The conservative-SPD coalition was the only path to a majority government after both major parties suffered steep losses in the February general election.
They have both ruled out governing with the far-right Alternative for Germany which scored a historic second place. Over the last two weeks, SPD members have voted on the coalition treaty drawn up by leaders of both parties. Their approval, which had been expected, would enable Merz to become chancellor on May 6.
In the vote, which ended on Tuesday just before midnight, 84 per cent of the members who took part were in favour of the deal, the party said, adding that 56 per cent of the around 360,000 members took part in the vote.
"In these very difficult times in global politics, we bear responsibility for our security, for economic growth, secure jobs and equal opportunities," party General Secretary Matthias Miersch said in a statement.
Reviving Europe's largest economy is a top priority for Germany's next government, amid fears a trade war sparked by US President Donald Trump's tariff announcements could further hurt its export-driven economy.Â
Despite the SPD's historic low of just 16.4 per cent of the vote, political experts say it secured key gains in the coalition deal, leveraging the conservatives' lack of alternative paths to the chancellery for the next four years.
The next coalition aims for example to invest heavily in Germany's infrastructure, raise the minimum wage to 15 euros ($A26.60) per hour, keep pensions level at 48 per cent of the current average wage and extend a cap on rents, according to the coalition contract.
The SPD also secured the coveted finance ministry, along with six other cabinet posts.
The SPD's concessions on tighter migration rules and cuts to unemployment benefits as well as its failure to secure tax hikes for the wealthy have, however, drawn sharp criticism from the party's influential Jusos youth wing, whose leaders had urged members to reject the deal.
with AP
