Angela Merkel ends deadlock in coalition deal with Social Democrats

Angela Merkel set for fourth term as CDU and SPD agree coalition deal

"Regardless of whether a ministry is led by the Social Democrats or the (Christian Democratic) Union, you can only spend the money you have", Merkel said.

Citing unidentified party officials, dpa said Mrs Merkel's Christian Democratic Union, its Bavaria-only sister party the Christian Social Union, and the centre-left Social Democrats overcame the last hurdles to a deal after previously achieving a breakthrough on the division of ministries.

After a session lasting more than 24 hours, the parties ultimately agreed to cap at 18 months fixed-term contracts imposed by employers without justification, down from 24 months under current rules, a source said.

Still, voting down the deal will most likely lead to another election where polls predict the SPD could emerge even more bruised than it did in September when its support dropped to 20.5%. Many members blame the party's electoral decline on its role as junior partner for two of Merkel's three terms and say the Social Democrats would do better to rebuild in opposition rather than join her again.

"Respect for the constructive spirit of my friends from the SPD", added the French Socialist, in a nod to Social Democrats who agreed to renew a coalition under Chancellor Angela Merkel despite worries that it could further undermine their electoral base.

The deal needs approval by SPD's membership to move forward.

But the SPD is deeply divided on whether to back her for chancellor for a third time, with opponents in the party pointing to a crumbling of support for the 155-year-old movement from nearly 35 percent of the vote in 2005 to just 20.5 during the Merkel era.

"The big differences between the previous grand coalition and a new one will be small", Pepijn Bergsen at the Economist Intelligence Unit wrote in an email to Quartz.

The deal between Merkel's Christian Democratic Union, its Bavaria-only sister party, the Christian Social Union, and the Social Democrats won't bring an immediate end to the political limbo following Germany's September 24 election.

Angela Merkel's Christian Democratic Union will get five ministries, including defence and economy, in the coalition deal. The SPD's 4,60,000 members will vote in the coming weeks on whether to agree to a coalition government with the CDU and CSU.

Other SPD appointees are expected to fill the finance ministry post, as well as the labour and social affairs portfolio.

The SPD initially vowed to rebuild in opposition before changing course and negotiating with Merkel, a U-turn that has divided the party, with its youth wing particularly vocal in opposition to another "grand coalition".

The parties reached agreements on energy and agriculture on Saturday but continued to haggle over healthcare.

Martin Schulz, the SPD leader who has called for the creation of the so-called United States of Europe by 2025, will become foreign minister, allowing him to shape Germany's policy on Europe over the next four years.

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