German Chancellor Angela Merkel's conservatives have agreed to enter a coalition with the centre-left Social Democratic Party (SPD), officials say.

The late-night decision follows lengthy discussions between leaders of the SPD and Merkel's Christian Democrats (CDU) and the allied CSU.

Merkel could be sworn in for a third term next month.

Her CDU fell just short of an outright majority in September's election, when its liberal partner won no seats.

The breakthrough came after 17 hours of tense negotiations.

The final coalition deal will now go to a ballot of SPD members to be signed off.

Merkel is expected to present the agreement alongside CSU leader Horst Seehofer and the SPD's Sigmar Gabriel on Wednesday morning.

Parties reached settlements on issues including a minimum wage, a lower retirement age, and changes to dual citizenship rules.

As a result, a nationwide minimum wage of 8.50 euros (.55, ?7.11) could come into force from January.

The parties also agreed that there would be no tax increases, a key demand of the CDU/CSU.

The SPD previously formed a grand coalition with the CDU/CSU in 2005-2009.

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