Upcoming German new gov't a strong boost to European Union: policy paper

Social Democratic Party SPD chairman Martin Schulz arrives for a statement prior to exploratory talks about a new German government between German Chancellor Angela Merkel's Christian Unions block and his party at the SPD headquarters in Berlin Thursda

Following a dismal result in Germany's election on September 24, the Social Democrats initially vowed not to enter into another government with Mrs Merkel's conservatives, but reconsidered their position after the long-time chancellor's attempts to form a coalition with two smaller parties collapsed.

"Even though these pre-coalition talks are meant more as a getting to know your partner, they really have become coalition talks", said Thomas Meyer, a political scientist at the University of Vienna, noting that final negotiations are increasingly based on the points hammered out during preliminary talks. It must now be voted on by the SPD party conference later this month, where there is likely to be resistance from members who believe a coalition would further damage their electoral appeal.

Nearly 16 weeks after her party won an inconclusive federal election, Merkel's second attempt to restore leadership in Europe's dominant country yielded progress, with an agreement to move on to a shared program for government.

The deal was welcomed by Germany's European allies, but her prospective partner now faces a tough task to sell it to skeptical supporters.

"And as far as Europe is concerned, we are convinced that we need a new awakening for Europe", she added. The first, involving the business-friendly Free Democrats and the Greens party alongside the Christian Democrats and Christian Social Union, failed after more than four weeks of negotiations that were marred by infighting and leaks to the media.

"In close partnership with France, we want to sustainably strengthen and reform the eurozone so the euro can better withstand global crises", the parties said.

The three coalition parties' support dropped by a cumulative total of almost 14 percentage points in the election.

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In return, reports indicated that the Bavarian sister party of Merkel's CDU had succeeded in its goal to limit the number of family members who can be reunited with refugees that have been granted asylum in Germany.

The deal eased months of uncertainty that has undermined Germany's role as the European Union's pivotal power, as the bloc confronts such major challenges as Brexit, euro-zone reform and immigration, and questions about Merkel's future.

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 party leaders agreed to a 28-page deal on Friday morning.

Merkel now leads a caretaker government, limiting her ability to take major policy initiatives as French President Emmanuel Macron pushes an ambitious European reform agenda.

European Commission president Jean-Claude Juncker said the deal was "significant" and "positive" for the EU's future, while French President Emmanuel Macron said he was "satisfied and happy" that the deadlock was broken.

On some polling, around half of SPD supporters oppose a new grand coalition.

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