— This is the script of CNBC's news report for China's CCTV on February 8, Thursday.
Political leaders in Germany have reached a breakthrough in talks to form a new coalition government, following more than 4 months of uncertainty after elections in September failed to produce an overall majority for any party.
German Chancellor Angela Merkel's Christian alliance, the CDU-CSU, and the Social Democrats, SPD, led by Martin Schulz, have agreed on a deal to form a coalition government. Speaking at a press conference on Wednesday afternoon, Merkel said the talks had been difficult, but worth it.
German newspaper Bild reported that the CDU-CSU will be given the economy and defense ministries in the agreement, while the SPD was reported to have been given the finance ministry. The Foreign Ministry is also said to have been given to the SPD.
Merkel said compromises had been made, especially in the division of ministries. She also noted that many conservatives will not be happy with the SPD taking over the finance ministry.
Talks between the parties have been going on for days, having missed a self-imposed deadline of Sunday, and went into the night on Tuesday.
The long-lasting struggle of Merkel to form a coalition government has dragged down her approval ratings and weakened her position in negotiations. A poll released on Jan 24 that to the question "do you think it's time for a change in who is the chancellor of Germany?," 42% of those polled said "definitely" and 22% said "yes, probably", meaning probably only around 35% agree that Merkel should serve her full term as the prime minister.
The stakes for the latest talks were high given the changing political landscape in Germany. The election in September saw the far-right Alternative for Germany (AfD) become the country's third largest party and enter the German Bundestag for the first time, unsettling the political establishment and many voters.
[David Roche, President & Global Strategist, Independent Stratgy] "In some ways this is quite good. Because the SPD have got economics and theyve got foreign ministry and they will forge ahead on the Europe, which is what we want to see. In some ways its bad. Obviously Merkel is past her use by date and shes on the way out. But more importantly, this is kinda building to dam to hold back populist forces."
If confirmed, the deal will still have to be approved by the SPD's 464,000 party members before the party can join Merkel's CDU-CSU alliance in power.
The party members could be harder to predict, however.Months have passed since the country's federal election back in September 2017, which failed to produce an outright winner. The result led to protracted talks between major and minor political parties in Germany aimed at forming a coalition government.
Now, Angela Merkel has exposed herself to criticism from her own party after she took a crucial step towards ending a four-month period of political uncertainty by reaching a coalition agreement at the cost of giving the centre-left Social Democrats a greater role in government. But Germany's next phase still depends on the SPD member ballot, before we argue about any upcoming policy changes from the Europe's biggest economy.
CNBC's Qian Chen, reporting from Singapore.