Chancellor Angela Merkel said on Monday she would work with France to tackle pressing issues such as trade policy, the war in Syria and competition with China after the Social Democrats (SPD) approved joining a coalition with her conservatives.
Merkel welcomed the vote by a clear majority of SPD members that ended more than five months of political deadlock after an inconclusive election, and she said the right-left government must quickly get to work.
"What we're seeing and hearing every day is that Europe needs to step up and Germany needs to have a strong voice there along with France and other member states (of the European Union)," said Merkel during a brief statement to reporters.
Priorities included international trade policy, on which many jobs in Europe's largest economy depend, ensuring open competition with China and dealing with the "scary situation" in Syria.
"It is important that we start working as soon as possible."
US President Donald Trump last week stunned his European allies with plans to put tariffs on steel and aluminium imports, triggering a warning by the European Union that it would retaliate with counter-measures.
Sunday's SPD vote result brought relief to German businesses and European capitals, which believe the euro zone would benefit from Merkel being able to partner with France on President Emmanuel Macron's ambitious plans to reform the single currency bloc.
But discord within the coalition could hamper Merkel's ability to tackle challenges like euro zone reforms, Trump's protectionist policies, and China's rising dominance. The war in Syria, which could result in more refugees arriving in Germany, is also a prime concern.
Both Merkel's conservatives and the SPD are under pressure to appear distinctive to voters in a coalition borne out of necessity rather than choice, making it difficult for Merkel to balance conflicting demands.
More than 6 in 10 Germans said in a poll published on Monday they believe the coalition will serve a full four-year term.
Former Greens Foreign Minister Joschka Fischer urged the coalition to speed up euro zone reforms and digitalisation, saying that Europe risked losing out politically and economically as China accelerated its technology developments.
"I hope they step on the gas pedal, when it comes to Europe. It’s a very un-Green demand, I know, but in this case, it's warranted," he told reporters.
'No opposition in government'
Senior conservative Jens Spahn, seen as one possible successor to Merkel, warned the SPD not to obstruct government policy in a re-run of the coalition that has ruled since 2013.
Spahn, a champion of the right in Merkel's Christian Democrats (CDU) and vocal critic of the chancellor, told Deutschlandfunk radio: "The SPD must decide: either we rule together or some will try to play opposition within the government."
SPD leaders, under pressure to revive their party after suffering their worst result in September's election since Germany became a federal republic in 1949, have vowed to fight the conservatives on major issues.
SPD secretary general Lars Klingbeil said his party wants the government, expected to be in place this month, to make social issues its top priority.
"Pension, family and education policy as well as the question of how we strengthen rural areas, those are the issues we want to tackle," he told the ARD broadcaster.
But Volker Kauder, parliamentary leader of the conservatives, said his bloc would focus on curbing immigration.
Despite agreeing on broad policy outlines, the two blocs are divided on how to implement policies on immigration, car emissions, labour rules and welfare.
Merkel also faces the challenge of easing tensions within her own conservative bloc, comprising her CDU party and their Christian Social Union (CSU) Bavaria-based partners.
The CSU on Monday spoiled her election pledge to have a cabinet consisting of an equal number of men and women by announcing three male politicians to fill the transport, development and interior portfolios.
The CDU have appointed three men and three women to fill their six cabinet posts under the coalition agreement and the SPD are expected to do the same. This means that the 16-strong cabinet, including Merkel, will have seven woman and nine men.
Merkel was weakened by her 2015 decision to welcome hundreds of thousands of people seeking asylum, which helped fuel the rise of a far-right party that stole conservative voters.
In power since 2005, she has led Germany and the EU through the financial and debt crises, but her waning authority at home could complicate efforts to deepen integration in the euro zone.