Merkel will be meeting in a series of talks with SPD leader Martin Schulz until Thursday. They also agreed to limit arrivals from asylum-seeking migrants to roughly 200,000, as well as a monthly cap on "the number of migrants who will be allowed to join their family living in Germany", according to the BBC.
SPD leader Martin Schulz said that his party's negotiators had agreed "unanimously" to recommend to the rank-and-file to back the draft coalition agreement and launch final negotiations on forming a government. They blame having been in a coalition with Merkel for the party's bad results in the September elections, and directly after the elections Schulz had ruled out a renewal.
The chancellor, who has won widespread respect overseas in more than 12 years in power, needs the coalition talks to succeed to avoid her personal authority being further undermined and Germany's global standing diminished.
It stressed the crucial role of Franco-German cooperation in that process, saying a renewal of the European Union could only succeed if Germany and France "work together with all their strength".
However that will likely depend on whether she can build on the policy document agreed on Friday over the coming months and forges what would be her third "grand coalition" with the SPD.
However the plans bring Germany much closer to his views on the Eurozone - meaning Angela Merkel is highly likely to throw her weight behind his vision, which also includes an European Union army and shared defence budget in a bold vision for Europe.
Toger with France we will find common solutions, "Chancellor Merkel said in morning, after transcending white smoke".
Germany also regularly comes under criticism over its massive trade surplus, the world's largest which swelled to around €250 billion previous year. Horst Seehofer of the conservative CSU party in Bavaria says he and the other coalition partners now get what the German public wants.
In a clear overture to Macron Friday, he said: "We would be pleased if next to the great Franco-German axis there could be a small Franco-Austrian axis", he said.
Merkel sounded optimistic ahead of the talks, commenting last Sunday that she believed an agreement "can be done", but the SPD's Schulz vowed to extract concessions from the CDU/CSU on many of its key policies.
Jean-Claude Juncker, European Commission president, hailed the parties' plans for Europe's future as "very significant" and "positive". Without a deal, Germany would've faced new elections.
Though a challenger has yet to come forward, impatience is growing in Christian Democrat ranks about Merkel's tendency to manage crises as they arise rather than presenting a vision the party can rally behind and sell to voters.
The conclusion of the formal coalition talks will also be submitted to SPD's 440,000-plus members to vote on. April or May is the earliest a new government could be in place.