The deal summed up nearly four years of inter-party wrangling over how to regulate immigration, promote the integration of newcomers into German society and replace a patchwork of rules with a modern law meant to signal openness and tolerance.

But on Thursday, the Social Democrats (SDP) and their Green Party coalition partners managed to forge an agreement with the conservative opposition Christian Democrats.

German Interior Minister Otto Schily said the new law would help jumpstart the economy. "The new law gives us the opportunity to take part in the race for the world’s best brains," he said. "Self-employed foreigners now have the chance to settle here and foreign students can stay on after their studies. I’m sure the new law will make a substantial contribution to Germany’s economy."

New workers allowed

If passed, the law will allow the first major immigration of foreign workers into Germany since the country closed its doors to Turkish "guest workers" in the 1970s.

The agreement is set against a background of growing worries over the demographic implications of Germany's low birth rate and aging population, tempered by fears about a possible influx of radical Islamic militants.

Despite high unemployment figures near 10 percent, German business has long been demanding looser regulations that would allow more skilled workers to enter the country, arguing Germany needs them to stay competitive.

Deporting 'hate preachers'

However, the number of legal immigrants will remain limited. The CSU managed to keep its goal of limiting recruitment only in the case of highly qualified foreigners, such as engineers, computer specialists and scientists. In addition, self-employed people who offer jobs to locals will also be allowed to immigrate.

Another key aspect of the deal is a rule that makes it easier for immigration officials to deport "hate preachers" -- wording aimed at Islamic extremists operating in Germany -- and to kick out terror suspects without trial.

The bill reflects pressure from the CDU for tighter security measures, prompted by the March 11 bombings in Spain that killed nearly 200 people. The alleged mastermind behind the attacks had previously spent time in Germany.

Only in May, the talks about the draft law were threatening to collapse when the Greens threatened to abandon negotiations accusing the conservatives of making unreasonable demands about national security. The sticking point was a CDU proposal aimed at provisionally detaining foreign extremists that cannot be deported because they would face the death penalty in their home country. Although this has now been scrapped in the text, the CDU’s chief negotiator, Peter Müller, says the new law bears a strong conservative mark.

"The law is a dramatic improvement," he said. "It creates more security and provides better opportunities for the integration of foreigners. We are now able to better channel and engineer immigration. In addition German fulfills its obligations regarding humanitarian and asylum issues."

The ultimate breakthrough came after Schily agreed to spend up to €100 million for integration courses for new migrants and the considerable number of foreigners already living here.

Meanwhile, Interior Minister Schily stressed that the Greens -- who had long objected to the proposals on civil rights grounds -- would also agree to the final result. The Christian Social Union, the CDU's Bavarian sister party, which was most vocal in its opposition to the original bill, is also expected to accept the compromise accord.

Both sides said they were convinced the law would pass through the parliament's mediation committee by the June 30 deadline, and would be approved by both the lower and upper houses of parliament on July 9. Should they be approved, the regulations would go into effect at the start of 2005.