Germany: Merkel’s conservatives make big concessions in coalition deal

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Chancellor Merkel's Christian Democrats and rivals Social Democrats agree to form new government

BERLIN German Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) yesterday agreed to a coalition deal, taking Europe's economic powerhouse closer to a new government after months of uncertainty that unnerved allies and investors.

In a move likely to mean a shift in Germany's euro zone policy, the media reported the SPD would take the Finance Ministry, which was overseen until recently by conservative Wolfgang Schaeuble, widely despised in struggling euro zone states during his eight-year rule for his rigid focus on fiscal discipline.

SPD leader Martin Schulz said earlier this week his party had ensured an agreement with the conservatives that would put an end to "forced austerity" and set up an investment budget for the euro zone.

Handing over the crucial Finance Ministry suggests the conservatives had to make big concessions to get the SPD to agree to renew the "grand coalition" that has governed Germany since 2013 and secure Mrs Merkel's fourth term in office.

Bruised by its worst election result in the post-war era, the SPD had planned to revamp itself in opposition and agreed to the coalition talks reluctantly. Its 464,000 members still have the chance to veto the deal in a postal ballot.

In a message posted alongside a photo of Mr Schulz and other SPD negotiators smiling, the SPD negotiators wrote: "Tired but happy. There is a treaty! Finally. Now the final details are being worked into the text."

The agreement should allow Germany to resume its leading role in international affairs and, at least for now, put an end to questions about how long Mrs Merkel will stay in her job.

Investors and partner countries had been concerned by Mrs Merkel's failure to assemble a government in more than four months at a time when Europe faces multiple challenges, including the need for euro zone reform and Britain's looming departure from the EU.

A negotiating source said the SPD would have the Finance and Labour Ministries, while the media reported that the party would also secure the Justice, Family and Environment Ministries.

Bild newspaper reported that Mr Schulz would become foreign minister. Newspaper Sueddeutsche Zeitung said Mr Schulz would quit as SPD leader and parliamentary floor leader Andrea Nahles was ready to take over.

Hamburg Mayor Olaf Scholz is slated to take over as finance minister, according to sources familiar with the negotiations.

Mrs Merkel's Christian Democrats will get the Economy and Defence ministries while their Bavarian allies, the Christian Social Union, will provide the interior minister in the form of Mr Horst Seehofer, who talks tough on migration.

The news agency DPA said the Acting Finance Minister, Mr Peter Altmaier, would become economy minister. - REUTERS