The center-left Social Democrats voted overwhelmingly to remain in a coalition with Merkel's conservative bloc, after hard and drawn-out negotiations triggered by September's elections, which saw the rise of a new right-wing force in German politics and raised questions about Merkel's future.
Kevin Kuehnert, head of the SPD's youth wing, said he was disappointed but that the "Jusos" (youth wing) would keep up their criticism, signaling that, after bringing in a flood of new members, they would be a thorn in the leadership's side.
Her political future hung on the whim of the SPD vote after her first attempt to form an coalition - with the liberal Free Democrats (FDP) and Greens - failed past year.
As the chancellor candidate of the biggest party, Merkel is poised for the fourth time to be elected as the new chancellor in the March 14 plenary session of the Bundestag, or the Federal Parliament, and the new government will be formed accordingly.
Two thirds of the membership voted "yes" to the deal in a ballot - a wider margin than many had expected - meaning Merkel could be sworn in for a fourth term as early as the middle of the month in a repeat of the grand coalition that has governed since 2013. But the long-serving leader faces a far rockier road ahead.
"It's good for our country that this phase of insecurity has passed and that three parties are prepared to accept government responsibility", said Mr Steinmeier, a long-time SPD politician who pressed his party to return to power despite a disastrous election result last September.
It is widely expected that snap elections will not address the political crisis but only make the anti-EU far-right populist party Alternative fuer Deutschland (AfD) stronger.
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The party will also hold another meeting on March 6 for intraparty elections to elect Shahbaz Sharif as the permanent president. The Central Working Committee of the PML-N met in Lahore to elect Shehbaz Sharif as party's acting president.
"In 2021 at the latest, they'll pay the price", the party tweeted.
"Those who want to get rid of Merkel will try pull the party to right in order to recapture those voters who have defected to the nationalist, anti-immigrant AfD", he said.
On Sunday Dr Merkel congratulated the SPD on its "clear vote", and said she looked forward to a "continued co-operation for the good of our country". The Social Democrats will put forward six names - three women and three men - to lead the ministries they will control in the upcoming coalition in the coming days, he said.
The tension within the party over its partnership with Merkel was illustrated by the silence that met news that the "yes"-camp prevailed, prompting Spiegel Online to headline its story "Hardly any rejoicing". That allows her to form a government after five months without one.
DANIELA SCHWARZER: Those actors who may lead their own campaigns to become her successors - they are pretty busy with their new jobs.
To stop the SPD from bolting, Merkel must deliver on those points in the coalition deal that are most dear to the Social Democrats: healthcare reform, and investment in education to meet the challenges of the digital age.
Spahn, 37, a former deputy to hardliner Wolfgang Schaeuble at the finance ministry, has repeatedly slammed Merkel's centrist policies, particularly on immigration. "That gives us the strength for the process of renewal we are embarking upon". Even so, she's begun preparing the CDU for her eventual departure.