Merkel Defiant Over Iraq Hostage

The fate of the German woman being held captive in Iraq today overshadowed Angela Merkel's first speech to the German parliament as chancellor.

Ms Merkel told German MPs that the country's parliament "will not let itself be pressured" by the kidnappers of Susanne Osthoff, an Arabic-speaking archaeologist.

A video of Ms Osthoff was this week obtained by a German television station. Her captors have threatened to kill her and her driver if Berlin does not break its ties with the Iraqi government.

Ms Merkel, who also set out plans for economic reform and appeared cool on Turkish EU membership, declared terrorism a threat to core values.

"It is directed at everything that is important to us ... at the core of our civilisation," she told the parliament. "It is directed against our entire value system. Against freedom, tolerance and the respect of human dignity, democracy and the rule of law."

Ms Osthoff's abduction presents Ms Merkel with a dilemma. If she pays a ransom - as France and Italy are suspected to have done in previous hostage crises - she risks facing accusations that she has given in to terrorism.

It could also jeopardise efforts to repair relations with the US, which Ms Merkel today pledged would be "honest, open and trusting". She said Europe should be a "self-confident partner" to the US.

Speaking about Turkish membership of the EU - which is backed by Washington - Ms Merkel repeated the scepticism of her days in opposition, when the coalition government of Gerhard Schröder supported Turkish accession.

She said Turkey was not guaranteed entry and that the membership negotiations that began on October 3 were "a process with an open end ... whose outcome cannot be guaranteed in advance".

Ms Merkel echoed her preference for a privileged relationship between Brussels and Ankara, stopping short of full membership, and said any country hoping to join the EU "must fulfil all the conditions" without exception.

Turkey could join the EU in between 10 and 15 years, but the Croatian, Romanian and Bulgarian membership processes may be completed by 2007 or 2009. "Europe is unimaginable without the support and trust of the citizens," she told the parliament.

Ms Merkel said economic issues were her government's greatest priority. Germany's first female chancellor, who heads a coalition of the rival Christian Democrats and Social Democrats, faces the challenge of holding her administration together while cutting unemployment and boosting growth.

She conceded a "government of action will have to take some blows", and offered a bleak assessment of the country's present economic state.

"Our growth hasn't picked up in years," she admitted. "Our debt has risen to alarming levels. The new [former East German] states stopped catching up years ago."

She insisted, however, that Germany had opportunities if the two halves of the coalition worked together. "We will show one thing ... we have major potential in our country," she said. "Germany is full of opportunities - inside and outside."

The governing parties have agreed to cut the German budget deficit to within EU limits by 2007, mainly through an increase in sales tax.

However, Ms Merkel's first week as chancellor has been dominated by foreign policy issues. She said she wanted a swift response from the US to European concerns that the CIA was operating secret prisons and rendition flights for terror detainees within EU borders.

She said comments from the Iranian president, who said Israel should be "wiped off the map" were "absolutely unacceptable". Germany and its EU allies France and Britain are in dispute with Tehran over its nuclear programme.