Merkel vows to restore Germany's economy

German Chancellor Angela Merkel promised Wednesday to re-energize Germany's sluggish economy and restore its standing as one of the fastest growing in Europe.

“We want to create the conditions for Germany once again to stand among the first three in Europe in 10 years,” Ms. Merkel said in her first speech to parliament as chancellor.

Ms. Merkel's “grand coalition” with predecessor Gerhard Schroeder's centre-left Social Democrats says its main priority is to boost chronically slow growth and tackle 11 per cent unemployment.

“One thing is clear: we all bear responsibility for the fact that we are not using our opportunities to the full,” Ms. Merkel, Germany's first female chancellor, said.

Ms. Merkel thanked Mr. Schroeder for launching efforts to trim the welfare state and reform the labour market.

However, “we have the highest number of long-term unemployed that the Federal Republic has ever known,” she said, adding that her government will eventually be judged on its performance in creating jobs.

The new government is also trying to shore up creaking public finances and tame Germany's large budget deficit.

It agreed Tuesday to scrap subsidies for home buyers as part of the drive to close the budget gap. Last week, the cabinet made a start on limiting tax breaks.

Still, the coalition's platform has drawn widespread criticism, notably for plans to raise the value-added tax in 2007 and use part of the proceeds to shore up the budget.

In her speech, Ms. Merkel also vowed that her government will “not let ourselves be blackmailed” by those who kidnapped a German archaeologist in Iraq.

Germany was strongly opposed to the U.S.-led invasion of Iraq and has refused to send troops since, but has been training Iraqi police and military outside the country. Ms. Merkel said the kidnapping would not affect Germany's policy, the AP reports.

V.Y.