Chancellor Angela Merkel's government says it has reached a deal with Germany's 16 states to secure the timely ratification of the European Union's new treaty enshrining fiscal discipline.

The agreement struck during talks at Berlin's Chancellery on Sunday paves the way for a vote by both houses of parliament on the legislation Friday.

Merkel's government needs the opposition's and the states' support to garner the necessary two-thirds majority for the treaty's ratification. To win over the opposition, Merkel has agreed to push for the introduction of a financial transaction tax and measures to promote growth in Europe.

Saxony-Anhalt state governor Reiner Haseloff said the government agreed, among other steps, to grant the states more money for child care centers and public transportation projects. He did not specify an amount.