet giants Google, Apple, Facebook and Amazon, and called for unspecified minimum rates for corporate tax.

Merkel currently leads a caretaker government, limiting her ability to take major policy initiatives as French President Emmanuel Macron pushes an ambitious European reform agenda.

"We have, in what feels like a long time since the election, seen that the world will not wait for us," Merkel said. "We are convinced that we need a new awakening for Europe."

"So I have no worries about us finding common solutions with France."

On migration, an issue that is key for Seehofer's CSU, the agreement states that the number of new asylum-seekers shouldn't exceed a range of 180,000 to 220,000 annually. And there will be a limit of 1,000 per month on the number of close relatives allowed to join migrants in Germany who are granted a status short of full asylum.

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