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Germany's Merkel makes breakthrough in coalition talks

Chancellor Angela Merkel and interim Finance Minister Peter Altmaier arrive for party talks

German Chancellor Angel Merkel's Christian Democrats, her Bavarian CSU allies and Martin Schulz's Social Democrats on Friday announced a policy blueprint for a future coalition government.

If things go well, a new government could be formed by Easter, said Horst Seehofer, the leader of the Christian Social Union - the Bavaria-only sister party to Merkel's Christian Democratic Union.

The prospective partners have governed Germany together for the past four years but Schulz, Merkel's defeated challenger in Germany's September 24 election, initially said after the Social Democrats crashed to a disastrous result that they would go into opposition.

The 28-page deal was reached in a marathon negotiating session that lasted 24 hours at the end of almost a week of talks.

"We need a new breakthrough for Europe, therefore we will try to find new solutions together with France".

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

Merkel has ruled with the SPD in a sometimes unwieldy "grand coalition" - or "GroKo", the German-language acronym - in two of her three previous terms in office, including in the last parliament from 2013-2017.

The document is expected to form the basis for formal coalition talks between the parties that could begin later this month if grassroots party members give a green light.

The euro jumped to a three-year high against the U.S. dollar after the deal was announced, reflecting the relief of analysts and the perceived importance of German leadership to the European economy.

"From the kindergarten to the school, to the university and the workplace and then on into old age and care homes, we want to strengthen respect, opportunity and solidarity, and bring these systems up to date", he said.

The three coalition parties' support dropped by a cumulative total of almost 14 percentage points in the election.

GERMANY will limit the number of asylum seeker arrivals to around 200,000 annually under a draft coalition agreement sealed today in marathon talks between the country's two biggest parties.

Pledges to spend more in poorer regions and allow up to 1,000 family members each month to join refugees already living in Germany also seemed created to placate SPD members distrustful of governing with Merkel again.

Merkel now leads a caretaker government, limiting her ability to take major policy initiatives as French President Emmanuel Macron pushes an ambitious European reform agenda.

But party leaders were in a buoyant mood on Friday morning.

"In the seemingly long period of time since the election, we've seen that the world is not waiting for us", said Merkel.

The SPD's youth wing chief Kevin Kuehnert said he would embark on a national tour to press his case against a new grand coalition, known as "GroKo" in German political shorthand.

European Commission president Jean-Claude Juncker called it a "very significant [and] positive.contribution to the European debate".