"I am happy to say that we have reached an agreement," OVP leader Sebastian Kurz told reporters on Wednesday. With this deal, he is set to return to power as chancellor.
At 33, Kurz would become the world's youngest sitting head of government over Finland's Sanna Marin, 34, reports Efe news.
The conservative leader said that the negotiating teams would still work to clarify details so that the government agreement could be presented on Thursday.
Kurz, who appeared alongside the head of the Greens, Werner Kogler, said that the negotiation, which has lasted seven weeks, "wasn't easy" because the two parties are very different in their internal orientations.
However, he said that an "excellent result" had been achieved and that the two parties had "reconciled the best of both worlds".
The two parties will keep their main election promises: the Greens' to stop climate change, and the OVP to lower taxes and fight against illegal immigration, he said.
"It's possible to reduce the tax burden and at the same time make the tax system more ecological. It's possible to protect the climate and the borders," Kurz concluded.
Although the agreement must be confirmed by the parties' delegates this weekend, Kogler predicted that the new government will take office next week.
The OVP is expected to take over 10 Ministries, including important ones such as the Interior, Foreign Affairs, Finance and European Affairs, while the official announcement is still forthcoming.
The Defence Department will also be in the hands of the ÖVP, and for the first time led by a woman.
Kogler will be the vice-chancellor and the Greens will oversee a "super ministry" responsible for the environment and infrastructure which includes energy, technology and innovation, with an agenda oriented towards the fight against climate change.
They will also run both the justice and the Social Affairs and Health Ministries.
( With inputs from IANS )