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German coalition talks drag on into third extra day

German Chancellor Angela Merkel leaves in a car after coalition talks in the headquarters of the Christian Democratic Union in Berlin Germany

Following more than four months of deadlock, Chancellor Angela Merkel will remain in power but will hand over control of the finance ministry to her center-left rivals in the Social Democratic Party (SPD).

Der Spiegel, public broadcaster ARD and the daily Bild each said the parties had ironed out their final differences and were ready to sign an agreement for Merkel's fourth term.

The left-of-centre Social Democrats (SPD) claimed the prized finance portfolio in a new grand coalition deal settled on Tuesday, a ministry that will be key to driving reforms in the European Union's single currency eurozone.

Speaking at a joint press conference with party leaders, after a marathon 24 hours of talks, Merkel said they managed to pave the way for a coalition government that would address citizens' real needs and problems.

The mass influx drove the rise of the far-right Alternative for Germany (AfD) party which scored nearly 13 percent in September elections.

Faced with the option of a snap election that could further boost the AfD or the prospect of heading an unstable minority government, Merkel opted to woo back the SPD - her junior partner for two of her three terms since 2005.

The SPD's roughly 460,000 members will soon have the final say on their party's participation in the new coalition in a special ballot. Nearly half-a-million SPD members will vote on the deal first.

The Christian Social Union will provide the interior minister.

Investors and partners had been concerned by Merkel's failure to form a government more than four months after the election, at a time when Europe faces major challenges including eurozone reform and the UK's departure from the EU.

He noted that Merkel's conservatives lost 3% points to 30.5% in the poll.

German Chancellor Angela Merkel said on Sunday that her conservatives faced tough negotiations with the Social Democrats (SPD) as they strive to form a ruling coalition, and it was unclear when they would be able to wrap up the talks.

With SPD leader Martin Schulz, a former president of the European Parliament, reported to be headed for the foreign ministry, Germany could become more amenable to proposals for strengthening E.U. institutions and the euro - to the delight of French President Emmanuel Macron. SPD boss Martin Schulz, who past year led the party to its worst national election result since World War II, looks headed for the Foreign Ministry.

The parties reached agreements on energy and agriculture on Saturday but continued to haggle over healthcare. The agreement focuses mostly on domestic policies, but it also sends mixed messages about Germany's views of the European Union's future, indicating a number of compromises between the SPD, which supports greater spending and risk sharing in the bloc, and the CDU and CSU, which are skeptical of measures that would have a negative impact on Germany's coffers.