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Parties finalize Merkel's four-year coalition agreement

Germany's main parties on Friday finalized a program for incoming chancellor Angela Merkel's left-right coalition government, ending nearly two months of political uncertainty in Europe's biggest economy.

Her conservative Christian Democrats and the Social Democrats (SPD) of outgoing leader Gerhard Schroeder wrapped up a manifesto of more than 130 pages for Merkel's four-year term in government.

"I am pleased to tell you that the pact for the second grand coalition at federal level in the history of the federal republic of Germany is finished," a smiling Merkel told reporters.

"This is a coalition of new opportunities."

It ensures Merkel will become Germany's first female chancellor and the first from the former communist east.

Germany has been gripped by political deadlock since an inconclusive September election which forced the Christian Democrats, who had finished narrowly on top, to open coalition talks with the Social Democrats.

The last time Germany had a grand coalition was in the late 1960s.

The deal is the product of last-minute horse-trading on contentious issues such as new taxation and the future of the country's nuclear power plants.

The pact seeks to tackle the daunting problems facing the ailing economy, including measures to close a record US$41-billion gap in the public deficit and bring down a jobless rate of 11 percent.

Critics say the proposals will do little to provide long-term solutions.

Although party leaders expressed relief that weeks of grueling haggling was over, there was little jubilation.

Hesse's state leader Roland Koch, who has been part of Merkel's negotiating team, warned earlier in the day that Germans should prepare for the strictest round of belt-tightening in their postwar history.

"We must recognize that the federal budget situation is so catastrophic that no one should be allowed to repeatedly violate the constitution with new deficits," Koch told German radio, defending the austerity measures.

Both parties emerged bruised and bloodied from a month of negotiations that saw Merkel's conservative ally Edmund Stoiber desert her, while internal party tensions cost SPD leader Franz Muentefering his job.

Muentefering, who will be vice-chancellor and labor minister, will hand over the SPD reins to ambitious state leader Matthias Platzeck at a party congress next week, where delegates must also sign off on the government's new manifesto.

The Christian Democrats and their Bavarian sister party, the Christian Social Union, are to approve the pact at separate congresses on Monday.

Merkel will be voted in on Nov. 22, six months after Schroeder called for new elections.
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