A TIRED but plainly relieved Angela Merkel was formally elected the first woman Chancellor of Germany yesterday, the leader of a precarious coalition that many fear will end up tearing itself apart and failing in its mission to reform the country’s sickly economy.

Deputies in the Reichstag building swept those lingering anxieties aside and gave the new Chancellor a standing ovation, relieved that months of confusion and paralysis had at last come to an end.

But opposition politicians were quick to highlight the immense problems awaiting Frau Merkel, the first Chancellor from the former East Germany and the country’s youngest postwar leader.

Certainly Germany’s outgoing leader, Gerhard Schröder, looked as if a weight had been lifted from his shoulders as he handed over his office and staff to the new Chancellor.

In a brief, emotional encounter in the Chancellery the two leaders, former and future, made a kind of peace after the months of often poisonous election rhetoric. Frau Merkel thanked Herr Schröder "for everything you have done for this country".

This brought tears to his eyes. "I wish you the best of luck," the departing chancellor said, his gaze sweeping for the last time over the huge vaulted building. Removal lorries are already shifting Herr Schröder’s borrowed paintings back to state galleries.

Earlier Herr Schröder, who will now set up shop as an international lawyer in Berlin, was one of 397 deputies to cast their vote for Frau Merkel.

She carried the vote, as expected, with a resounding majority of about 200 members of Parliament — her Grand Coalition groups the two biggest parties, the Christian Democrats and Social Democrats, and will be able to dominate the political agenda.

The problem will come from within: 51 deputies from the ranks of the future government secretly voted against Frau Merkel and over time more defections can be expected.

"That shows just how wobbly the foundation of this coalition really is," said Guido Westerwelle, the Free Democrat leader, who is in the Opposition. "I don’t see how it can last more than two years."

The parliamentary vote yesterday capped two months of horse-trading between the two parties, who have been bitter rivals for almost four decades.

No significant government decision has been taken since Chancellor Schröder called the snap election last May and as a result Frau Merkel’s in-tray is brimming over.

Her priority is to create jobs by easing bureaucratic hurdles and plugging the very large budget deficit. Critics say the coalition programme could hamper rather than encourage growth.

Foreign leaders, unsure how German foreign policy will change under Frau Merkel, sent congratulations with coded wishes. President Putin, once a close friend of Herr Schröder — he helped the former chancellor to adopt a Russian daughter — urged Frau Merkel to visit Moscow soon. He is clearly concerned about some of the anti-Kremlin rhetoric coming from Merkel advisers. President Chirac — whom Frau Merkel will visit today — called on the new German leader to launch new Franco-German initiatives in Europe "to continue our joint concerns for a more just and secure world". Although Frau Merkel is against sending German troops to Iraq, she does not want to be boxed into an anti-American corner by President Chirac.

Expectations were piling up on Frau Merkel yesterday — not only from abroad but also from economic and social reformers. Some of the loudest demands came from feminists who are urging her, as the first female leader of Germany, to spearhead a revolution on behalf of women. One of Frau Merkel’s most enthusiastic supporters, the veteran feminist Alice Schwarzer, said that she should "not forget her femin inity"; most of her votes came from women in the September general election.

Despite the tasks ahead, the tension seemed to melt away from Frau Merkel during a day of ceremonial transition.

The parliamentary vote and swearing in of one of the most powerful European leaders was a flat and understated occasion. Neither the German system nor the personaility of Frau Merkel lend themselves to theatrical flair.

"Dr Merkel would probably have preferred to have done the handover online," one of her close associates said.

Certainly Germany will have to get used to being led by a politician with no sense of ceremony — she was text messaging on her mobile minutes before being declared Chancellor — and little personal vanity.

POLICIES TO RESTORE GERMANY

BUDGET: Bring budget deficit into line with EU’s 3 per cent of GDP cap by 2007; said to require a minimum of €35 billion in cuts and new revenue

TAX: VAT to rise 3 percentage points, to 19 per cent, in 2007; reduction in tax incentives/exemptions from Jan 2006, such as scrapping tax breaks on new home purchases

ECONOMY: €25 billion to be invested in research and infrastructure. Small and medium-sized companies boosted by tax breaks and simpler rules on writing down value of plant and equipment against tax

ENERGY: Continue gradual decommissioning of nuclear power stations by 2020. Aim to generate 12.5 per cent of total electricity output from renewable sources by 2010, 20 per cent by 2020

LABOUR: Job protection measures to be reduced; probationary period for new recruits extended to 24 months from present six. Long-term jobless benefits in eastern Germany to be raised to western level

PENSIONS: Retirement age to rise to 67 from 2012 to 2035. Benefits to be frozen for four years, contributions to rise 0.4 percentage points, to 19.9 per cent of salary, from 2007

FOREIGN POLICY:

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