He will lead the first centre-left government in Germany for 16 years and the first with Green Party ministers.

Mr Schröder says he will usher in a new dawn for German politics and a government that will bring together east and west. He has said his main task will be to fight record unemployment.

But the BBC Bonn correspondent, Caroline Wyatt, says there is apprehension among German bankers that the new government could apply political pressure to achieve its goal.

Germany's central bankers have already rejected calls from the new finance minister, Oskar Lafontaine, for cuts in interest rates.

Highest honour

In Monday's session, the parliament appointed Social Democrat Wolfgang Thierse as Speaker. He is the first holder of the office from the former communist East Germany.

President Roman Herzog has meanwhile conferred the country's highest honour, the Grand Cross (Special Design) of the Order of Merit, on the outgoing Chancellor Helmut Kohl.

The award had previously been bestowed only on the country's first postwar Chancellor, Konrad Adenauer.

The opening of the new parliament follows the approval of a coalition plan by the Social Democratic Party (SPD) at a special party conference in Bonn over the weekend.

"The new government stands for innovation and justice," Mr Schröder told delegates.

"We are going to give Germany a new beginning, first in Bonn, then in Berlin," he said, referring to next year's government move.

Quick agreement

The coalition agreement with the Greens - a party with roots in the ecology and anti-Nato movements of the 1970s and 1980s - was negotiated in record time after Mr Schröder's election triumph over Chancellor Helmut Kohl four weeks ago.

The deal gives the coalition a 21-seat majority in the Bundestag, the lower house of parliament.

The government programme includes $6bn-worth of tax cuts over the next four years, and higher taxes on petrol.

The Greens approved the programme on Saturday, despite misgivings over some of the compromises made by the party leadership.

The Greens failed to persuade the SPD to loosen Germany's laws governing those seeking political asylum.

They also failed to push through heavy taxes on energy use.