As the biggest economy and most populous country in Europe, Germany faces high hopes to deliver progress during its six-month EU tenure and its year-long stint at the head of the world's eight most industrialized nations.

Berlin has set ambitious targets and achieving them will test the diplomatic powers of Chancellor Angela Merkel, who has already won widespread praise for her approach to foreign policy since taking over in November 2005.

She told Germans in a New Year's speech Sunday that the dual presidencies presented a unique opportunity to help shape Europe's future in a globalized world.

"Only a united Europe can tackle the challenges of globalization including international trade but also violence, terror and war," she said.

"A divided Europe is doomed to failure."

Germany wants to restart Mideast peace process

Merkel and Foreign Minister Frank-Walter Steinmeier have called for a January meeting to "revitalize" the Middle East quartet -- grouping the EU, the United States, the United Nations and Russia -- to help kick start peace efforts between Israel and the

Palestinians.

The chancellor will meet US President George W. Bush in Washington next week amid grumbling in Europe that the United States has let the peace process languish as Iraq has consumed its attention.

Steinmeier has said the aim is for the quartet to exercise a "stabilizing" influence in the region and encourage preliminary talks between Israeli Prime Minister Ehud Olmert and Palestinian president Mahmud Abbas to continue.

Breathing new life into dead EU treaty

The most pressing item for Europe, meanwhile, is the stalled constitution, especially with the Jan. 1 entry of Romania and Bulgaria boosting the number of member states to 27.

Merkel has cautioned against overly high expectations when Germany takes over the EU brief from Finland, saying that half a year may not be sufficient to resurrect a treaty that has been in the deep freeze for more than 18 months.

It was precisely because of the rapid enlargement of the bloc in 2004 that the 200-page constitution was drawn up in a bid to streamline decision-making and give the EU a stronger international voice. Its highly damaging rejection last year by voters in France and the Netherlands -- two founding members of the EU -- has overshadowed the fact that 18 countries have ratified it.

Germany has promised to present a "roadmap" of how to get the constitution back on track. "Our goal is to present a specific plan by the end of our presidency in which the timetable and the contours of a solution are laid out," Steinmeier told Saturday's Bild newspaper.

Energy security and climate protection

Under both presidencies, energy security and climate protection will loom large.

The EU wants to forge a common position for negotiations on the successor to the Kyoto Protocol which runs out in 2012. Germany would like the bloc to commit to reducing greenhouse gas emissions by 30 percent by 2020.

Merkel believes Europe would be strengthened if it negotiated with one voice with major suppliers such as Russia and diversified.

"Europe must reduce its dependence in order to secure its long-term energy supply," she wrote in Friday's Handelsblatt newspaper. "It must also speak with one voice on foreign energy relations."

Beyond energy, checking the destabilizing influence of highly speculative hedge funds and removing obstacles to faster economic growth in Africa will top the agenda when Germany takes the helm of the G8 from Russia.

The highlight of the G8 presidency will be the June summit in the Baltic resort Heiligendamm, attended by the leaders of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Seeking fairer growth distribution

"The goal will be to identify imbalances and to determine what can be done to ensure more balanced global growth," said Bernd Pfaffenbach, an aide to Merkel, adding that promoting "global prosperity" will be theme of the meeting.

The imbalances plaguing world economic momentum are already well-known: the US trade and current account deficits, the massive foreign exchange reserves held by the China, constraints on growth in Europe and obstacles to faster economic gains in Africa.

Merkel wants to forge a privileged partnership between the G8 and those African governments that are committed to corruption-free administration and to strengthening democratic reform.

On financial markets, Germany will press for greater transparency and political monitoring of speculative hedge funds, which are seen by Berlin -- and increasingly by some of its partners -- as a destabilizing element in global finance.

Germany now has the backing of the United States, which for years had been reluctant to go along with vigorous market supervision. But Pfaffenbach acknowledged that Merkel will probably have to be content with simply "a final declaration that calls for greater transparency."

Germany is also expected to push for a more rational use of energy resources and hopes to spark discussion on a follow-up to the Kyoto Protocol on reducing greenhouse gas emissions, which expires in 2012.

Berlin in addition wants to include Mexico, India, China, Brazil and South Africa, countries that are not members of the G8, in the climate talks.

The fate of the Doha Round of multilateral trade liberalization negotiations, currently deadlocked, is likely to hover over the G8 next year. But Germany, apart from general statements citing the need to complete the Doha process, has so far steered clear from any deeper involvement.