Agreement reached on basis for negotiating new German govt coalition - lawmakers

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The euro climbs to a three-year high as German Chancellor Angela Merkel's conservatives and rival Social Democrats reach a breakthrough in coalition talks.

While the CDU still came out on top of a fractured field, Merkel was forced to pursue an unwieldy deal among her own conservative bloc, the pro-business Free Democrats and the environmentalist Greens.

German Chancellor Angela Merkel on Sunday met with the chairman of her Bavarian sister party, Horst Seehofer, and Social Democratic (SPD) leader Martin Schulz at the start of preliminary coalition talks in Berlin.

Despite such reticence, German media reported on Tuesday that conservative and SPD negotiators had reached agreement on a law to attract skilled immigrants.

A working group paper seen by Reuters said the parties want Germany to achieve its climate targets through various measures, including support for electric vehicles and public transport.

Kevin Kuehnert, the head of the party's youth wing, criticized "cheap compromises". At the same time, Ms. Merkel seemed to give up on the notion of limits on accepting more refugees; she said in 2015 that she wasn't quite sure if Germany's borders could still be protected as they once were. Still, Merkel is trying to gain the SPD's support.

It stressed the crucial role of Franco-German cooperation in that process, saying a renewal of the European Union could only succeed if Germany and France "work together with all their strength".

"What we need in Europe is the same as at national level ... namely more solidarity".

The document stipulates that the European Union must play a leading global role in climate protection and advocate an ambitious implementation of the Paris Climate Change Agreement.

Merkel made this known in Berlin's first substantive response to President Emmanuel Macron's ambitious European Union reform proposals.

"This is far better than what "Jamaica" wanted to do".

Germany's information and telecom industry is the world's fifth-largest, but it lags behind transportation and logistics in terms of value added to the economy. Frank Baasner, director of Ludwigsburg-based think-tank German-French Institute, told Xinhua.

Carsten Brzeski, chief economist for Germany at ING, said that "as regards economic policies, the agreement is a continuation of the well-known policies of the last few years: cautious steps forward, rather than any visionary experiments".

"Although it's often that ambition is very strong and when it comes to details there are huge differences between France and Germany". Others worry that a new grand coalition would make the AfD the main opposition party.

European Commission President Jean-Claude Juncker called it a "significant, positive, forward-looking contribution" to the European policy debate.

"If that doesn t happen, then Martin Schulz will have great convince party members of the necessity of this grand coalition", he said.

Without a stable coalition government, Germany could be forced to hold new elections far earlier than planned, perhaps as soon as this year.

But another participant in the talks said the two blocs were still struggling to find common ground on the most divisive issues - taxes, pensions, migration and healthcare.

All three lost votes and seats in the September 24 elections, making the Social Democrats, in particular, reluctant to resume that arrangement. After the fractured verdict following the elections a few months back, Merkel has been trying to settle the coalition with few smaller parties but she has been unable to do so.