Both chambers of Germany's parliament approved a hotly contested welfare package, ending a deadlock between Chancellor Angela Merkel's governing coalition and the opposition over amending the rate of social aid.
In 2011, welfare payments will increase by 5 euros a month
The Bundesrat, or upper house of parliament - which had previously rejected a raise in welfare rates for the long-term unemployed as too limited - agreed to a cross-party deal in which both sides were able to save face.
Basic benefits for up to 4.7 million long-term unemployed will rise to 364 euros ($495) monthly per adult - an increase of 5 euros - followed by a further 3-euro hike from January 2012.
Welfare recipients in Germany also get rent supplements, extra child allowances, healthcare grants and a range of other help. Most have little prospect of ever returning to Germany's 40-million-strong working population.
The deal includes a three-year annual 400-million-euro top-up for an education fund for children from families on welfare, as well as legislation setting a minimum wage for some sectors of the economy.
The government needed the approval of the opposition since it no longer has a majority in the Bundesrat, which is made up of representatives of the 16 federal states.
In February 2010, Germany's Constitutional Court ruled that the existing welfare payments were not properly calculated. It set a deadline of the end of last year for payments to be made on a new basis.
However, that deadline was missed after the government could not get the agreement of the opposition on a new deal. While the government suggested a five-euro monthly increase, the opposition wanted six, along with a raft of other welfare measures.
The agreement clears a messy point of contention from Merkel's agenda at the start of a bumper election year, in which her Christian Democrats (CDU) have already had one humiliating defeat in Hamburg and face six further state elections.
The bill is now free to be signed into law by President Christian Wulff.
Author: Gabriel Borrud (dpa, dapd)
Editor: Toma Tasovac