Merkel and Rivals Strike Deal on New German Government

BERLIN - Chancellor Angela Merkel and her main rivals agreed early Wednesday to a blueprint for Germany's next government, bringing to a close five weeks of negotiations that ended in a 17-hour session.

But before Ms. Merkel can launch the next coalition between her conservative bloc and the center-left, the deal must still be put to a vote before the 470,000 members of the Social Democrats, who would serve as the junior partner in the agreement.

The accord, detailed in some 180 pages, will introduce Germany's first minimum wage, at 8.50 euros an hour, starting in 2015. In late-night meetings, Ms. Merkel and the leaders of her Bavarian sister party, the conservative Christian Social Union, and the Social Democrats, also whittled down compromises on pensions, allowing young Turks and others born in Germany to maintain dual citizenship and on a highway toll that will affect millions of foreigners transiting the country, probably from next summer.

Exhausted negotiators pronounced themselves satisfied with the accord, with Social Democrats expressing guarded confidence that their rank and file will approve the pact by mid-December in a planned mail-in vote.

Going into marathon negotiations the past two days, drafts of the accord lacked a sweeping vision for the so-called grand coalition - a pact between Germany's two biggest parties that also governed from 1966 to 1969, and in Ms. Merkel's first term as chancellor from 2005 to 2009.

Instead, the document emphasized the need to maintain Germany's competitiveness - as well as that of Europe. But it was definitely Germany first: in several sections - from health care to education to media and culture - it stressed, albeit in a confident tone, the urgent need for Germany to adapt to the primacy of the digital world.

'Our country needs a new time of innovation,' the accord said in its opening sentences, using the term Gründerzeit, referring to the great upswing in the mid-19th century. 'We want to strengthen entrepreneurship and the spirit of innovation and make them more respected. We will also improve the conditions for innovation and investment, especially for small and medium businesses.'

'The part played by Europe in the 21st century depends decisively on whether we succeed in keeping up with the digital realm, set European standards and thus preserve our European social model,' the accord said.

Particularly when referring to the recent rift with the United States over eavesdropping and data privacy, the accord said German or European standards of protection should apply where possible. A new trade deal with the United States is vital, the accord said, but should embrace European standards in protecting data, consumers, the environment and food standards.

The new government will remain committed to meeting Germany's goal of closing all nuclear power reactors by 2022 and meeting the targets of slashing greenhouse gas emissions by 2030.

A key element of the effort to expand renewable energy will be to ease the burden on consumers, who have borne much of the cost of the energy transition. This will involve reforming the country's renewable energy law by next summer, including a restructuring of the feed-in tariff system and reductions to incentives for wind power in areas where it is already widely in use.

In addition, the policy of exempting about 2,300 companies from renewable energy surcharges will be reviewed, but not scrapped. The policy is aimed at maintaining Germany's international competitiveness but has come under fire for unfairly shifting too much of the costs to smaller businesses and private consumers.

The coalition also foresees a restructuring of the power market and a continued expansion of the power grid, policies that have taken shape under Ms. Merkel's previous government. A moratorium on shale gas fracking will also be maintained, the agreement said.

Whether this German government - assuming it takes office - is more adept at keeping promises of adapting to the 21st century than in the past is unknown. For years, for instance, governments have acknowledged the need to invest more in ailing infrastructure - particularly roads and bridges in heavily populated areas of former West Germany, which did not benefit from the trillion or so euros invested in East Germany after reunification.

The current accord foresees as much as €2 billion a year extra for road, rail and waterways, but that is well below an estimate of €7 billion a year that a commission of government experts recommended.

Some money - in the range of hundreds of millions of euros - may come from the new highway toll for non-German vehicles crossing Europe's largest transit country. Although Ms. Merkel vowed during the election campaign that 'with me, there will be no toll,' she apparently conceded to the strong demand from her Bavarian sister party - on condition that it not violate European laws. The toll will be introduced next year, affecting millions of Europeans traveling on pleasure or business.

The sections in the accord on Europe and on financial policy contained few surprises. The document reiterates the primacy of the 'unique' Franco-German partnership in Europe but also stresses how important it is to strengthen German-Polish ties. It also says that German should become a working language of the European Union, alongside French and English. That reflects the electoral program of Ms. Merkel's conservative bloc and also seemed to show that Germany is comfortable asserting its interests in Europe.

In that vein, the accord confidently reiterates Germany's financial policies and particularly its frequently voiced belief that weaker European economies are entitled to 'solidarity' but must also take responsibility for their own affairs. Many in struggling southern Europe read this as continued austerity prescribed and administered by Berlin. German officials insist they are no stricter with others than with themselves, and have so far shrugged off demands from Brussels and Washington to spend more of their surplus.

The accord reiterates that taxpayers should not pay for any bank failures or closures and that funds from the European Stability Mechanism should not be directly available for closing banks. Similarly, it rejects all mutualization of debt in the euro zone, and foresees a renewed German push for a financial transactions tax.