German parties agree on coalition

By Frederik Pleitgen, CNN

German Chancellor Angela Merkel and Guido Westerwelle, Germany's new foreign minister, present their coalition government programme in Berlin

STORY HIGHLIGHTS

Christian Democratic Union, has agreed with two other parties on the terms for a center-right government.
Merkel will remain chancellor under the agreement and the head of the Liberal Democrats.
Agreement for new government caps almost three weeks of negotiations following September 27 elections.

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Berlin, Germany (CNN) -- German Chancellor Angela Merkel's party, the Christian Democratic Union, has agreed with two other parties on the terms for a center-right government, her party said Saturday.

The agreement with Bavaria's Christian Social Union and the Liberal Democratic Union (FDP) will formally be signed on Monday, according to Merkel's party, the CDU.

Merkel will remain chancellor under the agreement and the head of the Liberal Democrats, Guido Westerwelle, will become foreign minister, Germany media reported.

The new coalition partners say they want to cut taxes, consolidate household spending, and reform the German health care system as the country claws its way out of recession.

A main point of dispute between the Christian Democrats and the Liberal Democrats had been the level of possible tax cuts. German public finances are in shambles because of government spending programs aimed at softening the effects of the financial crisis on the economy and put into effect by the previous coalition government of the CDU and Social Democrats (SPD).

Saturday's announcement of an agreement for a new government caps almost three weeks of negotiations following the September 27 elections, in which Angela Merkel won a second term in office and the Liberal Democrats gained a substantial piece of the popular vote.