Merkel seals the deal as Germany prepares for coalition government

German chancellor Angela Merkel has secured a coalition agreement with the opposition Social Democrats (SPD), putting her on course for a third term as German Chancellor.

The deal reached between Merkel's Christian Democrats (CDU) and the SPD includes the introduction of a national minimum wage and promises to raise spending on social security without further tax increases.

Germany's new minimum wage will be set at €8.50 (£7.11) an hour and will come into force in 2015. The two sides also agreed on an optional early retirement age of 63, after contributing to a pension for 45 years.

In terms of broader European policy, both parties agreed that each member state of the European Union should be responsible for closing down their countries banks should the common resolution fund be incapable of resolving the problem.

Representatives of both parties have welcomed the agreement claiming success on their key issues. Herman Groehe, secretary general of the CDU, said "the result is good for our country and has a conservative imprint" while SPD MP Karl Lauterbach told the Associated Press "the Social Democratic signature on this coalition agreement is everywhere"

The deal will need to be passed by the SPD party which plans to hold a referendum amongst its 470,000 members. A poll by Yougov for German newspaper Bild last week found that 49 per cent of SPD of voters favoured a deal while 44 per cent were opposed to one.