Germany will limit the number of asylum seeker arrivals to around 200,000 per year under a draft coalition agreement sealed Friday after marathon talks.

A deal being hammered out between Angela Merkel's CDU party, it sister CSU party and the left-leaning SPD says that migrant arrivals will be limited to between 180,000 and 220,000 each year.

In addition the parties will agree to cap the number of people who will be allowed to join their family living as refugees in Germany at 1,000 per month.

All three parties are now reported to have agreed to the 28-page draft which will allow formal coalition talks to take place over the coming weeks.

German Chancellor Angela Merkel (centre), Bavarian Prime Minister Horst Seehofer (CSU) (left) and Social Democratic Party (SPD) chairman Martin Schulz (right) pose for a photo after the exploratory talks between Merkel's conservative bloc and the Social Democrats on forming a new German government

German Chancellor Angela Merkel all-but secured her grip on power on Friday morning as a 'breakthrough' was announced in talks to form a coalition government

Negotiators from Merkel's CDU party (left), its Bavarian sister party the CSU (right) and the left-leaning SPD were locked in talks for 24 hours before a deal began to emerge

The detailed negotiations will lift the uncertainty that has undermined Germany's role in international affairs and will secure Merkel's job.

The draft says that Germany would also reduce by 1,000-per-month the number of refugees it takes from Greece and Italy under a European Union voluntary pact.

Family reunification would only apply to marriages sealed before migrants fled and only if the individuals concerned had committed no crimes, were not dangerous and in cases where refugees were not expected soon to return home.

After 24-hours of talks, the six leaders began presenting the blueprint to party members, party sources said.

Weakened by an election setback in September, Merkel turned to the left-leaning SPD to renew their so-called 'grand coalition' after the collapse in November of talks on a three-way coalition with the Greens and Free Democrats (FDP).

The chancellor, who has led Germany for more than 12 years, needs the talks to succeed to avoid further erosion of her personal authority and weakening of German international influence, not least in the European Union.

As Europe’s largest economy and pre-eminent power broker, Germany is crucial to the region’s fortunes. Berlin’s partners are eagerly awaiting a new German government to help drive forward Brexit talks, euro zone reform and EU diplomatic initiatives.

'We have achieved outstanding results,' said the Social Democrats' leader, Martin Schulz on Friday.

To make a new government a reality, he must persuade a party congress on January 21 to agree to formal coalition negotiations.

If those talks are successful, he must steer a coalition deal through a ballot of the full party membership.

If things go well, a new government could be formed by Easter, said Horst Seehofer, leader of the Christian Social Union - the Bavaria-only sister party to Merkel's Christian Democratic Union.

French President Emmanuel Macron (right), pictured today with Austrian Chancellor Sebastian Kurz, said he welcomed the news from Germany

'If we succeed, these could be four very, very good years,' Seehofer said. 'I am already speaking of these years because I believe we will succeed.'

Schulz obtained a minor reform to how public health insurance is financed - far from his party's original proposal - as well as a commitment to guarantee the current level of pensions until 2025, among other things.

He did not secure an increase in the top income tax rate that his party proposed.

Merkel highlighted promises to hire 15,000 more police officers and 2,000 people to strengthen the justice system.

She currently leads a caretaker government, limiting her ability to take major policy initiatives as French President Emmanuel Macron pushes an ambitious European reform agenda.

'We have, in what feels like a long time since the election, seen that the world will not wait for us,' Merkel said.

'We are convinced that we need a new awakening for Europe. So I have no worries about us finding common solutions with France.'

France and Bulgaria, which holds the rotating EU presidency, welcomed Friday's developments.

Jean-Claude Juncker, head of the European Commission, said the European part of the deal was 'a significant, positive, constructive, future-looking contribution to the European policy'.

President Macron on Friday welcomed a deal on opening German government talks, saying the provisional terms of the deal were good for Europe.

'We have had this morning ... good news from the other side of the Rhine, and I am particularly happy and very satisfied that Chancellor Merkel is able to move forward towards the constitution of a coalition government which ... is awaited by all of Europe and particularly France,' Macron told a news conference.

The terms of the deal are more favourable to the European project than previous attempts at the end of last year, he said.

Merkel has ruled with the SPD in two of her three terms in office, including in the last parliament from 2013-2017. A re-run of their partnership is not yet certain.

Before the two groups move to formal coalition negotiations, SPD leaders need to convince party members to give a green light at a congress planned for January 21.

Many SPD members fear governing with the conservatives again would further weaken their party after it suffered the worst result in September’s vote since the modern Federal Republic was founded in 1949.

Kevin Kuehnert, head of the youth branch of the SPD, said on Thursday he planned a ‘NoGroKo’ tour of Germany to persuade party delegates to vote against the grand coalition.

Thirty nine negotiators, 13 from each party, have been locked inside the headquarters of the SPD (pictured) as they try to hash out a deal to form a grand coalition

Soeren Bartol of the SPD and Christian Schmidt of the CSU parties are pictured during coalition talks in Berlin

Daniel Guenther, conservative premier of the northern state of Schleswig-Holstein, said his party and the German government still needed Merkel at the helm, but it was time to start building a succession plan.

'We need people in a new government that also have prospects for the time after Angela Merkel,' Guenther told the Heilbronner Stimme newspaper.

Some progress was made during this week's exploratory talks, draft plans show, including pacts to cut use of the weed killer glyphosate, and drop a target of reducing carbon dioxide emissions by 40 percent by 2020 from 1990 levels.

Germany's flourishing economy, whose growth hit a six-year high in 2017, and the resulting record 38.4-billion-euro ($46.2 billion) public sector surplus, also offer negotiators a windfall to fund new programmes.

But the wish list presented by negotiators totals some 90 billion euros, about twice what they have estimated they can spend on new programmes, another source of conflict.

One SPD negotiator told the Bild newspaper that Bavaria's CSU, sister party to Merkel's Christian Democrats, was blocking any agreement on raising tax rates for the wealthiest.

CSU leaders are pushing the conservative bloc to the right, worried about ceding further ground to the far-right Alternative for Germany (AfD) party in elections later this year.