Germany’s biggest parties agree to form ‘grand coalition’

BERLIN, Germany — The country's two leading political rivals agreed on a "grand coalition" on Wednesday that will almost certainly install Angela Merkel as chancellor for her third term.

“This contract forms a great coalition for great challenges,” Merkel told reporters.

Following weeks of horse-trading, Merkel's Christian Democratic Union (CDU) and its regional sister party, the CSU, finally sketched out a blueprint for a common program with the opposition Social Democratic Party (SPD).

“This is also a great coalition for the little people,” SPD chairman Sigmar Gabriel said.

The terms grant the SPD its demand for a national minimum wage of 8.50 euros ($12) per hour but scotch its hopes for a hike in income taxes, the BBC reported.

"The work is done. It has been very intense and sometimes very hard work today but I think we have a result that is good for our country which is the main measure, but we can also say the result has a strong Conservative imprint," said CDU secretary general Hermann Groehe, according to the news channel. "No new taxes and no new debts."

At their joint news conference Wednesday, Merkel announced that the parties had also agreed to allow older Germans to retire and receive full social security benefits at 63, instead of 67, provided they had worked for 45 years. Moreover, the contract calls for non-working mothers to receive social security, provided they had their children prior to 1992.

In addition, the coalition agreed to the SPD's demand to allow dual citizenship for the children of immigrants who are born in Germany — which faces a shrinking population.

“This is a clear signal to these young people that we want them here in Germany,” Merkel said.

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Though the contract is a big step forward, the would-be chancellor isn't out of the woods yet.

In a first for Germany, SPD members will have the chance to vote down the agreement in a party-wide mail-in vote. There is "significant uncertainty" about the result, Bloomberg quoted a Citibank economist as saying.

“All the members of the SPD negotiating team is convinced this is not only a good agreement, but a very good agreement,” Gabriel insisted. “I expect we will get overwhelming support from our members.”

If the deal survives that hurdle and Merkel is sworn in next month, the minimum wage and dual citizenship proposals will have to be presented as bills and passed into law by the new parliament — which is by no means a foregone conclusion.

For instance, a controversial toll for foreign visitors entering Germany by highway — pushed by Merkel's conservative partners in Bavaria's CSU, or Christian Social Union — was also written into the agreement. But CDU deputy chairman Julia Kloechner has said on the record that it will not be passed into law, according to German broadcaster ARD.

The SPD's more populist policies could face equally hard going.

Merkel came within a hair's breadth of winning an outright majority in the September elections, capturing 41.5 percent of the vote compared to 26 percent for the SPD. While Merkel resisted calls to form a minority government, conservatives will be well-placed to fight a rear-guard action against the coalition agreement's concessions to the liberals.

In addition, the minimum wage policy will be phased in over several years, not taking effect in every sector nationwide until 2017.

That holds out hope for conservatives and business leaders, who have argued that a minimum wage would cost Germany millions of jobs.