Merkel back to work after Berlin Wall party
In her first major policy her re-election, Merkel said the German economy is still in its worst post-war slump and that there is work ahead.Berlin -- Fresh from the euphoria of celebrations for the 20th anniversary of the fall of the Berlin Wall, Chancellor Angela Merkel pulled no punches Tuesday as she outlined the hefty challenges facing Germany.
In her first major policy speech since winning a second four-year term in elections in September, Merkel, 55, said that despite tentative signs of recovery, the economy, Europe's biggest, was still in its worst post-war slump.
"The problems are going to get bigger before the situation improves," Merkel told the German parliament as she outlined a 24-billion-euro (36-billion-dollar) package of tax cuts to get the economy moving.
"As a consequence of the crisis, Germany now finds itself in the worse recession in its history. The economic contraction is five times worse than the previously worst slump in the early 1970s," added the chancellor.
"There are the first faint signs of recovery but large parts of industrial production are still well under their pre-crisis levels. Important banks are still dependent on the state, the financial system is still far from capable of supporting the German economy, and in particular a recovery."
Export-dependent Germany as a whole has been hit hard by the global recession, pushing it into its steepest slump in six decades, leaving the country's public finances and its reputation for fiscal rectitude in tatters.
The government expects output to shrink by five percent this year before recovering only slightly in 2010, but Merkel said unemployment was set to rise next year.
The answer of Merkel's conservatives and their new pro-business coalition partners is a raft of tax cuts, even though this will further increase Germany's ballooning debt pile and leave future generations to pick up the tab.
Other challenges include the need to reform Germany's creaking health care system and to bolster public support for the country's unpopular mission in Afghanistan, where it currently has around 4,300 troops.
On Monday, Merkel and leaders past and present feted 20 years to the day since the authorities in communist East Germany gave in to immense public pressure and threw open the border on the evening of November 9, 1989.
Just eleven months later, West and East Germany became one country again, as other communist regimes across Eastern and Central Europe collapsed. Soon even the Soviet Union was no more.
The highlight of Monday's commemorations was a procession of leaders through the historic Brandenburg Gate that was blocked off to West Berliners for the 28 years of the wall's existence and which is now a symbol of German unity.
Merkel, Russian President Dmitry Medvedev, British Prime Minister Gordon Brown and French President Nicolas Sarkozy gave rousing speeches and a surprise video address by US President Barack Obama was beamed in to cheering crowds.
A thousand giant dominoes along the former path of the hated concrete barrier were toppled before the night sky exploded with fireworks and live music entertained the more than 100,000 rain-soaked revellers.