Grand Coalition Year One

Germany is currently enjoying the greatest economic growth since 2000 and has seen a fall in its unemployment rate to just over 10 percent.

"After years of stagnation, the country is on the upswing," Merkel said during a general debate on the budget in Berlin.

The chancellor also pointed to increasing tax revenue as a sign of the coalition's "effective" politics.

"I think they are good results and we can be happy with them."

Merkel said that despite the 3 percent increase in sales tax, which is to be introduced on Jan. 1, there was no evidence of weaker economic growth.

However, many business analysts expect the tax increase to put the brakes on already weak consumer spending. And the business confidence index, which reflects expectations for the German economy, fell again in November to its lowest point in seven years.

Year too short

Looking back at her first year as chancellor, Merkel said it was a very short period "to prepare a land for the future."

But she said the coalition had enjoyed many successes in this time, such as a reform of the healthcare system, changes to inheritance tax, the introduction of a payment for new parents, and the participation of German soldiers in peacekeeping missions in Lebanon and Afghanistan.

Continuing conflicts with the Social Democrats

The grand coalition of Social Democrats (SPD) and Merkel's Christian Democrats took office in November 2005 more than two months after a general election gave neither of Germany's two biggest parties a clear mandate to form a majority government.

The SPD's parliamentary head, Peter Struck, admitted that after a year, the working relationship between the two coalition partners was difficult at times, but he emphasized there was a "relationship of trust."

"Grand coalitions also mean making grand compromises," he said, "but differences are surmountable when there is trust between the negotiators."

Struck has been attacked by the Christian Democrats in recent weeks because he has, amongst other things, criticized Angela Merkel's working methods.

Opposition says year wasted

The acting chairman of the opposition Free Democrats, Rainer Brüderle, said the first year of the coalition "was a squandered year."

He said Germany's economic upsurge was not driven by the government but rather by German industry and business. Factors such as increased exports, the World Cup and the hot summer had all contributed to the recovery, he added.

"The federal government is neither the father nor the mother of the economic upswing," Brüderle said.

The opposition Left Party accused the chancellor of ignoring the development needs of formerly communist eastern Germany.