Germany's SPD, Greens, Liberals announce initial deal for next govt

German Finance Minister Olaf Scholz took a step closer to succeeding Angela Merkel as chancellor, as his Social Democrats, the ecologist Greens and liberal FDP on Friday announced a preliminary deal to form a new government.

The three parties have been holding talks since Scholz's centre-left Social Democratic Party (SPD) won the general elections on September 26 with Merkel's conservatives in second place as she prepares to leave politics.

The agreement that will form the basis of formal coalition talks all but means that Merkel's CDU-CSU alliance is headed for the opposition benches after scoring their worst post-war election result.

CDU leader and chancellor hopeful Armin Laschet had recently said his party remains open to forming a governing coalition, but even his own job is hanging on a thread.

Facing their worst crisis in decades, the conservatives are planning a clean sweep of their leadership, with a congress by December to elect their new bosses.

Scholz, who is also Merkel's vice chancellor, this week voiced confidence that the three-way talks involving his party will produce Germany's next government before Christmas.

A coalition of SPD, Greens and FDP -- known as "traffic-light" after the three parties' red, green and yellow colors -- has found favor with Germans, with 62 percent approving the constellation as the next federal government, according to a poll published Friday.

The imminent shift in Germany's leadership to the center-left comes as Europe's biggest economy is grappling with the complex challenge of securing the country's post-pandemic recovery.

All sides are eager to avoid a repeat of the 2017 election aftermath, when the FDP dramatically walked out of coalition talks with the conservatives and the Greens and it took months for a new government to take shape.

Analysts believe that as compromises are found between the parties, Germany is unlikely to see a sharp lurch to the left.