The Chancellor said about Europe: "Germany is needed as an anchor of stability and engine of growth."

Merkel characterised the situation in Germany at present as robust. Low unemployment and a record number of earners have meant perceptible wage increases and pension contribution rate reductions for jobholders. The Federal Government remains committed to a solid budgetary policy and decreased debt ratio, said the Chancellor. For decades, the state has lived beyond its means "and we are going to put a stop to that." Sound budgets and investment and growth promotion policies are not diametrical opposites, she added.

The 2015 Federal Budget provides for total expenditures amounting to 299.1 billion euros. That is 400 million euros less than foreseen by the government draft. 26.45 billion euros are designated for investments.

Central points are:

• The Federal Government is relieving the burden on federal states and municipalities by six billion euros so that they can use the saved costs to better fund nurseries, day-care centres, schools and universities;
• The research sector will receive an additional three billion euros, mainly for the Pact for Research and Innovation and Excellence Initiative programmes;
• The Federal Government will provide an additional five billion euros for investments in roads, railways and waterways. Transport investments will increase on the whole to nearly 12 billion euros by 2017;
• Urban development funding, recently raised to 700 million euros yearly, will stay high in coming years as well;
• Ministries will be allocated an additional total two billion euros for development cooperation.

Government Must Create Confidence

Social market economy must combine sound financial policies with good economic policies, said Merkel. Government must create confidence in reliable framework and social conditions. Germany, she said, is one of the world's most competitive countries. "But we are not content to rest on our laurels. Our country must remain innovative." Bureaucratic encumbrances on business should be lessened.

She designated as key areas transport and infrastructure, managing the transition to alternative sources of energy, climate protection, the digital revolution, as well as research and education.

To further promote growth, the Federal Government will provide an additional ten billion euros for investments in the period from 2016 to 2018. Decisions on allocation of these funds will be made when key priorities of the 2016 budget are set.

A Way Out of the National Debt Crisis

The way out of the European national debt crisis, said Merkel, will be long and anything but easy. Nevertheless, she said that Europe is on course. What matters is adhering to the Stability and Growth Pact. Recent resolutions adopted by the EU Commission on budgetary controls show that Europe is "by and large on the right track." The Federal Government supports the EU Commission in "stringent examination of budgetary planning of the Member States." The development of Europe is very closely monitored throughout the world. "The reliability of common rules of the Growth Pact is of great importance for bolstering confidence in the entire euro area." Investments, sustainable growth and sound budgetary management go hand in hand, said the Chancellor, while praising Ireland and Portugal as positive examples.

Merkel backed the 315-billion-euro investment package of the EU Commission. At the same time, she called for expenditures mainly for future-oriented projects and further structural reforms.

With regard to the G20 Summit in Australia, Merkel said that progress was achieved in regulating banks operating internationally. She called it a success that taxpayers no longer have to contribute to paying costs. However, the shadow banks have yet to be regulated.

Giving Priority to Free Trade Agreements

Free trade, said the Chancellor, is a major determinant of economic growth. She pointed out the pace of economic development in the Asia-Pacific area. "The world is not waiting for Europe," she cautioned with reference to TTIP free trade agreement negotiations. Europe would miss opportunities if did not open the door to the TTIP free trade agreement with the United States.

Europe would also be missing the chance to continue to take part in making decisions on standards and regulations worldwide. For this reason, said Merkel, the TTIP agreement must have "absolute priority."

Diplomatic Way Out of the Ukraine Crisis

On the Ukraine situation, Merkel said that an "either-or decision" for Russia's neighbouring countries was out of the question. Nothing justified the Crimean annexation, much less the direct or indirect Russian participation in fighting in eastern Ukraine. Russia, she added, was disregarding the territorial integrity of Ukraine and violating international law. Consequently, economic sanctions against Moscow remain unavoidable. "We need to be patient and to persevere in our efforts to resolve the crisis," added Merkel. Ukraine must be in a position to decide on its own future. "What is imperative is the strength of the law, not the law of the stronger," she said.

Combating ISIS Terrorism

The Federal Chancellor reaffirmed the German contribution to fighting the "Islamic State" terrorist militia. The militia is "one of the most brutal threats to the lives of people in Syria and Iraq," said Merkel. Common efforts of the global community are needed.

Assistance to Refugees

Owing to the rising numbers of refugees, said Merkel, the world is facing great challenges. Its causes must first be dealt with in the refugees' own countries. She said the probable number of asylum seekers finding refuge in Germany this year would number roughly 200,000. Merkel pledged government support to local authorities.

Energy Transition Remains a Major Challenge

By the amendment to the Renewable Energy Law in 2014, the Federal Government created important framework conditions for the restructuring and expansion of Germany's energy supply, said Merkel. She emphasised that the goal of working out the cost dynamics of the transition to alternative energy sources remained a long-term undertaking. What matters, she said, is not just securing energy supply but also making sure it is affordable.

As a result, said Merkel, the energy transition is one of the most important investments in the country. Further grid expansion must be clarified and must be accelerated. She added that the pro and contra of a capacity market must also be discussed; moreover, the energy transition must be brought into line with climate protection.

Mastering the Digital Revolution

Regarding the digital revolution, Merkel said that it is important to "remain on course and seize opportunities of digitization." This, she added, would require European regulations such as the General Data Protection Regulation. In addition, sound framework conditions should be created to support telecommunication and network companies. She said that the evolution of industry to Industry 4.0 would impose critically important future tasks.

Expansion of Infrastructure

Regarding future infrastructure, the Chancellor assigned an important role to the expansion and maintenance of transport networks. In the current legislative period, an additional five billion euros is available for transport investments.

German G7 Presidency

The German G7 Presidency will greatly influence the work of the Federal Government next year, said the Chancellor. Germany will single out topics of pivotal importance for the "future of one world." The summit meeting of the G7 heads of state and government is to take place on 7 and 8 June 2015.

Key areas are:

• New development goals—the "Post-2015 Development Agenda";
• Eradication of absolute poverty by 2030;
• Protection of oceans and the climate;
• Fighting the spread of antibiotic resistance and neglected tropical diseases;
• Empowerment of women regarding self-employment and vocational training;
• Stricter adherence to international environmental standards in global trade.

The Chancellor added that the Federal Government would seek dialogue with civil society and would regularly inform the Bundestag about the G7 Summit.  The political will is required "to assume responsibility for our values and interests, for peace and freedom."