Merkel said it was the joint task of politicians, businesses and unions to work together to make the economic model, which has a strong consensual aspect and seeks to carve a middle way between socialism and capitalism, fit to face the challenges of the future.

Her comments come against the background of the global financial crisis, a number of high-level corruption scandals in big German companies and a string of labor disputes. There has been widespread media criticism of businesses, which have made job cuts or relocated their plants abroad to cut costs despite rising profits.

Speaking at the opening of the Hanover industrial trade fair on Sunday, April 19, she praised the "cohesive power" of the social market economy, which many see as helping to bring about the country's economic miracle after World War II.

Managers urged to lead by example

Juergen Thumann, head of the BDI, the Federation of German Industries, said the behavior of business people also played a role in determining whether people would support this social model in the future.

"People in positions of responsibility have to set a good example," Thumann said, adding that the federation had faith in the system, which he praised as a successful one.

Merkel also said Germany should be prepared to change, to carry out reforms and to invest in order to continue to successfully compete in the global market.

She expressed understanding for people who were worried about the impact of globalization, particularly in the light of the global financial crisis, but she said that she did not share these fears.

"We can continue to profit from globalization, but it is up to us to determine to what extent," the chancellor said.

Germany at less risk than other countries

Merkel also said despite the impact of the crisis of Germany's growth rates that the country had good prospects of being less hit by the credit crunch than other states. However, she also said there was need to reform the German banking system and called for more transparency.

Thumann described economic developments in Germany as "robust" with 1.7 million jobs being created since 2005. He said the government had helped improved the situation for businesses, but called for further reforms.

Almost 5,100 businesses from 62 countries are represented at the Hanover Fair, which runs through Friday. The main focus of the fair is on energy-saving and climate protection technology. Japan is this year's partner country at the fair.