German would-be coalition partners agree not to raise taxes: source

"We agree on the aim of a balanced budget without new debt," read a draft of a coalition blueprint seen by Reuters, which was still subject to possible changes.

The blueprint showed they wanted to gradually abolish the 'solidarity tax' introduced after reunification in 1990 to support poorer eastern states.

The agreement, reached after all-night talks, suggests the parties are close to moving ahead with formal talks on a re-run of the 'grand coalition' that has governed Germany for the last four years.

(Reporting by Andreas Rinke and Markus Wacket; Writing by Michelle Martin; Editing by Paul Carrel)