Olaf Schulz has reached a milestone in his bid to succeed Angela Merkel as German chancellor by bringing his potential partners close enough to enter formal negotiations to form a coalition government.

After less than four hours of talks on Friday, his Social Democrats, the Green Party and the pro-business Liberal Democrats agreed on the basic principles of the ruling coalition. The agreement came remarkably quickly by German standards, with joint talks starting just a week ago.

The agreement includes a plan to exit coal in 2030, eight years earlier than planned, as well as a climate action plan. The Social Democratic Party and the Green Party also agreed to the demands of the Free Democratic Party to leave constitutional debt limits as they are and not to impose new taxes. Details will be worked out in official talks in the coming weeks.

Despite the chaos, the three-way combination is Germany’s most viable governing coalition, and the parties have been pressured to bridge major disagreements on issues from spending and taxation to climate protection and social policy.

While disagreements are still possible, moving ahead with coalition negotiations is a critical step in Germany’s complex process of transferring power. It shows that the parties see enough common ground and makes it likely that a government led by Schulz will start running Europe’s largest economy before the end of the year.

After narrowly defeating Merkel’s conservatives in the September 26 elections, the Social Democrats moved quickly to find common ground with the Greens and the Free Democratic Party, an unprecedented coalition at the federal level in Germany.

The challenge was to reconcile the differences. The FDP campaigned for fiscal prudence, while the SPD and Green sought to open Germany’s investment coffers in order to upgrade infrastructure, protect the environment and expand digital technologies.

Formal coalition negotiations are a more comprehensive format that includes policy teams, overnight negotiation sessions, and policy positions. There are significant hurdles still to be overcome, regarding the financing of a particularly thorny issue.

Once a preliminary agreement is reached to form the government, the party organizations must sign. The Greens said they would take the decision to a party conference. If approval is granted, the parties will enter into comprehensive talks that will entail smaller groups preparing political concessions, which are then assembled into a lengthy coalition agreement.

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