The leaders of France and Spain on Wednesday praised the formation of a new German grand coalition government incorporating the center-right Christian Democrats and center-left Social Democrats.

At a meeting in Madrid, Spanish Prime Minsiter Mariano Rajoy described the grand coalition deal as "good for Germany and good for Europe," praising the alliance above all as a stable one.

"If Europe needs anything at the moment, it's stable governments that can offer security," Rajoy said.

Christian and Social Democrats agreed terms for a coalition government in the early hours of Wednesday morning in Berlin.

French President Francois Hollande also welcomed the deal, giving a more explicit nod of approval to the shift to the left in the German government. The Socialist leader focused on the planned introduction of a minimum wage - a demand from the junior partners the Social Democrats that met some resistance from Chancellor Merkel's Christian Democrats - in Germany.

"This was a demand that we had asked of Germany for a long time, in view of the damage to competition caused in certain economic areas, in particular the agricultural sector," Hollande said in Madrid, concluding that the new German plans were "a step in the right direction."

A key victory for the Social Democrats in the German coalition negotiations was securing the promise of a minimum hourly wage of 8.50 euros ($11.53). This well be implemented starting in 2015, although pre-existing negotiated agreements on wages below that figure will remain valid until the end of 2016.

Hollande happy about fresh faces?

Like Spain and most European Union members, France already has a minimum wage. The French figure is also almost 1 euro per hour higher than the incoming German yardstick.

Hollande also welcomed the improved terms for retirement, allowing Germans who had paid income taxes for 45 years to receive a full pension from the age of 63.

The fresh Social Democrat influence in the German government is liable to please Hollande, himself a center-left lawmaker. Angela Merkel had supported conservative Nicolas Sarkozy, ultimately the loser, in France's 2012 presidential elections, even appearing with him on the campaign trail.

Hollande and Rajoy also urged their European partners to accelerate progress on a planned banking union during their Wednesday meeting. Hollande said a banking union could help prevent a repeat of major financial downturns like the recession of 2009.

Rajoy focused on "credit flows, in particular for small and medium-sized companies," saying further measures to promote growth and encourage lending would be a useful next step for the European economy. Like several debt-laden EU countries, Spain has been trying to rein in public spending and debt - even amid rising unemployment, especially among young adults. Rajoy said Europe should aim to implement its action plan to combat youth unemployment, currently a work in progress, no later than this coming January.

msh/ch (AFP, dpa, Reuters)