The agreement, reached after 24 hours of exploratory talks that stretched through the night, should pave the way for negotiations between the Bundestag’s two biggest parties to resume the “grand coalition” that has governed the country for eight of the past 12 years.
Speaking at a joint press conference on Friday morning with Schulz, the leader of the center-left Social Democratic Party, Merkel hailed the deal as a “new start for Germany.”
“We’ve been here for 24 hours and I wasn’t sure we would succeed,” Merkel said. “I knew it would be difficult. But we carried out the talks in spirit of finding a solution.”
“We have to react faster when it comes to political decisions and talk more with the citizens,” Merkel added. “The world is not waiting for Germany. We need a new breakthrough for Europe, therefore we will try to find new solutions together with France.”
SPD party members still need to formally approve coalition talks before they can begin. If that happens, it could still take several more months before a new government would be in place.
The two sides have agreed to a cap on refugees and pledged to draft new limits on the number of family members allowed to rejoin refugees in Germany, according to the position paper that will provide the outline for formal talks. The parties have also agreed to push more financing for European Union initiatives and to work closely with proposals from France.
The development will come as a relief for Merkel’s conservative Christian Democratic Union / Christian Social Union alliance, which remains the country’s largest party but was left weakened following a disastrous showing in September elections. Merkel’s inability to form a government had raised questions about her political future after 12 years at the helm of Europe’s largest economy.
Failure to strike a deal would have left the Chancellor to either run the country through a minority government or call fresh elections.
But party leaders were in a buoyant mood on Friday morning. Schulz, whose SPD finished second in the elections, admitted to “turbulent moments” during the talks, but said negotiators “never faced the risk of failure”.
“We want to ensure economic and political power for Germany is put towards creating a stronger Europe,” he added.
A grand coalition between the CDU and SPD would also leave the controversial anti-immigrant Alternative for Germany as the lead opposition party in parliament. The AfD surged into third place in September’s election, the first time in decades that a far-right, openly nationalist party had won seats in Germany’s federal parliament.
A recent poll from public broadcaster ARD showed that 52% of respondents did not think another grand coalition was a good idea.