Impact of global financial crisis may get worse: Merkel

German Chancellor Angela Merkel has warned the nation of greater economic difficulties in the New Year, saying the country is not out of the woods yet and the impact of the global financial crisis may even get worse in the coming months.

"We cannot expect that the economic downturn will soon be over. Certain things may even get worse in the New Year before getting better again," she said in a radio and TV address to the nation. "2010 will decide how we come out of the crisis."

However, the Chancellor struck a note of optimism, saying Germany has good reasons to hope that it will efficiently manage the worst financial crisis in its post-war history.

To achieve this goal, the government will take immediate steps to introduce new rules for financial markets. The government and business will work together to protect existing jobs and ensure sufficient credit for industry, in particular for the small and medium-level enterprises, Merkel said.

She also said that the economic crisis should not be used as an excuse to ignore other challenges like climate change and vowed to strive for a global solution to combat the problem in spite of the failure of the UN climate summit in Copenhagen to produce a binding agreement to reduce emissions.

"In Copenhagen, we witnessed goodwill and readiness to take action, but there were also many hesitations...," Merkel said. "It will be a mistake to be discouraged by that."

She offered Germany's readiness to go beyond the European Union's target for reducing carbon dioxide emissions. Germany has also earmarked aid funds to support poor nations to cope with the consequences of climate change, she said.