Germany's Merkel agrees coalition deal to keep her in power

Angela Merkel has agreed a deal with coalition partners that will keep her in office for a fourth term as Germany’s chancellor, according to reports.

Merkel’s Christian Democratic Union (CDU) and Bavarian sister party the Christian Social Union (CSU) have thrashed out a deal with the centre-left Social Democratic party (SPD) to form a grand coalition to govern Europe’s biggest economy, broadcaster Deutsche Welle said.

The deal, to be announced later on 7 February, will reinstall the three parties who governed Germany from 2013 in a grand coalition. The contract was agreed more than four months after an inconclusive election that saw support for mainstream parties fall and a breakthrough by the far-right Alternative for Germany party.

After what analysts described as the longest period of government formation in German history, the centre-right CDU and CSU have agreed policies and allocation of ministries with the SPD. Reports suggested the SPD would run the finance ministry in a major concession by its conservative partners. CSU leader Horst Seehofer, one of Merkel's most conservative allies, is slated to be interior minister.

SPD members will decide on whether to accept the coalition agreement. After an influx of new members, about 450,000 people will vote on the deal and the margin could be close. SPD officials have been announcing policies as they have been agreed in an effort to convince members that they have extracted concessions from Merkel on subjects such as the economy, housing and the EU.

Oliver Rakau, chief Germany economist at Oxford Economics, said: "The vote of the SPD party base over the coming three-to-four weeks is the last hurdle. A reluctant 'yes' is more likely than not, but a sceptical SPD could yet surprise.

"Despite the difficulties in forming one, we continue to think that the parties will form a competent government. However, meaningful steps to address Germany’s medium-term challenges look unlikely, not least because all governing parties may face a change at the top."