German coalition deal aims for 'Macron-lite' EU renewal

"The renewal of the EU will only succeed if Germany and France work together with all their strength. That is why we want to further strengthen and renew German-French cooperation," the 28-page text , agreed after 24 hours of marathon talks, said.

The actual election was in September, whilst an initial potential coalition of conservatives, liberals and greens - the 'Jamaica' option - fell apart during talks late last year.

While the agreement remains mute on details, it is clear Germany is not ready to loosen its grip on the continent's prudent fiscal policies.

It pledges to support the strengthening of the eurozone by supporting the idea of a future "investment budget" for the single currency bloc.

This falls short of backing Macron's proposed eurozone budget, but supports specific budgetary resources for economic stabilisation, social convergence and for structural reforms in the eurozone. This could be the starting point for the "investment budget".

The three German parties also support turning the eurozone emergency fund, the European Stability Mechanism (ESM) into a full-blown European Monetary Fund under parliamentary control and anchored in EU law. This would turn the fund into a European institution rather than an intergovernmental body.

"In this spirit, and especially in close partnership with France, we want to sustainably strengthen and reform the eurozone so that the euro can better withstand global crises," the agreement stated.

Capping migration

The CDU/CSU and the SPD have agreed to limit the number of asylum seekers coming into Germany to between 180,000 and 220,000 per year.

In another victory for the CSU – which has pushed for tougher asylum policy – a maximum of 1,000 people per month would be allowed to join their families already living in Germany.

Germany would also boost its contribution to the EU budget – as all member states will have to, as the UK will leave a hole in the budget after it leaves the bloc. The deal makes no mention of Brexit itself, however.

The parties are also backing fighting tax fraud and tax evasion, supporting taxing companies where they make their profits, especially concerning tech giants such as Google, Apple, Facebook and Amazon.

"In the future, companies must no longer be able to escape their social responsibility by playing off the EU states against each other," the preliminary agreement said.

To avoid social dumping, a key issue for both France and Germany, the deal sets out to propose minimum wage regulations and basic social security systems across the EU.

Warning to 'illiberals'

The deal also hints at the possibility of linking the EU budget to political conditions, when it states that reciprocal solidarity must also count for the EU budget.

This could be a warning to Hungary and Poland, which have not taken in any refugees despite an EU decision to do so.

Merkel last September warned that those rejecting "solidarity", a code word for taking in refugees under the EU scheme, could lose EU funds.

"We want to deepen the cohesion of Europe based on its democratic and constitutional values ​​at all levels and strengthen the principle of mutual solidarity," the text stated.

"The democratic and constitutional values ​​and principles on which European unity rests must be enforced even more consistently than hitherto within the EU," the deal adds, in a reference to rule of law and democracy concerns with Hungary and Poland.

The German parties also point out that with changing policies in the US, the rise of China and growing Russian influence in Europe, "Europe must take its fate more than before in their own hands".

The deal said Germany continues to believe in free and fair trade, while rejecting "protectionism, isolationism and nationalism", in a reference to US president Donald Trump's "America First" policy.

Macron was elected last May promising to overhaul the EU. Only two days after the German elections in September , he called for a a eurozone budget.

Merkel said at last month's EU summit that she would develop joint positions on Europe with Macron by March.

SPD votes

Merkel passed this first hurdle of the – by German standards unusually long – coalition talks by reaching a preliminary agreement with the SPD.

This comes as a relief to Merkel, who could have faced fresh elections had the coalition talks collapsed.

The task now is to convince the SPD's rank and file to sign up for the deal and the grand coalition with Merkel's Christian Democrats.

The SPD entered talks with Merkel reluctantly, as after four years of governing with the CDU, the Social Democrats suffered a bruising election last September, falling to their worst results since the second world war.

Party leader Martin Schulz initially said the Social Democrats would not enter another grand coalition, partly to avoid leaving the far-right Alternative for Germany (AfD) – which came in third at the polls – as the main opposition party.

SPD members were irked by the prospect of spending another four years in Merkel's shadow as voters punished mainstream parties at the September ballot.

However, as CDU/CSU's coalition negotiations with the Greens and the Free Democrats collapsed, Schulz saw an opportunity to push his pro-Europe, social agenda through.

A coalition agreement would need a green light from the SPD at a special conference on 21 January in Bonn, and needs ratification by the SPD's 400,000 members by post.

Formal coalition talks on the basis of the agreed text that could begin later this month if the SPD's congress gives the go-ahead and be concluded by March.

EU happy

European Commisison president Jean-Claude Juncker welcomed "a significant, positive, constructive, forward-looking contribution to the European policy debate."

"In terms of the substance, I'm very happy with what the CDU, CSU and SPD have agreed as party of a common policy for the future [of the EU]," he told journalists in Sofia.

Speaking with Juncker, Bulgarian prime minister Boyko Borisov, whose country is taking over the presidency of the EU Council, noted that "Germany's stability impacts all of the EU".

Referring to the discussions on a post-2020 EU budget that will start at spring, he noted that "the largest amount of money is expected from Germany."

"We all hope that this [coaltion forming] process will come on an end soon, because it will be for the benefit of all."

The prospect of a German government being in place in the coming weeks is "a big news, a good news," an EU source said, adding that "finally"' the EU will start to discuss again on the main issues.

While details are still to be agreed during the negotiations for a final coalition agreement, the official said that the main lines of the future German government were "compatible" with what the commission has proposed in recent months.