Chancellor Angela Merkel's speech on Wednesday touched on some major policy aspects of her new coalition as her third term gets under way.

The speech focused mainly on domestic issues and Merkel's vision of the 'grand coalition,' consisting of the chancellor's center-right Christian Democrats and the center-left opposition Social Democrats.

At the start of the speech, she briefly addressed developments in Ukraine, saying her office, the German embassy in Kyiv, and the German foreign ministry was keeping an eye on the situation in light of the "serious negotiations" going on.

On Tuesday, Ukraine's prime minster, Mykola Azarov, and his Cabinet resigned, and a strict series of anti-protest laws was repealed in concessions to demands of the opposition.

The chancellor gave her state of the nation speech from a sitting position for the first time due to an injury to her lower back that she sustained while cross country skiing over the New Year's holidays.

The heavy emphasis on social justice was remarkable coming from a chancellor from the conservative Christian Democratic Party, said Melinda Crane, DW's chief political correspondent. "If you didn't know which party Merkel belongs to, you'd think she was from the Social Democrats," Crane said

'An anchor of stability in Europe'

A large portion of Merkel's speech was devoted to Germany's economy. She acknowledged that it had withstood the challenges of the economic crisis quite well and as a result was positioned at the top of Europe's economy.

"Germany is an anchor of stability in Europe," she said. "We have emerged [from the crisis] more swiftly and stronger than other countries in Europe."

The chancellor praised the low unemployment rate that Germany had achieved, but added there was more work to be done to close loopholes, especially when it came to people working for temp agencies. These workers are often placed at a disadvantage in terms of pay compared to employees on contracts who do the same work.

Merkel's coalition recently agreed to implement a minimum wage of 8.50 euros ($116) starting in 2015, something she said was a "compromise" with the SPD, but the advantages outweighed the disadvantages. The minimum wage was a key element of the SPD's election campaign in 2013.

Earlier in the day, Merkel's cabinet announced its support of a comprehensive pension reform that would see long-term workers able to retire at 63 - four years earlier than the legal retirement age - and would increase pension benefits for more than 9 million women who had children before 1992.

The German energy experiment

Germany has announced some of the world's most ambitious plans to increasing the use of renewable sources of energy, and Chancellor Merkel said the powerful coalition of the CDU and SPD was the only way to achieve such a tall order.

"The grand coalition is a coalition for big jobs," she said.

By 2050, Germany is planning on supplying 80 percent of its energy needs from renewable sources. Currently, renewables supply 25 percent of Germany's energy mix.

"Germany has set its course for the energy turnaround," she said, adding that the "world is watching" to see how Germany's energy experiment turned out.

Oppositon's response

Following Merkel's speech, the opposition Left party's parliamentary leader, Gregor Gysi, offered a rebuttal of Merkel's speech.

He started by saying that large parts of Merkel's speech had "nothing to do with reality," before picking apart the main points of Merkel's speech.

He was particularly harsh on the chancellor's stance regarding the revelations that the American National Security Agency had spied on European citizens, including Merkel herself.

Merkel said that the NSA scandal, brought to light by former NSA contractor Edward Snowden, had brought up "serious questions," but that it was essential to maintain a partnership with the United States as it was mutually beneficial.

Gysi wondered why the chancellor was only engaged in talks with the US on the issue and why no action had been taken, such as expelling American embassy workers in Berlin who had taken part in espionage. He also brought up the issue of economic espionage that may have taken place, saying Merkel had not brought addressed this.

"It's the left-wing party who has to protect the companies!" Gysi quipped. "That's what it's come to."

The Left party, along with the Greens, form one of the smallest oppositions in German history with around 20 percent representation.