Merkel says Germans better off since she took power

BERLIN, Nov 22 (Reuters) Angela Merkel said today a thriving economy proved Germany was better off one year after she took power as chancellor, but opposition parties accused her of presiding over a ''lost year'' of failed reforms.

Defending her first year in office before parliament, Merkel pointed to steps taken to raise the retirement age, introduce benefits for new parents, reform the federal system and send peacekeepers on a ''historic'' mission to Lebanon.

She said the economy was poised to grow at its best rate since 2000 and that unemployment had declined steadily on her watch, helping new borrowing sink to its lowest level since German reunification in 1990.

''Is Germany better off than it was a year ago?'' she asked a packed Bundestag a year after she succeeded Gerhard Schroeder to become the country's first woman chancellor and the only leader from the former communist east.

''No one can dispute the fact that after years of stagnation, the country is recovering again.'' But politicians from the opposition Free Democrats (FDP), Greens and Left Party all questioned whether Merkel's ''grand coalition'' was responsible for an economic rebound whose strength has surprised even the most optimistic forecasters.

Rainer Bruederle, deputy head of the FDP, attacked Merkel for pushing through the biggest tax rise in post-war history and bungling reforms of healthcare and the corporate tax regime.

''The recovery is not a success of this government. Its first year is largely a lost year,'' he told the chamber.

SHAKEN NOT STIRRED After 12 months of ''grand coalition'' politics, Bruederle said, Germans were beginning to feel like fictional spy James Bond's famed Martini cocktail -- shaken but not stirred.

The debate in parliament, which coincided with the government's presentation of its 2007 budget, came as a new poll showed support for Merkel's conservatives and their Social Democrat (SPD) coalition partners hovering at year lows.

The survey by Forsa for Stern magazine put backing for both parties at 29 per cent. As recently as April, when Merkel was enjoying record popularity levels for a German chancellor, support for her conservatives stood at 42 per cent.

After a strong start which saw her broker an EU budget deal within weeks of taking office, repair relations with Washington and set a bold course for German foreign policy by sending troops to Congo and Lebanon, Merkel has come under sharp criticism at home for her reform drive.

Likened to Britain's reformist ''Iron Lady'' Prime Minister Margaret Thatcher before she took office, Merkel has been forced into messy policy compromises by centre-left SPD partners with whom she was forced to govern after her narrow election victory.

A decision to raise sales tax next year while reducing levies on German firms has been particularly controversial. She has won little credit for an economy which is set to expand at around 2.5 per cent this year and a jobless rate which has dipped a full percentage point to 10.4 per cent in her first year.

Merkel is hoping to regain momentum when Germany assumes the dual presidencies of the European Union and Group of Eight (G8) industrialised nations next year. She has vowed to revive the EU's constitution, rejected by voters in France and the Netherlands last year.

Reuters MIR DB1855