Germany is set to emerge from months of political deadlock after Angela Merkel’s conservatives (CDU/CSU) finally agreed a coalition deal with the centre-left Social Democrats (SPD).
Negotiators have agreed on the division of key ministries – one of the last hurdles towards forming a government.
It could end more than four months of wrangling since inconclusive elections in September.
But the deal will still need to be approved by SPD members.
Many in the party fear that re-entering a coalition with CDU/CSU could damage it in the long term.
In a joint news conference on Wednesday, Chancellor Merkel said the agreement gave the basis for a “good and stable government”.
SPD leader Martin Schulz thanked the conservatives for making what he said were tough compromises.
In a tweet, he said the deal “achieved a lot for people” and he would be recommending that his party members accept it.
The SPD looks set to control six ministries, including finance and foreign affairs.
Mr Schulz has confirmed he will step down as SPD leader in March and instead become foreign minister, if the coalition deal is approved by SPD members.
He will be replaced as SPD leader by former Labour and Social Affairs Minister Andrea Nahles.
The SPD’s 460,000 members will have the final say on the whole agreement in a postal vote, the result of which will be announced on 2 March.
Those opposed to any deal with Mrs Merkel include a new group within the SPD calling itself NoGroKo (no grand coalition).