During his speech at the Reichstag, in front of both the upper and lower houses of parliament, Köhler asked German leaders to "show courage" in continuing the unpopular program of reforms that aims to revive a sputtering national economy.

"We cannot afford to lose a single year in the renewal of Germany," Köhler said during the speech held after he took the oath of office. "Should we not care whether our county grows and prospers or falls further behind the global competition?"

"We're all sitting in the boat," he said to sustained applause.

Köhler, a member of the conservative Christian Democratic Union party, follows Johannes Rau, who has stepped down after five years in office. The 61-year-old economist began his speech by thanking Rau for his guidance during events such as EU enlargement, globalization and the attacks on Sept. 11, 2001, on the United States.

"We thank you today for your great service to our country," he said.

Ceremonial, but influential

The presidency, while officially the country's highest office, is largely ceremonial. Real policy-making power lies with the chancellor. But beginning with Richard von Weizsäcker, who held the office from 1984 to 1994, the president began acquiring something of a moral pulpit, and holders of the office have weighed in on major national issues such as integration of immigrants, nationalism, and the state of the nation's psyche. The president also represents Germany abroad.

Köhler, 61, who headed the International Monetary Fund from 2000 to 2004, is putting his moral weight behind the push to restart the once-mighty German economic engine. "Can we afford not to care if one of the motors of Europe keeps spluttering every more, as some say? I don't think so," he told parliamentarians.

Although once revered throughout the postwar world for its economic vigor, the German economy has been stagnant for more than three years. It shrank last year for the first time in a decade and has watched unemployment climb every month this year; Germany's jobless rate is the highest of the 12 countries that have adopted the euro.

While the governing red-green coalition of Social Democrats and Greens has enacted reforms that it hopes will remedy the problems, the measures have met with strong protest from trade unions and the German populace at large, who do not want to see the welfare state dismantled. The unpopular reforms include loosening labor market rules, lowering income tax rates and cutting some retirement and jobless benefits.

"We need to push forward with the courage of the government initiatives toward renewal and we need the courage of the opposition to make its alternatives completely clear," Köhler said. "And we also need something else -- the ability to form constructive compromises.

Economics heavyweight

Köhler was born in Eastern Poland in 1943 to a farming family that fled to Germany after the war. He studied economics at the University of Tübingen, getting a doctorate in 1977. He has held positions in the West German finance ministry and was once deputy for former Finance Minister Theo Waigel.

He became head of the German Savings Bank Association in 1993 and held the post until moving to the European Bank for Reconstruction and Development in 1998. He took the reins of the IMF in 2000 before stepping down in 2004 to run for president.

He is the first German head of state without experience in political office and some have questioned how he will succeed in an environment that is very different from that of the board room.

He has come under criticism from left-leaning members of German society, particularly from trade unions. They have argued that the German president should address issues more wide ranging than just economic ones.