BERLIN (AFP) - German Chancellor Angela Merkel agreed to form a coalition government with campaign rivals the Social Democrats on Wednesday, two months after her conservatives won elections but fell short of a full majority.
Ms Merkel's Christian Democratic Union (CDU), their Bavarian allies the CSU and the Social Democratic Party (SPD) agreed the deal after marathon talks lasting 17 hours before bleary-eyed party leaders formally presented it to a meeting of some 75 delegates from all three parties.
In the tense round of talks, following weeks of political horse-trading, the centre-left SPD scored several key concessions, including the introduction of a national minimum wage from 2015, while Ms Merkel stuck to her guns on her own red-line issue and blocked higher taxes for the rich.
The chancellor now hopes to be sworn in for a third term on December 17 as leader of Europe's biggest economy, but a key hurdle remains: a binding SPD membership ballot next month must still sign off on the proposed left-right 'grand coalition'.
"We negotiated hard till the end," said SPD general secretary Andrea Nahles emerging from the Berlin talks in the pre-dawn hours, adding that "for us it's a package that, I believe, we can present to our members, and we recommend it and say we can say yes to it."
"The result is good for our country and carries a strong Christian-Democratic imprint," said CDU secretary general Hermann Groehe, while his CSU counterpart Mr Alexander Dobrindt voiced satisfaction that "all our key elements are reflected in the coalition contract".
Despite the late-night breakthough, another political nail-biter looms in coming weeks. The outcome of the SPD rank-and-file postal ballot, expected December 14, remains far from certain because many party members reject the notion of their traditionally blue-collar party again governing in the shadow of powerful Ms Merkel, as it last did 2005-09.
After that uneasy political marriage, the SPD scored two humiliating electoral defeats in a row, winning less than 26 per cent against the conservatives' nearly 42 per cent in the September 22 ballot.
SPD chief Sigmar Gabriel, who would be Ms Merkel's vice chancellor, hopes to convince the base of his 150-year-old party with the key concessions his team has wrested from the conservatives. To avoid the impression that SPD chieftains are worried only about gaining ministerial posts for themselves, they have focussed on the policy deal they have fought for and reportedly plan to stay silent for now on who would get which portfolio in the next Merkel cabinet.
In the protracted talks, the SPD scored a major victory on its core demand, a minimum wage of 8.50 euros ($14.40) per hour from early 2015 to help the country's army of working poor.
The move aims to narrow a wealth gap brought about by decade-old labour reforms but should also cheer critics in the United States, the IMF and Europe who want the European export-power to stimulate domestic demand and correct its lopsided trade balance.
The SPD also pushed through a demand for a 30 per cent women's quota on the boards of listed companies from 2016, and the scrapping of a ban on dual nationality, a key demand of Germany's large Turkish immigrant community.
Both sides also agreed on pension increases to protect retirees in rapidly ageing Germany.
Bavaria's CSU also brought home the bacon on its own pet issue - charging foreign drivers a toll for using Germany's famed autobahn highways, negotiation sources said.
In all, the additional spending and investment agreed by all sides until 2017 amounts to 23 billion euros, reported national news agency DPA.
Details of the more than 170-page coalition deal were to be presented at noon Wednesday.