"We know that in order to make sure it continues to be good for our people in the future, we will have to modernise infrastructure, address the challenges of digitalisation", she said.
"To strengthen the European Union means to find a solution on the migration challenge".
Here are the main points in the 177-page coalition treaty, which would become policy goals for the next government.
Merkel has relied on exactly this coalition for two of her three four-year terms.
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Party leader Martin Schulz promised members a veto over any coalition deal to secure their consent for entering into coalition talks.
The CDU will get the economy, defense, education and agriculture ministries while their Bavarian allies, the Christian Social Union (CSU), will provide the interior minister, with an added "homeland" portfolio, in the form of Horst Seehofer, who talks tough on migration.
Julian Reichelt, editor-in-chief of the influential Bild daily, called it "the first SPD government led by a CDU chancellor". The left-wing Social Democratic Party will head several ministries including the Foreign Ministry and Justice Ministry.
Martin Schulz announced Wednesday he would step down as leader of Germany's centre-left Social Democrats and that he meant to serve as foreign minister in the next coalition government led by Chancellor Angela Merkel.
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Brent for April settlement lost 96 cents to close at US$67.62 on the London-based ICE Futures Europe exchange. It forecast that oil will return 24% to investors over the next six months.
Mr Scholz (59) was Dr Merkel's first labour minister before moving back to his native city-state of Hamburg in 2011 and the powerful mayoral post there.
The SPD tends to favour spending over austerity, so there could be a move away from the firmer fiscal policies of former ministers.
Schulz is hoping that the half-time assessment, which was not part of the previous two coalition pacts between the parties, will help sell the deal to the 460,000 SPD members who will have the final say on the agreement in an upcoming referendum.
However, the SPD's 464,000 members will be asked to ratify the deal, and could yet reject it in a postal vote whose result is due to be announced on 2 March. It's the least bad option simply because neither side fancies the alternatives: a minority government is seen as unstable; and fresh elections would lead to months of uncertainty and could kill off French President Emmanuel Macron's plans to reform the eurozone.
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Khloe and Caitlyn in particular have come head-to-head several times following her transition in 2015. Kardashian recalled to Howard Stern about Jenner's alleged deceit in 2016 .
Now the ministry will be controlled by a party that has called for the creation of a "United States of Europe" by 2025 and has enthusiastically welcomed French President Emmanuel Macron's plans for deepening European Union integration, the British paper adds.