Berlin - German Chancellor Angela Merkel of the Christian Democrats (CDU) and her new political partners added the finishing touches to the next government on Friday, as key ministerial appointments were decided. Merkel hammered out final details in talks with the Free Democrats' (FDP) leader Guido Westerwelle and Horst Seehofer of the CDU's Bavarian sister party, the Christian Social Union (CSU).
Merkel is to be re-elected chancellor next week, while Westerwelle is to become vice-chancellor and foreign minister, as is traditional for the leader of the junior coalition partner.
Rising star Karl-Theodor zu Guttenberg of the CSU was nominated as Defence Minister, a key move for the 37-year-old who was a political unknown before becoming Economics Minister earlier this year.
The biggest surprise of the day was Interior Minister Wolfgang Schaeuble's switch to the finance ministry. The CDU heavyweight, paralysed from the waist down since an assassination attempt in 1990, will play a key role in charge of the government's purse strings.
The CDU's Thomas de Maiziere, Head of the Chancellery, is likely to take over the interior ministry, leaving his current post to Ronald Pofalla, currently general secretary of the CDU.
Other agreed posts were Ilse Aigner, who is to remain Agriculture Minister, and Peter Ramsauer who is to become transport minister. Both are from the CSU, giving the party a total of three cabinet posts.
All appointments remained to be officially confirmed by the party heads. The government is due to be sworn in next week, after Merkel's CDU and the FDP won a majority in last month's general election.
After three weeks of coalition talks, CDU and FDP resolved their differences over key issues, including tax cuts and healthcare policy.
The parties agreed to reduce taxpayer contributions by 25 billion euros (38 billion dollars) by the year 2013, focusing on tax cuts for families in the form of greater exemptions and an increase in child benefits.
The incoming coalition also agreed to radically revise Germany's controversial healthcare funding mechanism from 2011, and paved the way for a likely increase in individual healthcare contributions.
Under the proposals, statutory health insurers will be given greater autonomy to set contributions, which are to take the form of flat insurance premiums to top up earnings-related contributions.
There is an ongoing public debate in Germany over whether to charge people for healthcare - and grant people different levels of provision - according to their ability to pay.
During the coalition talks, the three parties had struggled to reach political compromises in key areas including tax cuts, which they promised during the election campaign without taking into account budget constraints.
The economic crisis has created deficits totalling 20 billion euros in the state's healthcare and labour budgets.
The parties agreed to plug the shortfall with taxpayer money after plans for a "shadow budget" became unworkable, thus reducing opportunities to cut taxes in the next four years.
The partners also agreed to increase investment in education and research by 3 billion euros annually.
CDU, CSU and FDP have decided to extend the life of nuclear power stations beyond the year 2020, overturning a previous government decision.
Other decisions included improved benefits for the long-term unemployed, and a rejection of proposals for a minimum wage.
The security portfolio included a decision to limit the powers of the state to spy on citizens' online activities.
The CDU and FDP decided to reduce military service for young men from nine to six months. They agreed that "open-ended" EU membership negotiations should continue with Turkey.
The incoming government also wants to introduce language tests for four-year-olds, with the aim of ensuring that all children can speak German before reaching school.
Merkel has been keen for the new government to be ready in time for celebrations marking the 20th anniversary of the fall of the Berlin Wall, on November 9.
