German Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) agreed on Friday that they wanted to launch formal coalition talks.
But this will likely depend on whether she can build on the policy document agreed on Friday and forge what would be her third "grand coalition" - comprising her Christian Democratic Union (CDU), its Bavarian Christian Social Union (CSU) sister party, and the SPD - over the coming months.
For the deal, Schulz said Friday he had the unanimous endorsement of the SPD's negotiating team, but he still needed clearance from a party conference to be held in Bonn on January 21.
Merkel defended the deal, saying it sets the stage for ensuring Germany's prosperity for the next 10 to 15 years and for the "relaunch of Europe" in partnership with France.
Merkel's inability to form a government had raised questions about her political future after 12 years at the helm of Europe's largest economy.
France said it too welcomed the deal struck between the German Chancellor and Social Democrat (SPD) rivals to open power-sharing talks and revive a "grand coalition".
Germany is witnessing a political crisis, as talks to form a new government collapsed in November 2017, after the Free Democratic Party (FDP) withdrew from negotiations on forming the so called "Jamaica coalition" with the CDU/CSU and the Greens. A rise in government spending on education and home construction is included.
The Social Democrats had initially ruled out another coalition with Merkel after poor results in the election on 24 September, but reconsidered after her talks with two other parties failed.
The progress in stabilizing Germany's government propelled the euro to a three-year high versus the dollar to trade at $1.2122 as of 11:09 a.m.in Frankfurt.
The Christian Democrat Union (CDU) and the Social Democratic Party (SPD) have reportedly agreed on a program for government that includes a solidarity tax cut. There still remains much resistance to it within the party's membership, however.
The conservatives also performed poorly in the election, and the three coalition parties' support dropped by a total of almost 14 percentage points. It said the parties are committed to "strengthening social cohesion in our country and overcoming the divisions that have arisen".
The parties agreed to spend more on the European Union - a long way short of Schulz's ambition to create a "United States of Europe" by 2025.
Strengn cohesion with Europe to play an active role in strengning European integration.
Under the blueprint, Germany will seek to limit the annual intake of people seeking safe haven to around 200,000, in line with a long-standing demand of the CSU, whose southern state of Bavaria was at the frontline of the refugee arrivals. "We are convinced that we need a new awakening for Europe".
Merkel now leads a caretaker government, limiting her ability to take major policy initiatives as French President Emmanuel Macron pushes an ambitious European reform agenda.
Ms. Merkel used her statement to talk about the many technical solutions included in the agreement.