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Merkel Addresses Parliament

'Economic Crisis is Germany's Biggest Challenge Since Reunification'

Speaking in her first address to parliament since being sworn in for a second term two weeks ago, German Chancellor Angela Merkel said leading Germany back to growth is her top priority but warned that the nation faces a difficult 2010 as well as its biggest economic challenge since its 1990 reunification.

Chancellor Angela Merkel on Tuesday outlined a five-point government program for the next four year and said restoring the German economy to growth was her top priority -- but that recovering from a downturn represented the biggest challenge since the country's reunification in 1990.

In her first government statement to parliament since she was sworn in for a second term two weeks ago, Merkel warned Germans that they face a tough year in 2010 even though the economy was no longer technically in recession.

"The full force of the economic crisis will hit us next year," she said. "The problems will become bigger before things can get better."

"Germany faces a challenge the likes of which it hasn't seen since reunification," Merkel added, referring to the restructuring of the former communist eastern German economy, which has so far cost more than €1 trillion ($1.5 trillion) and still hasn't been completed.

The worldwide crisis was so deep that it would lead to a fundamental reshuffling among global competitors and fresh rivalry for market share, raw materials, investments and human capital in which established strengths could not be taken for granted any more, she warned.

"Creating growth is the goal of our government. The central question is whether Germany will emerge stronger from this recession. I want to lead Germany to new strength," Merkel said.

On Monday, Merkel's cabinet had agreed to Germany's third economic stimulus program in a year in the form of a "growth acceleration law", an €8.5 billion package of tax cuts for companies, hotel owners and company heirs as well as increased child benefits.

Merkel plans a total of €22 billion in tax cuts next year and is planning further relief in 2011, even though Germany's federal budget deficit is projected to balloon to €86 billion in 2010. She rejected opposition calls for spending cuts to tackle the growing government debt, saying this would choke off the tentative recovery.

Apart from its measures aimed at overcoming the recession, her plan includes improving public services, finding solutions for the ageing of the population, pushing for global accords to combat climate change and tackling risks to global security.

She said a failure of next month's global climate summit in Copenhagen would throw efforts to combat climate change back by years. "We can't allow that to happen," she added, urging the US, China and India to make stronger efforts to help reach a deal.

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