Hours ahead of a two-day EU summit in Brussels, Chancellor Angela Merkel addressed the Bundestag in what was her last face-off in parliament with Social Democratic Party (SPD) chancellor candidate Peer Steinbrück ahead of the September 22 election.

In her speech, Merkel stressed the importance of strengthening European growth, "growth and fiscal consolidation are not mutually exclusive - in fact, they depend on each other," Merkel said.

Merkel also called for a settlement of the disputes over the medium term budget of the EU. However, shortly after her speech, the European Commision President Jose Manuel Barroso announed a political deal on the hotly contested EU budget had been made.

During the two-day summit in Brussels, leaders are set to address the social effects of the euro crisis, especially unemployment. Six billion euros ($7.8 billion) are to be set aside to fight youth unemployment, a much smaller amount than previously intended.

After Merkel's speech, SPD chancellor candidate Steinbrück addressed the Bundestag, drawing an enthusiastic response from his party.

Steinbrück criticized Merkel and her ruling coalition, claiming them responsible for the high unemployment in the EU. “The youth unemployment, you're talking about here and the high overall unemployment, Ms. Chancellor is a direct result of the completely one-sided austerity that you have operated in Europe."

He accused the chancellor of failure down the line. “And the vicious cycle of savings, growth slumps, higher unemployment, higher youth unemployment and greater difficulties to finance the deficits due to the revenue slump, this vicious circle is unbroken.”

Earlier this week Chancellor Merkel presented her Christian Democrats' (CDU) election platform with promises to pump public money into key social and infrastructure projects without raising taxes. In his speech, Steinbrück criticized the plan saying Merkel could not spend money she didn't have. "If you ruled the desert, the sand would almost be gone." Steinbrück said.

SPD still trailing CDU

Despite his party's rousing applause, Steinbrück's campaign has yet to pick up steam in his bid to unseat Merkel ahead of the general election. A recent national opinion poll, released June 26, found that 57 percent of Germany would prefer Merkel to stay on as chancellor compared to 20 percent for Steinbrück. The SPD currently trails the CDU in the opinion polls by about 15 points.

Steinbrück, a former finance minister when Merkel led a grand coalition of the CDU and SPD, has also been dogged by a series of early campaign gaffes.

Late last year it was revealed he had accepted speaking fees in excess of one million euros ($1.3 million) over a three-year period. He then said the chancellor's salary was too low in an interview, with quotes authorized by his spokesperson Michael Donnermeyer. The comments reinforced concerns that Steinbrück was out of touch with the SPD's blue-collar base, whose central election campaign theme is "social justice."

Promises for the future

After finalizing her party's election platform on Monday, Merkel called the program "a paradigm shift from the past 40 years." She promised "solid finances, a halt to new debt, repayment of old debt, and investment in the future."

The conservatives claim that the extra funding for new social and infrastructure programs would come through a strengthening of the economy and the subsequent increase in tax revenue.

However, the plans were met with criticism by the liberal Free Democrats (FDP), the CDU's junior coalition partner, and from the opposition Social Democrats (SPD).

FDP leader and Germany's Vice Chancellor Philipp Rösler accused the CDU and CSU of being lured by "the sweet poison of spending."

Thomas Oppermann, the SPD's parliamentary floor speaker, labeled the manifesto "insincerity in print," claiming the chancellor was promising "everything under the sun" after a failed program of reforms.

hc/rg (Reuters, dpa, AP)