Three weeks of protracted negotiations between Angela Merkel's conservatives and the Free Democrats ended yesterday when the parties signed a coalition deal focused on tax cuts.
The parties eventually agreed on €24 billion ($47.5 billion) of cuts in an attempt to spur economic growth, ending disagreement over the main stickingpoint of the three-week long talks. A new government is due to take office this week.
Corporate tax cuts, a reform of inheritance laws and health reform were also central to the negotiations.
The main challenges of Chancellor Merkel's new government, formed almost a month after her conservative Christian Democrats (CDU), the Christian Social Union (CSU) and the Free Democrats (FDP) won a parliamentary majority in a federal election, will be to stabilise the economy and cut a huge deficit.
The main players in the new government include Guido Westerwelle, head of the FDP, and the first openly gay leader of a mainstream political party in Germany who will become the new foreign minister. Westerwelle's suitability for a role requiring diplomatic skills was questioned last month when he bristled as a BBC reporter asked him to answer a question in English, to which he responded: "We're in Germany here. Here we speak German."
One of the biggest surprises was the appointment of Wolfgang Schauble, of the CDU, as finance minister.
Schauble, 67, who has been in a wheelchair since he was shot and almost killed by a mentally-disturbed man 18 years ago, has often clashed with Merkel. But analysts yesterday suggested she might have picked him because he was straight-talking, experienced, and has no ambitions to become chancellor.
