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Last Updated: Saturday, 12 November 2005, 13:50 GMT
Merkel defends German reform plan
Angela Merkel
Angela Merkel has a raft of tough measures for Germany
Germany's Chancellor-designate Angela Merkel has called on Germans to make sacrifices to help reverse the economy's "downward trend".

Unveiling the details of a coalition agreement, Mrs Merkel said Germans would have to tighten their belts.

The deal was clinched on Friday, after weeks of painstaking negotiations following inconclusive elections.

Mrs Merkel's Christian Democrats (CDU) and the Social Democrats (SPD) are to form a power-sharing government.

Both parties will hold conferences next week to ratify the accord before the coalition goes to a vote in parliament on 22 November.

It will be the country's first "grand coalition" between the two main parties since the 1960s.

Tough measures

Mrs Merkel said she wanted to reduce unemployment and increase economic growth.

"Our aim is to stop this downward trend and reverse it," Mrs Merkel said.

"We want to give people hope of having jobs.

"I am absolutely certain - I know - that the success of this coalition will be measured by the question: Are there more jobs?"

1. Christian Democrats/Christian Social Union (CDU/CSU): 226
2. Social Democrats (SPD): 222
3. Free Democrats (FDP): 61
4. Left Party: 54
5. Greens: 51
Among the measures are a 3% rise in VAT, higher income tax for top earners, and no protection from dismissal for the first two years in employment.

Pensions are being frozen, subsidies for first-time home owners are being scrapped and for the first time since the war, the budget deficit will not adhere to Germany's constitutional rules.

The conservative leader also said she wanted to treat smaller members of the European Union more fairly, and to maintain strong ties with neighbouring Poland and France.

And she said Germany wanted strong ties with Turkey - having in the past argued against Turkey's full membership of the European Union.

The 18 September elections left neither the centre-left SPD nor the conservative CDU and its Bavarian sister party, the CSU, with a majority in the Bundestag, the lower house of parliament.

The BBC's Ray Furlong in Berlin says there is not much optimism in Germany that this coalition government will be able to address the key problem of mass unemployment.

Leaked details of the coalition agreement drew withering criticism from industry leaders, opposition politicians and trade unions, he reports.

There are also questions about whether an alliance of left and right can stick together.

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