The public holiday pays tribute to the moment when the two Germanys were peacefully reunified on October 3 1990, after nearly four decades of confrontation during the Cold War.

In the capital Berlin, spectators watched a 15-metre tall string-puppet emerge from the Spree River and parade as part of a performance entitled "Rendez-Vous in Berlin" by French puppet masters Royal de Luxe.

Later on Saturday, the puppet is to greet a second giant marionette in a symbolic gesture at the historic Brandenburg Gate, a former border of the once-divided city.

No wall, but barriers remain

The focus of official ceremonies was the south-western city of Saarbruecken, where Germany's recently re-elected Chancellor Angela Merkel called on the country to overcome the lingering inequalities which continue to stoke resentment between eastern and western Germans.

"Now is the time for us to forge a common future," Merkel said, following a church service also attended by German President Horst Koehler.

Studies show that despite billions of euros of investment in Germany's formerly communist eastern states, unemployment remains significantly higher, and income significantly lower, than the national average. But Merkel noted in her speech that parts of western Germany were now no better off than some parts of the east.

Merkel also said that the current economic crisis was "perhaps the first great challenge" for a re-unified Germany. She added that East Germans' struggle against their former communist regime set an "example" of the determination needed to tackle the current crisis.

Merkel also said German unity was brought about by the bravery of thousands of its citizens.

"It didn’t fall from the heavens," Merkel said. "It was the result of bravery, decisiveness and civic courage."

Security concerns

This year's ceremonies have been accompanied by heightened security. Islamist groups have issued a number of Internet threats in recent weeks, warning they would attack Germany over its participation in the war in Afghanistan.

Police also arrested a German-Turkish national on Friday suspected of recruiting for al Qaeda and obtaining bomb-making materials.

The city of Berlin's Interior Minister Ehrhart Koerting said police would be reinforced due to "a changed security situation."

Security has also been tightened at Munich's Oktoberfest, while up to 1,500 police have been deployed to the site of official Unity Day ceremonies in Saarbruecken.

The regional capital of the state of Saarland was chosen as the location for official ceremonies in line with a tradition that designates the honor to the home town of the sitting president of Germany's upper house of parliament.

The current president of the Bundesrat is Saarland's conservative premier, Peter Mueller.

International tribute

Former Soviet leader Mikhail Gorbachev said Germans could be proud of their reunification. "Germans have every reason to celebrate this event, they have achieved a lot in the reconstruction of their country," he told tabloid Bild am Sonntag.

Gorbachev's reform agenda in the Soviet Union in the 1980s was crucial for the eventual collapse of the communist German Democratic Republic (GDR) regime, and paved the way for the swift reunification of Germany that followed.

nw/AP/dpa
Editor: Sonia Phalnikar