Deputy-leader of the Social Democratic Party (SPD), Ralf Stegner, State Premier for the state of Hesse, CDU's Volker Bouffier and German Interior Minister Thomas de Maiziere are seen through a window during talks between the leaders of the conservative CDU/CSU union and the SPD on forming a new government | Tobias Schwarz/AFP via Getty Images Germany edges closer to new coalition Deal between Merkel and Social Democrats still faces big hurdles.

BERLIN — Germany inched toward installing a new government as Angela Merkel's conservatives and leaders of the Social Democrats (SPD) reached agreement on the outline of a legislative agenda after marathon talks.

After negotiating non-stop for 24 hours to conclude exploratory talks, the parties agreed on a 28-page position paper, laying out their policy priorities for the coming years.

The parties devoted the first three pages of the document to Europe but offered little more than platitudes about the importance of further reform and their support for deeper integration. While they signaled a willingness to spend more on Europe and to work together closely with France, the parties offered no specifics on how much Berlin would be willing to spend and on what.

"We held intense, serious and very detailed exploratory talks," Merkel told reporters, the exhaustion of the marathon session written across her face. "The paper that we put together is not superficial, rather it underscores our commitment today and for the term of this legislature to take the necessary steps necessary to ensure we live well in Germany in 10 and 15 years time."

SPD leader Martin Schulz, who previously ruled out another grand coalition, was even more enthusiastic, calling the preliminary deal "an excellent result."

Though the paper is quite specific in some areas, such as the number of refugees Germany is willing to accept per year (220,000), it is vague in others and contains few surprises.

"The results include a number of compromises and few substantial reforms," said Marcel Fratzscher, the head of the Berlin-based DIW economic research institute. "What's missing is a clear vision and courageous reforms that will prepare Germany for the future."

While Friday's agreement boosts the chances for a renewal of a "grand coalition" between the center-left and center-right, negotiators face a circuitous path towards a final deal. Before they can proceed to formal talks, the SPD leadership needs to secure the agreement of a special party convention, scheduled for January 21.

And even if those talks result in a deal, a process that is expected to take several weeks, the SPD has insisted on putting the final coalition agreement to a vote of its membership. That means Germany is unlikely to have a new government until late March at the earliest.

SPD challenge

The SPD's biggest challenge will be to convince its members that a new grand coalition represents something more than a continuation of the status quo.

After recording their worst result in postwar Germany, the Social Democrats resolved to rebuild their party in opposition. When talks to build a coalition between Merkel's Christian Democrats, the Greens and the liberal Free Democrats failed in November, the SPD agreed to reconsider in order to avoid a new election.

Many in the party believe the price for a grand coalition should be a promise to support a signature SPD project, such as an ambitious healthcare reform to automatically insure all citizens. The conservatives balked at that idea, however, agreeing only to a slight increase in the health insurance contribution paid by employers.

Without such a banner achievement, Schulz will struggle to win over the skeptics in his party.

Members of the party's left-wing wasted little time in attacking the deal on Friday, vowing to campaign against formal talks in the run-up to next week's SPD convention, arguing that the position paper "falls well short" of what party leaders had promised.

"We are going to engage on this much more intensively," Hilde Mattheis, an SPD MP and leader of the party's left wing, said on Friday.

If the two sides fail to form a coalition, a new general election is likely. A failure of the talks would also likely trigger a leadership contest in both the CDU and the SPD, spelling the end of Merkel's more than 12 years as chancellor and of Schulz's short period at the helm of the Social Democrats.

Germans are unaccustomed to waiting this long for parties to form a coalition. For decades, the center-left and center-right had enough votes to lead a two-party coalition, with the junior role generally falling to a smaller party. When the math didn't work, a grand coalition was the fallback.

But last September's election saw a fracturing of Germany's political landscape and a steep drop in support for the mainstream parties that have dominated the country's politics since World War II.

The Christian Democrats and SPD have governed Germany together for eight of the past 12 years.

Many analysts say the constellation has made the parties indistinguishable and softened their edges. That has opened the door for populists on both the left and right, in particular the anti-immigrant Alternative for Germany (AfD), to fill the vacuum. The AfD won entry to parliament for the first time in September and will be the largest opposition party if a grand coalition is formed.

A new iteration of the coalition would be grand in name only, holding just over 50 percent of the seats in parliament, compared to nearly 80 percent in the previous legislature.

Though members of both parties worry that another grand coalition could further erode their support and strengthen fringe parties, they fear a new election even more.

Recent polls suggest another ballot would result in a similar outcome.

This article has been updated with additional information.