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Tuesday, October 20, 1998 Published at 11:16 GMT 12:16 UK


World: Europe

Germany's coalition agreed

Mr Schröder (left) celebrates the deal with Mr Fischer (centre) and Mr Lafontaine

Germany's victorious Social Democrats (SPD) and their allies the Greens have signed a deal to form the country's first centre-left government for 16 years.

The coalition talks were completed in record time so that the new government, headed by the SPD's Gerhard Schröder, can be sworn in next week.


[ image:
"Super minister" Oskar Lafontaine
It will be the first time that the Greens have taken power, although they had to make compromises on their more radical policies.

Their leader, former peace activist Joschka Fischer is to be foreign minister, but he is expected to pursue similar policies to Mr Kohl's outgoing government.

The BBC Bonn correspondent, Caroline Wyatt, says the real winner in the deal has been the SDP party chairman, Oskar Lafontaine.

He is set to become the most powerful cabinet minister since World War II. His finance ministry has been expanded to include decision-making on Germany's European economic policy in the run-up to the launch of the single currency.

Mr Lafontaine, a traditional socialist, has also seen off the millionaire businessman Jost Stollmann, who Mr Schröder brought into the election campaign to symbolise the new political centre ground.


[ image: Joss Stollmann: No thanks]
Joss Stollmann: No thanks
Mr Stollmann refused the post of economics minister after its powers were reduced by Mr Lafontaine.

Our correspondent says Mr Lafontaine's appointment suggests Germany will follow a more traditional socialist agenda than the middle way promised by Mr Schröder.

Mr Lafontaine backs many interventionist policies that could worry German industry and Europe's central bankers. He has already put pressure on the independent German Bundesbank to lower interest rates, and believes monetary policy should do more to stimulate employment.

Explaining why he turned down the economics portfolio, Mr Stollmann said: "A balanced supply and demand policy must be the basis for a turnaround on the jobs market. This does not seem to be present in the results of the coalition talks."


[ image: Second choice: Economics minister Werner Mueller]
Second choice: Economics minister Werner Mueller
Werner Mueller, a 52-year-old former manager of energy company Veba, has agreed to take the post instead.

"I am very pleased we were able to make a correct and quick decision," Mr Schröder said.

Other appointments include SPD parliamentary whip Rudolf Scharping as defence minister; while the mastermind of Mr Schröder's election campaign, Bodo Hombach, will take over as the government's chief of staff.

In addition to the foreign ministry, the Greens get the environment and health portfolios. One third of the new ministers will be women.

The new coalition government is committed to combating record unemployment, cutting some taxes to stimulate growth, and putting an end to nuclear power.

However, German business fears that it could put heavier burdens on industry by reversing welfare cuts made by Chancellor Kohl's outgoing government.

The rank and file members of the Greens and the Social Democrats are to hold special party conferences this weekend to approve the deal.



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