BERLIN • German Chancellor Angela Merkel struck a deal with Social Democrat (SPD) rivals yesterday to open government coalition talks, easing months of uncertainty that has undermined Germany's global role and raised questions about Dr Merkel's political future.

The deal further cleared a key hurdle late yesterday when the Social Democrats' party board gave the green light to the agreement hammered out in marathon talks.

The SPD, Germany's second largest party, said in a statement that its 45-member board had overwhelmingly given its blessing to formal coalition talks with Dr Merkel's conservatives following a deal in principle sealed earlier in the day.

The draft programme, outlining policy goals during Dr Merkel's fourth term, must now be approved by 600 SPD delegates at a party congress on Jan 21, and then by the party's more than 400,000 rank and file members.

"We have felt since the elections that the world will not wait for us, and in particular... we are convinced we need a new call for Europe," Dr Merkel, who has played a central role in tackling crises over the euro and refugees, said after exploratory talks that had run through the night.

A 28-page policy document, which will form the basis for talks, pledged close cooperation with France to strengthen the euro zone.

Weakened by an election setback in September, Dr Merkel turned to the left-leaning SPD to renew their "grand coalition" after the collapse in November of talks on a three-way coalition with the Greens and Free Democrats (FDP).

The dominance of the SPD and the conservatives long ensured smooth government transition. But elections last September saw the rise of the right-wing Alternative for Germany (AfD), which upset the arithmetic.

The agreement was welcomed by France and the European Com-mission, where concerns have mounted in recent months that the window for reforming Europe could close without a German breakthrough.

"This deal is important for the stability and future of Franco-German relations, but especially Europe," said French government spokes-man Benjamin Griveaux.

European Commission President Jean-Claude Juncker called it a "significant, positive, forward-looking contribution" to the European policy debate.

The euro climbed to a three-year high after news of the breakthrough in the talks.

In early London trading, the euro rallied 0.7 per cent against the US dollar to hit its highest levels since January 2015 at US$1.212.

REUTERS, AGENCE FRANCE PRESSE