Angela Merkel said on Tuesday she was ready to make “painful compromises" in order to form a new coalition government, as late-night negotiations looked set to yield an agreement with Germany’s second largest party.

The German chancellor is hoping to clinch a deal with the Social Democrats (SPD), so that she can end months of political uncertainty, save her political career and return stability to Europe’s largest economy.

“Each of us will have to make painful compromises and I am ready for that,” Mrs Merkel told reporters on Tuesday morning. “We live in turbulent times and what is expected of us as popular parties is that we form a government for the good of the people, one that brings stability,” she said.

The negotiations between Mrs Merkel’s Christian Democrats (CDU), her Bavarian sister party, the Christian Social Union (CSU), and the centre-left SPD, were expected to come to an end on Sunday evening. But despite some progress, the parties missed a series of self-imposed deadlines and it is now expected that a new coalition deal will be announced on Wednesday.

German Chancellor Angela Merkel takes a piece of meat of a roasted wild boar as she visits Trinwillershagen, a town in her constituency,

The parties had allegedly put together a draft coalition document by Tuesday evening. On Monday they came to an agreement on the country’s future Europe policy, planning to invest more in the euro zone and to end austerity, Martin Schulz, leader of SPD, said.

There would be “more investment, an investment budget for the euro zone and an end of forced austerity,” he posted on social media on Monday.

The two parties have also agreed to invest in the building of new social and private homes by 2021, as well as to promote high-speed broadband expansion. However, the two big sticking points have been over labour rules and healthcare.

Mr Schulz said that it was finally “decision day”, as he headed into negotiations on Tuesday morning, adding that he had “good reason” to assume there would be a fruitful outcome between the parties.

Julia Klöckner, deputy leader of CDU, told German broadcaster ARD on Monday that the negotiations were on the “final stretch”.

It has now been four months since Germany’s federal election, which left Mrs Merkel with the largest share of the vote but without the majority needed to form a new government. Since then, she has struggled to reach an agreement with other parties and to form a stable coalition government.

Even if the parties successfully reach a new coalition agreement on Wednesday, they could face a further setback. The Federal Constitutional Court in Germany is currently examining whether the SPD party member vote, upon which it was decided to enter into talks with Mrs Merkel, was unconstitutional. According to German newspaper the Rheinische Post, claimants say the membership vote goes against German Basic Law. It is not clear when a decision on the case will be made.

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