Olaf Scholz took a major step towards the German chancellorship on Friday, as his Social Democratic Party (SPD) and their favoured coalition partners struck an initial deal to work together.
The pact between the SPD, the Greens and the Free Democrats (FDP) signals consensus on speeding up Germany's exit from coal-fired power stations, raising the minimum wage and ruling out tax hikes.
The 12-page outline paves the way for fuller negotiations to agree a line-by-line programme for the new government, which Mr Scholz wants in place by Christmas.
Tricky discussions were expected after the three parties emerged best placed to form a government after September’s general election.
But the provisional deal suggests they were able to bridge the gap between the liberal FDP and more interventionist SPD and Greens.
“It’s a very good result,” said Mr Scholz. “It makes clear that a government can be formed in Germany that will ensure the necessary progress in many areas.”
The announcement further closes the door to Armin Laschet, the centre-right candidate who had maintained faint hopes of forming a government, despite losing the election to Mr Scholz.
Climate and budget deals
Green co-leader Annalena Baerbock described the deal as a programme for a “decade of renewal” in Germany.
The parties agreed to implement Green promises to put solar panels on every newly-built roof and use 2 per cent of Germany’s land for wind power.
They said the coal exit currently planned for 2038 should “ideally happen by 2030”, another pledge in the Green manifesto.
On budget policy, the FDP secured an agreement not to increase income or corporation tax and to stick to constitutional borrowing rules.
In another win for the FDP, the parties will not bring in a blanket speed limit on German motorways, despite Green calls to introduce one.
“If such different parties can agree on common challenges and solutions, there is an opportunity to bring together our country as a whole,” said FDP leader Christian Lindner.
“There is a chance that a potential coalition can be greater than the sum of its parts.”
The parties agreed to raise the minimum wage to €12 ($14) per hour, one of Mr Scholz’s key campaign pledges.
An SPD promise to build 400,000 new homes per year also found its way into the agreement.
All the parties praised a positive atmosphere during the talks, which Mr Scholz said was a good sign for a potential government.
“We do not regard each other as large and small parties, but as equal partners on the same level,” said a preamble to the agreement.
The SPD won the election with 25.7 per cent of the vote. The Greens took 14.8 per cent and the FDP 11.5 per cent. The final results were set in stone on Friday by Germany's electoral commission.
The three parties have a combined 416 seats, giving them a comfortable majority in the new 736-seat parliament.
After emerging as kingmakers, the Greens and FDP held preliminary talks between themselves before approaching the SPD.
Although they took opposing views on many issues in the election, they both called for modernisation and were popular among young voters.
A coalition between the SPD, FDP and Greens is known as a “traffic light” because of their respective red, yellow and green colours. It has never happened before at national level.
Once policy details are agreed, the parties will need to decide on ministerial posts. Mr Lindner and Green co-leader Robert Habeck have both been suggested as potential finance ministers.
Mr Scholz, 63, would become Germany’s ninth postwar chancellor, replacing Angela Merkel who is retiring after 16 years in power.
Her party is set to elect a new leadership team after Mr Laschet indicated he was willing to step aside.
The centre-right Union bloc took 24.1 per cent of the vote, the worst result in its history.