GERMANY: Chancellor-designate Angela Merkel has said cutting Germany's budget deficit and reducing mass unemployment will be her policy priorities in government.
Her pledge comes as talks on forming a grand coalition with the Social Democrats (SPD), expected to last at least a month, begin in Berlin this morning.
"Unemployment has to drop in this legislature period. Decisive for this country will be the development of the labour market," Dr Merkel told Der Spiegel.
"We are obliged to succeed in budget consolidation. The inventors of the stability pact will themselves be measured against it. This will be hard but we can manage it."
Labour policy and the new government's finances will not be in CDU hands, however, but with the SPD. The future finance minister Peer Steinbrück, from the right wing of the party and respected in the CDU, has signalled huge budget cutbacks to slash the €1.5 billion deficit.
"I take very seriously the signals from Brussels and I recommend everyone not to write them off as verbal tintinnabulation," said Mr Steinbrück.
He has ruled out any further tax cuts in the near future and is considering selling off Germany's 12,000-km autobahn network, valued recently at €213 billion.
The SPD has already produced a €14.5 billion savings plan to bring new borrowing below the Stability Pact ceiling of 3 per cent of gross domestic product by 2007.
The coalition talks will be the greatest test yet for Dr Merkel, whose authority as chancellor of a grand coalition has already been questioned by Bavarian state premier Edmund Stoiber.
"The chancellor of course has a special weight but whether this government sees itself as a unit will be decisive," he said in an interview yesterday.
Dr Merkel hit back against doubters in her own ranks, saying: "Cabinet discipline applies to everyone."