– POSTPONING ECONOMIC MELTDOWN IN GERMANY

Merkel aims to dispel gloom over economy
By Bertrand Benoit in Berlin

Angela Merkel yesterday called for a "second reconstruction" of Germany, recalling the efforts deployed to rebuild war-torn Germany in the 1950s and reconstruct the former Communist east after reunification.

"This land has great possibilities, Germany is full of opportunities," Ms Merkel said in her eagerly awaited first speech to parliament as chancellor. "I am looking forward to unleashing this dormant energy."

The address marked Ms Merkel's first attempt to dispel the pervasive gloom of her predecessor's painful economic reforms, which economists say are partly responsible for Germans' stubborn reluctance to spend and eagerness to save.

In her effort to stir the nation, she appealed to powerful historical imagery such as the reunification, which she experienced at close range as a 35-year-old East Berliner.

"I had banked on many things, but not on receiving the gift of freedom before my retirement," she said. "Once you have been surprised in such a positive way, a lot seems possible. Let us then surprise you all with what we can achieve."

Infused with rosy optimism, her 90-minute Regierungserklärung, the lengthy speech that traditionally accompanies the start of a new government, offered a sharp contrast to the blood-and-tears rhetoric of Gerhard Schröder, the outgoing chancellor.

She also called for a new pragmatism in politics, painting the left-right government that emerged from the inconclusive September election as a unique opportunity to transcend ideological cleavages rather than an awkward marriage of circumstances.

Ms Merkel's determination to rise above party lines two months after one of the most divisive electoral campaigns in Germany's postwar history drew applause from the Christian and Social Democratic benches.

She graciously bowed to Mr. Schröder, her opponent during the campaign, and praised his "courage and decisiveness" in pushing through the unpopular steps that had paved the way for future reforms of Germany's social security system.

She also borrowed a famous 1969 quotation from Willy Brandt, Germany's first Social Democratic chancellor. His "let us dare more democracy" became "let us dare more freedom", in an effort to curry cross-party enthusiasm for her economically liberal principles.

"Not a great speech, but not bad at all," said one SPD member of parliament. "She has fulfilled my expectations."

The collegiate tone of Ms Merkel's speech echoed similar efforts by Franz Müntefering, the former SPD chairman and now vice-chancellor, to put the election campaign behind them.

"She has a talent for analyzing problems in a timely manner," Mr. Müntefering told the Die Zeit weekly in an interview published yesterday. "She will try to solve them informally and she will not let it come to a clash."

Ms Merkel's decision to emphasize cross-party harmony in her first big parliamentary address meant she had little room to unveil initiatives.

The policy section of the speech largely drew from the 190-page coalition contract, the joint programme signed by the two parties, which will act both as the grand coalition's prenuptial agreement and as its policy roadmap for the next four years.

She rebuffed criticism, mainly from business and economists, that the deal was light on ambitious structural reforms of the labor market and social security systems and excessively reliant on tax rises in its plans to fix the country's unbalanced budget.

Prudent fiscal policy, she said, was a "moral obligation" towards future generations. She also staged an energetic defense of her government's gradualist approach to reform.

"Many will say, 'This government takes a lot of small steps but not one decisive one.' And I reply: 'Yes. That is precisely what we are doing. Because this is the modern way to do things.'"