European Union relieved after Merkel clinches grand coalition deal

Posted February 08, 2018

Which party runs which ministry isn't decisive, she said.

A rejection of the deal by Social Democrat members would leave a minority government under Merkel or a new election as the only viable political options.

It said that, following an all-night session, the three parties still have to work through a relatively short list of disagreements before reaching a final agreement.

The SPD suffered its worst result in a September national election since Germany became a federal republic in 1949 and initially ruled out another coalition, vowing to rebuild in opposition.

But before any of these changes can go into effect, the Social Democrat voters have to sign off on the coalition deal via a postal vote.

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Leaving the powerful finance industry in the hands of the SPD gives the junior coalition partner the opportunity to spend a record budget surplus and embracing their demands for European reform.

The coalition deal must be approved by the SPD's 463,000 rank-and-file members, many of whom bristle at the prospect of enabling yet another star turn for Merkel in Germany and overseas.

While it ensures her position at the head of the coalition, she had to make the deal attractive enough for traditional rivals the SPD and its members to back.

A Social Democrat finance ministry - replacing pro-austerity Wolfgang Schäuble - is more likely to go along with French President Macron's ambitious plans for European Union reform, by allowing more German support for struggling eurozone economies.

After a first attempt to form a coalition with the ecologist Greens and the pro-business liberals fell through in November, Merkel was forced to turn to the reluctant SPD for talks while she and her ministers worked on as caretakers.

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News of a deal will bring some relief to investors and partner countries, who had been concerned by Merkel's failure to cobble together a government for more than four months at a time when Europe is facing multiple challenges - including the need for euro zone reform and Britain's departure from the EU.

The SPD looks set to control six ministries including finance and foreign affairs.

German media reported that Social Democrat party leader Martin Schulz will serve as foreign minister, Hamburg mayor Olaf Scholz will oversee finance, and Horst Seehofer-chief of the Bavarian Christian Social Union-will get interior. The Exterior Ministry is also said to have been given to the SPD with speculation that party leader Schulz could be put in charge.

All Germany's mainstream parties are united in saying they want a good deal with the UK, while at the same time stressing the single market should not be undermined by cherry-picking. "This government will have an even clearer SPD stamp than the former grand coalition did".

"I think the coalition agreement that we've assembled can be exactly this: the basis of a good and stable government that our country needs and that many in the world expect from us", Merkel told reporters.

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