Germany’s ‘grand coalition’ is back

German Chancellor Angela Merkel’s conservatives and the Social Democrats (SPD) have agreed to a coalition deal, taking Europe’s economic powerhouse closer to a new government after months of uncertainty that unnerved allies and investors.

In a move likely to mean a shift in Germany’s euro zone policy, media reported the SPD would take the finance ministry, a post held until recently by conservative Wolfgang Schaeuble, widely despised in struggling euro zone states during his eight-year tenure for his rigid focus on fiscal discipline. SPD leader Martin Schulz said earlier this week that his party had ensured an agreement with the conservatives would put an end to “forced austerity” and set up an investment budget for the euro zone.

Handing over the crucial finance ministry suggests the conservatives had to make big concessions to get the SPD to agree to renew the ‘grand coalition’ that has governed Germany since 2013 and secure Merkel’s fourth term in office. In a message posted alongside a photo of Schulz and other SPD negotiators smiling, the SPD negotiators wrote: “Tired but happy. There is a treaty! Finally. Now the final details are being worked into the text.”