Leaders from Chancellor Angela Merkel's conservatives and the centre-left Social Democrats (SPD) have agreed to enter negotiations on forming a grand coalition.
The SPD secured a green light to launch the talks from some 200 senior party members on Sunday, after promising to wring concessions from the chancellor on a minimum wage, equal pay and investment in a 10-point list of "non-negotiables".
The talks to agree policy compromises and cabinet posts are expected to begin on Wednesday and last a month or more.
Below are the SPD's 10 points, key coalition-related quotes from senior officials, as well as areas of potential compromise on policy and personnel.
SUMMARY OF THE SPD'S 10 "ESSENTIALS"
* a minimum wage of 8.50 euros per hour
* equal pensions in former West and East Germany
* increased contributions for long term care insurance
* equal pay for men and women
* right for German citizens to hold dual citizenship
* increased budgets for Germany's towns and cities
* investment in infrastructure without privatizations
* investment in education and training
* introduction of a financial transaction tax, crack down on tax evasion
* A sustainable growth strategy for the euro zone. Increased fight against youth unemployment.
SIGMAR GABRIEL (SPD)
"We have not yet discussed minister posts amongst ourselves. Also with the CDU/CSU we have not yet had a single discussion about personnel or assigning portfolios."
VOLKER KAUDER(CDU) "we need to reach a result in the end and I'm sure we will manage this... certain ways of reaching a good result are feasible... we can't do anything that will put jobs at risk." "In a difficult time for Europe we need the best person there is. Wolfgang Schaeuble is the best finance minister I can see out there."
WOLFGANG SCHAEUBLE (CDU) "We need regulations for labor, but we do not want to give up on the system of wage-negotiation between employers and unions. We have to take care... a regulation cannot put jobs at risk. If we destroy a few hundred thousand jobs then we have not fulfilled our responsibilities. We will still have to fight over what the best solution is."
"In private as in public life, we always have more demands than we have actual chances. That is the task of responsible politics - to agree which demands to pursue together in order to make them realistic."
POTENTIAL POLICY COMPROMISES
TAXES - During the campaign, the SPD urged a hike in tax rates on incomes above 100,000 euros to 49 from 42 percent to pay for higher investments in infrastructure, education and research. Merkel and her conservatives are open to higher public investment but have ruled out financing this through tax hikes or higher debt. Both sides have signaled a readiness to compromise, but finding the required revenues may prove difficult. One solution for bringing more cash in longer-term would be to close tax loopholes for multinational corporations.
WAGES - The SPD has made a nationwide minimum wage one of its main demands in exploratory coalition talks. The CDU/CSU, which only supports "wage floors" on a regional or sectoral basis, may have to accept some form of blanket minimum wage. The parties may agree to set up an independent commission to determine how a minimum wage is introduced, and at what level.
EUROPE - No insurmountable differences. The SPD would seek symbolic steps to promote growth in struggling euro zone states, but is unlikely to press for more German taxpayer money to be used for this purpose. It will push for a financial transactions tax and support the creation of a banking union, while insisting that banks themselves shoulder the costs of restructuring. The SPD is not expected to push hard for debt mutualisation, despite having backed the idea of a debt redemption fund during its campaign.
ENERGY - The SPD and CDU/CSU could reach a compromise on scaling back subsidies for renewable energy.
BARGAINING FOR CABINET POSTS
* Finance minister Wolfgang Schaeuble has signaled a desire to stay in his post, and is said to have the support of Merkel. Unless the SPD insist on the finance ministry as a condition for entering a coalition with Merkel, Schaeuble is likely to continue in his current position.
* For the SPD, much will depend on party chairman Sigmar Gabriel, who is said to have his eye on the labor ministry. If he opts for that post, the SPD would probably aim for either the finance or foreign ministry.
* Frank-Walter Steinmeier, leader of the SPD in parliament, is the top SPD candidate to become either foreign or finance minister. Should he decide to stay in his parliament post, SPD parliamentary whip Thomas Oppermann is also seen as a possible finance minister. ECB board member Joerg Asmussen is a dark horse choice for the finance ministry.
* Were the SPD to claim the finance ministry, one source said Merkel might want to shift Schaeuble to the foreign ministry.
* Apart from Schaeuble, the other member of Merkel's CDU who is seen as a lock for the cabinet is Ursula von der Leyen, who may be keen on the foreign ministry. If she were to get this post, or move into the parliamentary leadership role held by Volker Kauder, many would see it as a sign she was being groomed to succeed Merkel.
* It remains unclear whether the SPD's pre-election proposal to group together responsibility for all energy-related issues in one ministry -- they are currently shared between the economy and environment ministries -- will see the light of day. Merkel is likely to want someone she trusts to oversee her "Energiewende" shift from nuclear to renewable power.
(Compiled by Berlin bureau)