Merkel wants to seal coalition deal with SPD swiftly

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Chancellor Angela Merkel's conservatives and the centre-left Social Democrats took a big step on Friday toward forming a new German government, sealing a preliminary agreement in which they vowed to strengthen the European Union and keep a lid on the number of migrants entering the country.

"I'm very satisfied content-wise with what the CDU/CSU and SPD have reached in terms of joint policies for the future", Juncker said, referring to Merkel's Christian Democrats and allied Bavarian Christian Social Union and Schulz's Social Democrats.

Schulz had previously ruled out entering into another "grand coalition" with Merkel after his party suffered its worst ever result in the federal elections in September.

After more than 24 hours of talks and months of political paralysis, red-eyed party chiefs and their negotiating teams reached an in-principle agreement that could lead to a new government for the biggest European Union economy in coming months.

Deep scepticism runs through the party, because of fears that to again govern in Merkel's shadow will force the SPD to betray its ideals and further damage its voter appeal.

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

Left party chairwoman Sahra Wagenknecht said the deal would perpetuate "blatant social injustice", including Germany's precarious low-wage sector and poverty in old age, while business raked in "gushing dividends".

Italian Prime Minister Paolo Gentiloni commented via Twitter that the agreement between Merkel and Schulz was "a good item of news for Europe".

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He reluctantly reconsidered after Merkel's coalition talks with two smaller parties collapsed in November. "A fresh start for Europe is also a fresh start for Germany".

The progress in stabilizing Germany's government propelled the euro to a three-year high versus the dollar to trade at $1.2122 as of 11:09 a.m.in Frankfurt.

The conservatives also performed poorly in the election, and the three coalition parties' support dropped by a total of almost 14 percentage points.

They pledged to fight tax dumping and evasion in Europe, pushing for "fair taxation of big companies" including the internet giants Google, Apple, Facebook and Amazon, and called for unspecified minimum rates for corporate tax. The coalition paper foresees the new government drawing up a timetable for phasing out coal power by the end of this year.

"We've carried out intensive, serious and profound exploratory talks", Merkel told reporters at SPD party headquarters in Berlin on Friday.

Under the deal, the number of refugees with "limited protection status" who could bring their families to join them would be limited to 1000 per month, and the number of asylum seekers taken in altogether would be limited to 180,000 to 220,000 per year.

But as hopelessness in the early hours of Friday gave way to cautious optimism in the morning, the steepness of the climb ahead remained evident: All three leaders must now secure the support of their party hierarchies.

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