Merkel, who heads the conservative Christian Democrats (CDU), outlined the major points of the grand coalition agreement on Wednesday, including a national minimum wage and a call to balance Germany's budget.

In a joint press conference with Social Democrat (SPD) leader Sigmar Gabriel and Horst Seehofer, leader of the CDU's Bavarian sister party, the Christian Social Union (CSU), Merkel expressed her satisfaction with the long-sought deal.

"We will be a grand coalition, achieving a grand mission for Germany," she told reporters in Berlin. "We will not develop a union of debt but a union of stability."

'Fair' negotiations

It was a long, drawn-out process for the two parties to come to an agreement following the CDU's victory in Germany's September 22 election. The final negotiating session in the German capital lasted some 17 hours before party leaders emerged with the news of a deal early Wednesday morning.

"You will not be surprised to see that we started these negotiations with different views, which is why it took a while," said Merkel.

Sigmar Gabriel stressed that the negotiations had been a fair process. "We never had the impression that we weren't on an eye-to-eye level," he said.

"Of course there were differences, but this is natural because we're members of different parties," he added.

Compromises made

The SPD secured the implementation of a national minimum wage of 8.50 euros ($11.55) per hour starting in 2015, which had been a cornerstone of their election campaign. Industry and labor associations will be given the ability to negotiate exceptions to the rule until 2017. The national minimum wage means about 1 million of Germany's working poor will no longer need to supplement their incomes through benefits.

The SPD also pushed through their ideas on a new pension plan and dual citizenship. Beginning next year, full retirement will be available at age 63 after at least 45 working years. Dual citizenship will be allowed for children who grew up in Germany and were born after 1990 to foreign parents. Previously, they had to choose either citizenship from Germany or their parents' country of origin by their 23rd birthday.

The conservatives managed to push through their position on state finances: The agreement spells out that there would be no new taxes or increase in debt. The coalition deal sets the aim of creating no more new debt at the federal level starting in 2015.

A key issue for the CSU, a controversial motorway toll for foreigners, was included in the deal. However, the tax must only apply to non-German registered vehicles and conform to European law.

Going to a vote

The SPD's 470,000 members must now vote on the coalition deal before it can be final, with a result expected in mid December. Gabriel said his party's members would "definitely" support the agreement.

The decision over who will fill Germany's cabinet minister positions will be made after the SPD vote. The CDU are expected to be allocated five posts plus the head of the chancellery – a separate post from the chancellor. The SPD will have six ministers and the CSU three.

dr/rg (dpa, AP, AFP)