Angela Merkel’s Christian Democratic Union and the centre-left Social Democrats have agreed on a paper outlining the basis for moving ahead with formal coalition talks.
The German Chancellor and the leader of the Social Democrats Martin Schulz held overnight talks at the Social Democrat headquarters in Berlin.
The 28-page paper outlined their compromise positions on a wide range of issues including taxes, migration and healthcare.
“Many, many hours of work, serious wrangling and shaping are contained in these 28 pages,” tweeted CDU politician Julia Kloeckner, part of Mrs Merkel’s negotiating team, on Friday morning.
Social Democrat spokesman Serkan Agci said there had been a “breakthrough” agreed upon by the party leaders but said final revisions were still being made on the document by negotiating teams, which would also need approval.
The final negotiating session between the two sides began on Thursday morning and continued through the night.
However, there is still a long way to go before a deal is done.
The Social Democrats’ leaders still have to convince a party conference of coalition talks and expect to face resistance.
Both sides then need to come to an actual coalition agreement, which would have to be approved in a ballot of the Social Democrats’ entire membership.