"We laid the ground for a common future for the European Union and overcame the impasse," she said in her final address to the European Parliament before Germany's presidency of the EU ends on Saturday.

"At the end of the day we did not disappoint people's expectations and we avoided a division," she said. "Europe can once again look forward to a period of strength and confidence."

Merkel told the deputies that she had anticipated difficult negotiations at the summit in Brussels, which saw Poland threaten to block the treaty in a dispute over voting rights.

If the talks had failed it would not have meant the end of Europe as we know it, she said, but it would have had major consequences which would have been difficult to predict.

Merkel said failure could have led to a two-speed Europe, with those in favor of reform pressing ahead at the expense of those who were reluctant to change.

New EU Treaty

The treaty, a key priority of the German presidency, meant the EU was able to preserve elements of the European constitution rejected by French and Dutch voters in a referendums held in 2005.

It allows for decisions to be taken by majority rather than a unanimous vote and removes the threat of national vetoes. There are also provisions for an EU president and more powers to the EU's foreign policy chief, giving the bloc a bigger say in the world.

She said the post of a high representative for foreign affairs was necessary because it would enable Europe to speak with one voice as it grows more assertive on the world stage.

"This is a European political quantum leap," she said to applause from deputies.

The new treaty has to be endorsed by an inter-government conference before it can be ratified and put in place in time for European Parliament elections in mid-2009.

The chancellor said she hoped these talks could get underway next month when Portugal takes over the rotating EU presidency from Germany.

Licking their Wounds

While calling the German Presidency of the EU a resounding “success”, German Foreign Minister Frank-Walter Steinmeier did acknowledge that relationships between some in the EU bloc did take a few hits in the past few weeks, notably Germany and Poland

Speaking at a news conference in Berlin Steinmeier said that he hoped the “rough” exchanges last weekend would be soon forgotten.

“Things got quite abrasive and in the long run European politics cannot endure that,” he said.

Steinmeier went on to criticize the Polish magazine Wprost for featuring a photo montage of a topless Angela Merkel breastfeeding the Kaczynski brothers, Poland's Prime Minister and President.

"Germany wanted to be a mother for Poland but she turned out to be a false mother," said editor-in-chief Stanislaw Janecki.

The magazine cover is just the last of a long line of recent spats between the EU neighbors but Steinmeier expressed hope that such disagreements would not continue.

"We want to develop good relations and I am sure that, with some distance, we will succeed,” said Steinmeier.