Dec 17 - Angela Merkel has been re-elected by parliament as German Chancellor. As she begins her third term, the German economy continues to look good, but as Joanna Partridge reports she does have challenges ahead.
Finally clinching a rare third term. Angela Merkel was elected German chancellor again after a vote in the lower house of parliament. Almost three months after the election, her new grand coalition can now get to work. They're in a position that would be envied by all other European governments - economically at least. The country's investor sentiment survey rose far more than expected in December, hitting the highest level in over 7 years. Robert Parker from Credit Suisse believes the German economy may grow by 2% in 2014. SOUNDBITE: Robert Parker, Credit Suisse, saying (English): "That will I think be associated with an improvement in consumption in Germany and an improvement in investment spending. And obviously one has to emphasise in the case of Germany, in contrast to many other European countries, that unemployment is actually very low." But that's not to say Merkel's Christian Democrats and her partners the Social Democrats are in for an easy ride. They have to implement the national minimum wage, which the SPD fought hard for during coalition negotiations. One of the government's top priorities will be energy. Germany is going to switch off nuclear power by 2022. The complex renewable energy law needs to be reformed - it's sent costs for consumers soaring due to generous incentives for solar and wind power. SPD Chairman Sigmar Gabriel will lead the ministry responsible for the economy and energy policy. He faces a delicate balancing act, reducing incentives for renewables to help industry, while ensuring investment doesn't grind to a halt. Wolfgang Schaeuble is staying on as finance minister. And Merkel's unlikely to change her stance on austerity. Germany could still be hurt by its neighbours' problems. SOUNDBITE: Robert Parker, Credit Suisse, saying (English): "Economic indicators in France are looking I think quite worrying, and then the second concern is although I think that the dollar will recover against the euro from current levels, the risk is that I may be wrong and the euro stays at current levels. In which case the euro north of 1.35 against the US dollar is not positive for the German export industry." Merkel's only the third post-war Chancellor to gain a third term. While she has kept the ship steady during the euro zone crisis, some analysts say her name isn't linked to any large projects. During the next four years, she'll be looking to create a legacy, at home and abroad.