Angela Merkel’s CDU/CSU has agreed terms for a coalition with the centre-left Social Democratic Party (SPD), German officials say.
The late-night deal follows talks by SPD leaders with Angela Merkel’s Christian Democrats (CDU) and allied CSU.
Chancellor Angela Merkel could be sworn in for a third term in office next month if SPD members ratify the deal.
The CDU/CSU fell short of a majority in September polls, and traditional coalition partner the FDP won no seats.
The breakthrough came after 17 hours of tense negotiations.
The final coalition deal will now go to a ballot of SPD members to be signed off, with the result expected in mid-December.
Chancellor Angela Merkel could be sworn in for a third term in office next month if SPD members ratify the deal
The German chancellor is expected to present the agreement alongside CSU leader Horst Seehofer and the SPD’s Sigmar Gabriel on Wednesday morning, though cabinet posts may not be announced until after the SPD vote.
Parties reached settlements on issues including a lower retirement age and changes to dual citizenship rules.
The SPD won a key demand for a nationwide minimum wage. An hourly minimum of 8.50 euros ($11.55) will come into force in the country for the first time in 2015.
The parties also agreed that there would be no tax increases, a key demand of the CDU/CSU.
“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 Hermann Groehe, CDU secretary general.
“No new taxes and no new debts.”
The SPD previously formed a grand coalition with the CDU/CSU in 2005-2009.
This time around, the partnership faces the twin tasks of rebalancing the eurozone’s biggest economy and winning the support of the German public to tackle the eurozone’s debt and banking problems.
At the election on 22 September, the CDU took about 41.5% of the vote, the SPD won 26%, the Greens 8.4%, and the former communist Left Party 8.6%.
Former German President Christian Wulff will go on trial today over receiving and granting favors in office.
Christian Wulff, 54, is alleged to have accepted the payment of hotel bills by a film producer in return for lobbying while he was premier of Lower Saxony in 2008.
The former president – who stepped down in February 2012 after less than two years in the post – is Germany’s first head of state to answer charges in court.
Christian Wulff rejects the allegations and has vowed to clear his name.
Film producer David Groenewold also faces similar charges.
The trial is expected to start at 10 a.m. local time in the northern city of Hannover.
Christian Wulff is alleged to have allowed film producer David Groenewold to pay hotel bills in Munich during the Oktoberfest beer festival in 2008 and on the northern island of Sylt in 2007.
In return, Christian Wulff is accused of having lobbied German companies to support David Groenewold’s work.
Christian Wulff is alleged to have accepted the payment of hotel bills by a film producer in return for lobbying while he was premier of Lower Saxony in 2008
Prosecutors had sought to put the former head on trial for corruption, but the court only approved the less serious charges.
If convicted, Christian Wulff faces up to three years in jail or a fine.
Christian Wulff and David Groenewold had rejected an offer from the prosecutor in March to settle the case with a fine – a procedure allowed for cases not considered especially serious.
He resigned amid a welter of unfavorable coverage in the German media dealing with his links to businessmen.
The pressure on him increased at the end of December 2011 with allegations, published in the mass circulation Bild newspaper, about a low interest home loan received from the wife of a wealthy businessman in 2008.
Christian Wulff was accused of giving misleading statements about the loan and later apologised to the editor of Bild, Kai Diekmann, for leaving an angry message on his voicemail threatening him if the story was published.
Chancellor Angela Merkel had pushed strongly to get Christian Wulff, from her centre-right CDU party, appointed to the largely ceremonial post in 2010.
At the time of his resignation, Angela Merkel said she accepted it “with respect but also with regret” and that she was convinced he had “acted legally”.
President Christian Wulff was succeeded by the Lutheran pastor and former East German anti-communist campaigner, Joachim Gauck.