Nov 27 - A new German government should be in place by Christmas, after Chancellor Angela Merkel's conservatives clinched a deal with the Social Democrats. As Joanna Partridge reports, many expect Merkel to allow her ministers to focus on running Germany while she completes her euro zone legacy.
A new government with some old faces. Two months after voters went to the polls - the German Chancellor's conservatives have signed a coalition deal with the centre-left Social Democrats. The rival parties worked together before in a grand coalition during Angela Merkel's first term as chancellor. The CDU had to give in to various SPD demands, including ones which some economists fear could push up unemployment. SOUNDBITE: German Chancellor Angela Merkel, saying (German): "The question of a standard minimum wage was one of the big hurdles we had to clear and we had different views, as we set out in our government programme, but I think we've reached a fair compromise." Merkel's also promised not to raise taxes or increase Germany's debt. But she and Sigmar Gabriel, head of the SPD, also agreed to ensure stability in Europe. SOUNDBITE: Sigmar Gabriel, Head of the Social Democrats (SPD) party, saying (German): "We have a European election campaign ahead of us in which everyone everywhere, including in Germany, who stands for European ideas and wants to develop Europe, stabilise it and revive it, will have their hands full stopping anti-European parties and right-wing populist parties who are mobilising against Europe." Investors and traders welcomed the agreement. But the biggest sigh of relief will come from other European capitals. Drawn-out coalition negotiations have delayed movement on major reforms like banking union. Germany's stance on Europe isn't expected to change, despite SPD election promises to focus more on growth. AXA Group's Eric Chanet says Merkel is looking to her legacy. SOUNDBITE: Eric Chanet, Chief Economist, AXA Group, saying (English): "Chancellor Merkel really wants to focus on consolidating the euro buildings so to speak in her last mandate because that will be the last mandate. I think she will more or less leave domestic policies to the coalition, to the finance minister, and she will focus on getting a stable euro area because that would be the crown for her reign." SDP party members still need to approve the deal. But Europe's largest economy should have a new government in place by Christmas.