(CNN)Three German political parties have sealed a deal for a new government, with left-leaning Olaf Scholz the proposed next chancellor following lengthy coalition negotiations and a historic election that sees Angela Merkel stepping down after 16 years at the helm.
Under the agreement announced in Berlin on Wednesday, Scholz, of the center-left Social Democratic Party (SPD), will head a three-party coalition with partners the Greens and pro-business Free Democrats. It follows a close September election and two months of negotiations to form a new government.
Scholz, joined by coalition partner leaders, told a news conference that the "traffic light government" is here, referring to the red, yellow and green colors of the respective parties. "We want to be daring when it comes to climate and industry," he said.
The deal -- which sets out the government's vision for its four-year term -- will now go to the wider party members for consideration. Barring any last-minute upsets, Scholz will be sworn in as chancellor early next month.
The new government's coalition parties are not traditional bedfellows. The pro-business Free Democrats is more usually aligned with the center-right, rather than the left-leaning SPD and Greens.
One sticking point in the coalition wrangling has been funding the Greens' ambitious climate plans, with the Free Democrats opposed to raising taxes.
But as far as coalition negotiations in Germany go, this one has been fairly swift. After 2017 elections, it took more than four months to iron out a new government.
It also spells the end of the Merkel era, and consigns her center-right Christian Democratic Union (CDU) and sister party the Christian Social Union (CSU) into opposition after 16 years in power.
Incoming Chancellor Scholz will take over the helm of Europe's largest economy at a time of increasing diplomatic uncertainty in the European Union -- namely aggression from Russia and Belarus, and threats to the rule of law from Poland and Hungary.
As Germany emerges from its worst climate disaster of recent years -- devastating floods over the summer that killed 180 people -- the Greens will also play an important role in steering the country towards a coal-free future.
Mandatory vaccinations to be considered
But chief among the hefty to-do list facing the incoming government is the acute Covid-19 wave gripping the country. Germany is battling surging cases that have pushed Europe back to the epicenter of the pandemic, prompting tough restrictions from neighboring countries and protests from lockdown-weary citizens across the bloc.
On Wednesday, Scholz told reporters that mandatory vaccinations will be considered by the new coalition because "vaccination is the way out of this pandemic."
Case numbers are particularly dire in Germany's eastern states where health officials have warned overstretched hospitals could soon run out of beds for intensive care patients.
While Germany has vaccinated around 80% of its adult population, according to the European Centre for Disease Prevention and Control (ECDC), it still trails behind southern European countries such as Spain and Portugal.
On Monday, Health Minister Jens Spahn didn't mince his words as he urged more people to get their shots. Spahn told a press conference in Berlin he was certain that by the end of this winter, everyone in Germany would be "vaccinated, recovered or dead," in relation to the Delta variant.
The country now plans to introduce targeted Covid-19 restrictions on the unvaccinated. However Germany's pandemic-related state of emergency was set to expire on Wednesday, and the coalition partners have agreed on a new infection protection act that already passed the lower house and upper house of parliament last week.
Diplomatic shifts
Meanwhile the migrant crisis on the Poland-Belarus border, which Western leaders have accused Belarusian President Alexander Lukashenko of orchestrating with the support of Russian President Vladimir Putin, has intensified tensions with the European Union's volatile neighbor.
The crisis too has turned a sharper focus on Russia's influence in Europe -- not least the controversial Nord Stream 2 pipeline, which will bring gas from Russia to Germany under the Baltic Sea. German authorities last week paused the approval process for the pipeline amid issues with the company's operating license.
Elsewhere populist governments in Poland and Hungary continue to push the boundaries of EU membership by rolling back core democratic values. Recently, the EU's top court ruled Poland had violated the bloc's laws relating to judicial independence.
Scholz's predecessor Merkel made a name as the steady hand of EU diplomacy, variously steering the bloc through the European debt and migrant crisis. Whether the new chancellor will also step up to the role of EU leader -- or leave those shoes for another to fill -- remains to be seen.
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