The former European Union president suffered a disastrous election, but Mrs Merkel's poor results ensured he would be a key part of the coaltion, which was finally agreed today. Referencing the Chancellor and Horst Seehofer, leader of the Bavarian sister party of Mrs Merkel's conservatives, Mr Schulz said: "You'll forgive me for thanking Mrs Merkel and Mr Seehofer, especially regarding the European policy chapter of this deal, because what we wrote down in this coalition agreement about the European Union and its future will be a fundamental change of direction in Europe. With this coalition agreement, Germany will take an active and leading role in the European Union again."

The coalition deadlock prompted speculation the 63-year-old Chancellor could be forced to step down but, after long negotiations and a series of “painful comprises”, it now appears Mrs Merkel will continue as the German leader for another term. However, any deal still needs to be approved by by the SPD's 464,000 members, who could yet vote against another grand coalition with Merkel’s Christian Democratic Union (CDU) party. Mr Schulz yesterday called the coalition deal “a new dawn for Europe” and an “end to the diktat of austerity”.

Alice Weidel, leader of the far-right Alternative for Germany (AfD), the biggest opposition party, tweeted: "Things could not get worse for Germany," calling the coalition deal "insane" as it did not contain an upper limit for migration. Speaking in December, Mr Schulz called on EU member states to sign up to a “United States of Europe” by 2025 or risk being kicked out of the bloc.

Peter Altmaier, Merkel’s chancellery chief, admitted he was surprised by Schulz’s proposal and instead believes it would be more effective to tackle specific issues, such as unemployment and immigration. He told the Rheinische Post newspaper: "The discussion about whether Europe should be a federal state, confederation or a united states is one for academics and journalists - not for German foreign policy. A United States of Europe would transfer member states' sovereignty to Brussels and there would not be a majority for that in many EU states.”